Libor conspiracy 'cloak and dagger', says prosecution

Hayes denies using code to conceal rate manipulation

Tom Hayes

The former trader accused of manipulating Libor has denied allegations he used secretive and subversive tactics to influence other banks' submissions to the controversial benchmark.

Mukul Chawla, lead lawyer for the prosecution, called former UBS and Citi trader Tom Hayes's tactics "cloak and dagger" during the final day of his cross-examination at Southwark Crown Court in London today (July 16).

Chawla referred to a chat conversation between Hayes and his stepbrother Peter O'Leary, who was then a junior with HSBC. Hayes suggested O'Leary buy the HSBC Libor submitter drinks and get to know him before asking him to submit rates that would benefit Hayes.

Chawla asked why Hayes needed to go through a third party to make the requests, rather than going to the submitter directly. "What was the need for this cloak and dagger?" asked Chawla.

Hayes replied: "There's absolutely nothing cloak and dagger about that."

He explained it would be unusual to speak to the HSBC submitter "out of the blue".

Hayes is accused of being "ringmaster" of a group of traders and brokers who conspired to rig the London interbank offered rate (Libor) for personal gain. He pleads not guilty to eight charges of conspiracy to defraud.

During the cross-examination Chawla also questioned Hayes about alleged use of code to conceal his Libor requests. The court was shown chat communications between Hayes and one of his brokers in 2007, in which the broker – who cannot be named for legal reasons – expressed concern about Libor requests.

"Had a lot of compliance pressure recently due to the credit problems, we both need to be a little more subtle in our 'views'," wrote the broker. "My emails etc. need to be worded more carefully."

In subsequent communications between the two they would sometimes substitute the words "arbitrage" or "arbi" for "Libor".

But Hayes disputed that this was tantamount to using a code.

"If I really felt that strongly that we needed to talk in code I would have taken all conversations out of writing," he said. "I don't view this as a code."

Hayes went on to liken the suggestion he used code, but only in a few recorded instances, to having "an Enigma machine I only used 10% of the time".

Hayes denies having acted dishonestly at any point between 2006 and 2010, when the manipulation is alleged to have occurred. He maintains he carried out all actions with the full knowledge of his managers, and sometimes under direct instruction from superiors.

The former trader also argues that his requests for Libor fixings were only ever within an 'acceptable range' of submissions, all of which would be justifiable as accurate.

Chawla ended his cross-examination looking back at Hayes's 2013 interview with the UK's Serious Fraud Office (SFO). In the excerpt from the SFO interview, Hayes said former RBS rate setter Paul White – who was sacked following the Libor scandal – was the real "tragic character" in the affair.

"There's a litany of tragic characters," he told the court today. "People like me at the bottom of the chain being thrown under the bus."

The trial continues.

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