Hayes prosecution puts the focus on dishonesty

Closing remarks begin as Libor trial enters ninth week

Tom Hayes
Tom Hayes: 'concerted campaign' to fix Libor, says prosecution

The outcome of any of Tom Hayes's yen Libor requests is irrelevant, Mukul Chawla told the jury at Southwark Crown Court today (July 20), when the key part of a conspiracy to defraud case is the proof of a dishonest agreement.

Chawla was summarising the prosecution case against Tom Hayes, ex-UBS and Citi trader, for his alleged role in the rigging of the yen London interbank offered rate (Libor) between 2006 and 2010. The trial is now in its ninth week, having begun on May 26.

"I told you then that it was a simple case," Chawla told jurors today as he outlined the prosecution's closing remarks. "Though one that would be heavy on detail. Essentially, it is about honesty and dishonesty – and you can be sure [Hayes's] actions were dishonest."

The standards of honesty in the banking industry are the same as everywhere else, he continued, and the jury should assess Hayes's behaviour against that of a "reasonable and honest member of society". Whether Hayes's requests were successful or not was "nothing more than a smokescreen".

Hayes has been charged with eight counts of conspiracy to defraud. He has pleaded not guilty and claims that asking traders to adapt their daily Libor submissions to benefit trading positions was widespread and his senior managers were aware of his tactics but never reprimanded him.

The defence has also said that at the time there were no clear written rules available to traders regarding Libor at either UBS or Citi. "Do you need a written rule to know that [something is] wrong?" Chawla asked the jury today. "Of course not."

Over the duration of the trial, the jury has been shown a number of email, phone and instant chat exchanges between Hayes and various contacts at UBS, Citi and other banks and brokerages, in which Hayes would request certain Libor movements to suit his trading book.

Chawla urged the jury to "step back" from "the detail of everything", and take into account the desperate tone of many of Hayes's requests, such as the "pleading and demanding" that he would pursue as well as the inducements he suggested to those that helped him reach out to submitters, such as telling them to offer coffees, curries, or visits to strip clubs.

"Look at the sheer persistence of the requests," Chawla said. "It appears that on every trading day he has a basis-point risk" linked to Libor.

The prosecution has called Hayes's behaviour a "concerted campaign" to manipulate the yen Libor rates at his and other panel banks, by reaching out either directly or indirectly to submitters with promises of rewards or large deals.

Chawla urged the jury to look at who Hayes made requests to: "They were people he knew." If he was unsure whether somebody would fall in with the scheme, such as when he moved to Citi in late 2009, for instance, and sensed a different culture than that of UBS where he had been for three years, he would try and persuade others to make the requests instead, according to the prosecution.

Hayes also received warnings from the brokers who would relay his requests to submitters at other banks. "Need to make sure my emails are worded a bit more carefully," wrote one broker, while another suggested they refer to Libor in code so as to make sure the correspondence would not be flagged by compliance.

Chawla reminded the jury that when Hayes set about urging junior traders to do his bidding, he stressed that they needed to keep the requests "super casual" and "offline", perhaps by catching the submitter "on the way to the toilet".

"Is that the language of honesty? Or is it the language of dishonesty?" Chawla asked. "He saw people as lottery tickets, as dispensable."

"Making money is not a crime," Chawla said. "But you do it honestly. [Hayes] wanted to get the edge, wherever he could maximise his position." He knew if he went too far and asked for a 20 basis point jump instead of the small changes he did request it would have been too obvious, Chawla added. "What would it have looked like? It would have looked suspicious."

Hayes is the first trader to face trial on charges relating to the rigging of Libor. The court has heard that a number of other individuals are currently awaiting trial or being investigated by regulators and criminal enforcement agencies around the globe, while six banks have pleaded guilty to misconduct over their Libor submissions in various currencies.

The trial continues. Defence counsel Neil Hawes will make his closing speech following Chawla.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Investment banks: the future of risk control

This Risk.net survey report explores the current state of risk controls in investment banks, the challenges of effective engagement across the three lines of defence, and the opportunity to develop a more dynamic approach to first-line risk control

Op risk outlook 2022: the legal perspective

Christoph Kurth, partner of the global financial institutions leadership team at Baker McKenzie, discusses the key themes emerging from Risk.net’s Top 10 op risks 2022 survey and how financial firms can better manage and mitigate the impact of…

Emerging trends in op risk

Karen Man, partner and member of the global financial institutions leadership team at Baker McKenzie, discusses emerging op risks in the wake of the Covid‑19 pandemic, a rise in cyber attacks, concerns around conduct and culture, and the complexities of…

Moving targets: the new rules of conduct risk

How are capital markets firms adapting their approaches to monitoring and managing conduct risk following the Covid‑19 pandemic? In a Risk.net webinar in association with NICE Actimize, the panel discusses changing regulatory requirements, the essentials…

Building resilience into ESG risk management

Risk and resilience continue to play an important role in the navigation of an increasingly uncertain world. Fusion Risk Management explores why it is equally crucial for technology to support organisations in addressing pertinent environmental, social…

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here