May 19, 2022

Inquiry Focuses on BBC Severance Payments

Mr. Thompson is scheduled to testify before Parliament on Sept. 9 about severance payouts that were given to high-ranking officials at the organization. A recent report from the National Audit Office found that the BBC paid out £60 million (about $93 million) in severance between April 2005 and March 2013, and that a quarter of the senior managers who received payments were given more than they were entitled to. A BBC spokesman told the British newspaper The Telegraph that the audit “found no evidence of wrongdoing.”

Since Mr. Thompson left the BBC, Parliament has called him back several times for its investigations of events that took place under his tenure as director general, which began in 2004. He was recalled to testify about how the BBC handled sexual abuse accusations against one of its longtime television hosts, Jimmy Savile. Then in June, Mr. Thompson agreed that he would testify before Parliament about questions he answered for members in 2011 about a program called the Digital Media Initiative, which fell under his jurisdiction.

That program had started in 2008 and was intended to convert all of the organization’s production and archived materials to a digital format. The project was halted in October 2012 for a performance review, and in May, the BBC’s current director general, Tony Hall, decided to cut the program after it had accumulated about $154 million in costs. It remains unclear when Mr. Thompson will testify on the Digital Media Initiative.

Eileen Murphy, a Times Company spokeswoman, declined to comment about the news that the British police have started to investigate the severance payouts. But in June, after the announcement that Mr. Thompson had been called to testify about the Digital Media Initiative, Ms. Murphy said, “Mark has always been cooperative with inquiries when they arise, and he fully intends to continue that practice.”

E-mails sent late Friday evening to both the British police and the BBC for comment were not returned.

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Spain’s Real Crisis Is a Leadership Void, Analysts Say

But while the charge may be simple enough, the case is not. Having previously withheld information from the courts about secret Swiss accounts, the former treasurer, Luis Bárcenas, who now sits in prison, seems less than fully credible, and the courts incapable of digging to the bottom on the matter with real speed.

The result is less a crisis for Mr. Rajoy — though he is certainly damaged, polls show — than one for Spain, its national morale and the credibility of its institutions, with all the risk that the steady drumbeat of allegations will deny recession-hit Spain strong leadership and distract the government from pressing economic concerns as the scandal unspools for years, analysts say.

In fact, Mr. Rajoy’s best defense may be to stonewall and string out the corruption case beyond the end of his scheduled mandate in 2015 and the next election. Given Spain’s overburdened courts, that should not be hard to do.

“Rajoy is the ultimate resistance fighter and he has clearly decided that time will play in his government’s favor,” said José Ignacio Torreblanca, a political columnist and head of the Spanish office of the European Council on Foreign Relations, a research group.

Still, Mr. Torreblanca suggested that Mr. Rajoy was making “a big mistake” if he resorted to stalling tactics in an attempt to keep political pressure at a minimum.

“A prime minister should not only ask people to trust him but instead present a credible story about exactly what happened when faced with such accusations,” Mr. Torreblanca said.

This week, however, the Popular Party rejected a call from opposition parties for Mr. Rajoy to appear in Parliament and explain exactly how the party’s finances had been managed by Mr. Bárcenas. Meanwhile, prosecutors started naming senior Popular Party officials whom they want to appear as witnesses in the case, led by María Dolores de Cospedal, the secretary general of the party.

Mr. Bárcenas was first subpoenaed in 2009, as part of what then appeared to be a mundane graft investigation into whether a group of businessmen had bribes to receive contracts from conservative mayors and regional politicians. He denied at the time ever having had money in Switzerland.

Since January, investigators have unearthed at least €47 million, or $61.4 million, that he allegedly stashed offshore, in Switzerland but also possibly in the United States and other countries. Mr. Bárcenas is next scheduled in court on Monday, and with each appearance speculation mounts that he will turn on his former party colleagues, as they turn on him.

Mr. Bárcenas reportedly left his job as treasurer in 2009 with a trove of documents. This week, the newspaper El Mundo published ledgers that it claimed were the party’s parallel financial accounts, mirroring allegations made in late January by another Spanish paper, El País.

Mr. Bárcenas is being held in a prison outside Madrid since a court judged him to be a flight risk in June. After visiting his friend on Monday, Miguel Duran, a lawyer, told RAC1 radio that Mr. Bárcenas had told him “interesting things.”

“He has enough information to make the government fall,” Mr. Duran said ominously.

Mr. Rajoy and other senior party officials have denied wrongdoing, as has Mr. Bárcenas. Increasingly the scandal boils down to their word against his. Senior party officials have now sought to isolate and even disparage their former colleague, at the risk that Mr. Bárcenas will become even looser with his years of accumulated knowledge of the inner workings of the Popular Party.

By Thursday, Mr. Bárcenas was being called “a delinquent” by Alfonso Alonso, the party’s parliamentary spokesman, “for whom lying has become a way of life.” At the same time, Mr. Alonso acknowledged that “there has been a corruption ring, which is what we want the judiciary to clarify.”

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Total and French Officials Cleared in Iraq Oil-for-Food Case

The across-the-board acquittal in the case, which prompted a decade-long French investigation, came despite widespread international accusations that the program was rife with corruption and was thwarted to benefit Saddam Hussein’s government.

The Paris prosecutor’s office said everyone facing trial in the French case was acquitted Monday by a Paris court. Prosecutors have up to 10 days to appeal.

Defendants included Total; its chief executive, Christophe de Margerie; the former interior minister, Charles Pasqua; and former French diplomats, among others.

Investigators accused them of getting around a United Nations embargo against Iraq by buying Iraqi oil through front companies, allowing the Hussein government to raise money illicitly.

Total has said it was operating according to the rules of the
program, which allowed Iraq, while under United Nations sanctions, to sell oil in exchange for humanitarian goods from 1996 to 2003.

The program was intended to help Iraqis cope with United Nations sanctions, but authorities said the program was corrupted because Mr. Hussein was allowed to choose the buyers of Iraqi oil and the sellers of humanitarian goods.

A sweeping United Nations investigative report in 2005 alleged many kickbacks in the lucrative contracts linked to the program. The report said that Mr. Pasqua, for example, was awarded 11 million barrels of oil. Mr. Pasqua denied receiving any.

The French investigation was opened in 2002 on the basis of funds transferred from 1997 to 2001 between Total subsidiaries and companies based abroad.

After years of investigation, prosecutors in the French case had argued that the case be dropped, saying investigators had failed to uncover enough hard evidence for a conviction.

Mr. Pasqua and two former high-ranking diplomats were accused of influence-trafficking and corruption. Mr. de Margerie was accused of “complicity in the abuse of company assets” and “complicity in corrupting foreign officials.”

A lawyer for the oil company, Jean Veil, drew wry smiles when hailing the “total acquittal” of Total.

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BBC Faces New Allegations of Sexual Abuse

Thirty-six of the new accusations are from complainants who were under the age of 18 at the time of the alleged assaults.

The disclosures raise new questions about the workplace culture at the BBC, the behavior of its employees, and what it may have condoned or overlooked over the years. They also show how the broadcaster is still consumed with the fallout from the case of Mr. Savile, a larger-than-life BBC star who died in 2011 at the age of 84 and who was later unmasked as a serial sexual predator with dozens of victims over four decades.

The new figures were first reported by The Daily Telegraph, which unearthed them through a Freedom of Information request. The BBC subsequently made its response available to other news organizations.

The broadcaster would not comment on any specific cases, but it said in a statement that it was “appalled” by the allegations.

“We have launched a series of reviews that aim to understand if there are any issues with the current culture of the BBC or the historic culture and practices from as far back as 1965,” the statement said, “to see what lessons can be learned to prevent this happening again.”

The report shows that 40 of those accused currently work for or contribute to the BBC, while 41 are dead or employees from long ago. Of the 152 separate complaints, 48 involve Mr. Savile, who died before the revelations about him came to light.

Some of the allegations did not involve criminal acts and were investigated internally, the BBC said, while the rest were reported to the police. The police have investigated or are investigating the allegations against 25 of the current employees or contributors, the broadcaster said. So far, the investigations have led to the conviction of one person who is “no longer employed by the BBC” and is awaiting sentencing, the report says.

That is most likely a reference to Stuart Hall, 83, a former BBC personality who recently admitted molesting 13 girls, ages 9 to 17, from 1968 to 1986.

The Savile case provoked a crisis in the BBC, Britain’s public broadcaster, and led to the resignation of its director general and to numerous personnel and structural changes. The broadcaster now faces the prospect of lawsuits brought by victims of Mr. Savile and Mr. Hall and a long period of more investigations into its culture, involving current practices and events from as long ago as the 1960s.

An independent report released in early May, one of many commissioned by the BBC in the aftermath of the Savile scandal, painted a picture of an organization with a “visible, frequent and consistent” culture of bullying, anxiety and fear.

“It may be bullying or harassment, it can be rudeness, victimization or verbal abuse, but whatever the definition or action, people recognize it as simply ‘wrong,’ ” said the report, prepared by a lawyer, Dinah Rose.

The report said that victims were afraid to complain, and that those who did often found their concerns “swept under the carpet or referred elsewhere,” never to be dealt with.

Tony Hall, the BBC’s director general, said at the time that the broadcaster was conducting a thorough overhaul of its culture.

“I want zero tolerance of bullying and a culture where people feel able to raise concerns and have the confidence they will be dealt with appropriately,” he said. “I also want people to be able to speak freely about their experiences of working at the BBC so we can learn from them.”

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DealBook: Deutsche Bank Agrees to Settle Energy Trading Inquiry

The headquarters of Deutsche Bank in Frankfurt, Germany, under construction in 2009.Ralph Orlowski/Getty ImagesThe headquarters of Deutsche Bank in Frankfurt, Germany, under construction in 2009.

Deutsche Bank has agreed to a settlement with the Federal Energy Regulatory Commission over charges that the bank manipulated California’s energy markets in 2010.

The agreement, announced late on Tuesday, includes a $1.5 million fine against Deutsche Bank, which also must surrender around $170,000 in profit related to the energy trading activity.

The energy commission said in a statement that some of Deutsche Bank’s employees had entered into a number of transactions in early 2010 that unfairly benefited the bank.

“Deutsche Bank violated the commission’s anti-manipulation rule by engaging in a scheme in which Deutsche Bank entered into physical transactions to benefit its financial position,” the commission said.

The action is the latest effort to clamp down on market abuses by the commission, which oversees the oil, natural gas and electricity sectors.

The Federal Energy Regulatory Commission is also levying a $470 million penalty against the British bank Barclays related to trading activity, though Barclays is challenging the accusations. The fine would be the largest ever made by the commission.

The agency has also barred JPMorgan Chase’s energy trading unit from participating in a number of American energy markets for six months after some of the firm’s employees provided false information during an investigation into market manipulation.

The commission had originally proposed the fine against Deutsche Bank in September. The statement on Tuesday said Deutsche Bank neither admitted nor denied wrongdoing, adding that the bank failed to reduce the financial penalty during negotiations.

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World Briefing | Europe: France: Budget Minister Faces Inquiry on Foreign Bank Account

Budget minister Jérôme Cahuzac, left, who is leading a crackdown on tax fraud, was told Tuesday that he would face a preliminary investigation into charges that he kept an illegal bank account abroad. Mr. Cahuzac said he welcomed the decision of the Paris prosecutor to open an investigation into what he calls “crazy claims” that he committed tax fraud by holding a Swiss bank account with UBS until 2010, when he then supposedly moved the money to Asia. The accusations were made by Mediapart, a French Web site of investigative journalism, which published a recording of a man it identified as Mr. Cahuzac. He denies that the voice is his and has said he will sue Mediapart.

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DealBook: UBS Pays $1.5 Billion Over Rate Rigging

UBS agreed to record fines to settle a rate-rigging case.Michael Buholzer/ReutersUBS agreed to record fines to settle a rate-rigging case.

UBS, the Swiss banking giant, announced a record settlement with global authorities on Wednesday, agreeing to a combined $1.5 billion in fines for its role in a multiyear scheme to manipulate interest rates.

In a sign that officials are increasingly taking a hard line against financial wrongdoing, the Justice Department also secured a guilty plea from the bank’s Japanese subsidiary, sending a warning shot to other big banks suspected of rate rigging. The UBS subsidiary, which agreed to plead to a single count of wire fraud, is the first unit of a big bank to agree to criminal charges in more than a decade.

The cash penalties represented the largest fines to date related to the rate-rigging inquiry. The fine is also one of the biggest sanctions that American and British authorities have ever levied against a financial institution, falling just short of the $1.9 billion payout that HSBC made last week over money laundering accusations.

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The severity of the UBS penalties, authorities said, reflected the extent of the problems. The government complaints laid bare a scheme that spanned from 2005 to 2010, describing how the bank reported false rates to squeeze out extra profits and deflect concerns about its health during the financial crisis.

“The findings we have set out in our notice today do not make for pretty reading,” Tracey McDermott, the enforcement director for the Financial Services Authority of Britain, said in a statement. “The integrity of benchmarks,” she said, “are of fundamental importance to both U.K. and international financial markets. UBS traders and managers ignored this.”

The UBS case reflects a pattern of abuse that authorities have uncovered as part of a multi-year investigation into rate-rigging. The inquiry, which has ensnared more than a dozen big banks, is focused on key benchmarks like the London interbank offered rate, or Libor. Such rates are used to help determine the borrowing rates for trillions of dollars of financial products like corporate loans, mortgages and credit cards.

Libor Explained

Sergio P. Ermotti, chief of UBS.Walter Bieri/KEYSTONE, via Associated PressSergio P. Ermotti, chief of UBS.Tracey McDermott, the enforcement director for the Financial Services Authority of Britain.Financial Services AuthorityTracey McDermott, the enforcement director for the Financial Services Authority of Britain.

In the UBS matter, the wrongdoing occurred largely within the Japanese unit, where traders colluded with other banks and brokerage firms to tinker with Yen denominated Libor and bolster their returns. During the 2008 financial crisis, UBS managers also “inappropriately gave guidance to those employees charged with submitting interest rates, the purpose being to positively influence the perception of UBS’s creditworthiness,” according to authorities.

In a series of colorful e-mails and phone calls, traders tried to influence the rate-setting process. “I need you to keep it as low as possible,” one UBS trader said to an employee at another brokerage firm in September 2008, according to the complaint filed by the Financial Services Authority. “If you do that,” the trader promised to pay “whatever you want. I’m a man of my word.”

As the employees carried out the alleged manipulation, they also celebrated the efforts, with one trader referring to a partner in the scheme as “superman.” “Be a hero today,” he urged, according the complaint by regulators.

The British and Swiss authorities released their complaints on Wednesday before the bank’s shares began trading in Switzerland. American authorities are expected to release their own complaints later Wednesday in Washington.

In a statement, UBS highlighted its cooperation with the investigation. The firm previously stated that it made provisions of 897 million Swiss francs ($975 million) to cover potential legal and regulatory fines.

“We discovered behavior of certain employees that is unacceptable,” the chief executive of UBS, Sergio P. Ermotti, said in the statement. “We deeply regret this inappropriate and unethical behavior. No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity.”

The UBS case provides a lens to view broader problems in the rate-setting process, which affects how consumers and companies borrow money around the world. In June, authorities scored their first Libor settlement, securing a $450 million payout from Barclays, the big British bank.

The UBS case — the product of cross-border collaboration among regulators and federal prosecutors – is more than triple the earlier fine.

The Commodity Futures Trading Commission and the Justice Department leveled about $1.2 billion in combined fines. The Financial Services Authority of Britain fined the bank $260 million. The Swiss Financial Market Supervisory Authority, which does not have the power to fine, recovered $65 million in the bank’s supposed ill-gotten gains.

The Justice Department’s criminal division, which arranged the guilty plea with the Japanese subsidiary, also struck a non-prosecution agreement with the parent company. The exact total of the penalties was unclear, because the department has not yet released its settlement documents.

The Justice Department’s case is also expected to take aim at some of the bank’s traders, including 33-year-old Thomas Hayes. The Justice Department plans to announce charges against Mr. Hayes, the former UBS and Citigroup trader, who featured prominently in the investigation, according to people with knowledge of the matter. He was arrested in London last week and later released on bail. Other UBS employees have been suspended or fired following an internal investigation.

The fallout from the UBS case is expected to ratchet up the pressure on some of the world’s largest financial institutions and spur settlement talks across the banking industry.

The Royal Bank of Scotland has said it expects to pay fines before its next earnings statement in February, while Deutsche Bank has set aside an undisclosed amount to cover potential penalties. Some American institutions, including Citigroup and JPMorgan Chase, also remain in regulators’ crosshairs.

The UBS case has exposed the systemic problems with the rate-setting process. Over a 6-year period, UBS traders targeted the major currencies that form the Libor system, including the U.S. dollar denominated rate. The bank was also cited for attempting to manipulate other benchmarks like the Euro Interbank Offered Rate, or Euribor, and the Tokyo Interbank Offered Rate, or Tibor.

Much of the activity took place in the bank’s Japanese unit. Authorities said four UBS traders colluded to manipulate submissions to Yen Libor. The individuals made more than 1,900 requests to brokers and other banks to alter the rate, according to regulatory filings. As part of their efforts, UBS employees made quarterly payments of £15,000 ($24,000) to outside brokers involved in the rate-rigging for at least 18 months for their help, the complaint said.

To avoid arousing suspicion, UBS employees routinely made small changes to submissions, the complaint detailed. The individuals, who communicated with colleagues about the rate-setting through emails and instant messages, also altered rate submissions to benefit traders at other banks.

The Japanese unit’s guilty plea for wire fraud follows frantic last-minute negotiations last week between senior UBS officials and American authorities. The actions detailed in the complaint emboldened the Justice Department to seek the guilty plea from the Japanese unit. By forcing the plea from the firm’s Japanese subsidiary, federal authorities sent a clear message about the level of wrongdoing, but stopped far short of shutting UBS out of the American markets.

Still, the steep sanctions come as a surprise, given the bank’s cooperation with investigators.

Since first announcing that it was the subject of Libor investigations, the Swiss bank has eagerly worked with authorities in a bid for leniency. UBS, for example, had received conditional immunity from the Justice Department’s antitrust unit, a deal that did not apply to the Justice Department’s criminal division.

The case presents the latest setback for UBS.

The Swiss bank already agreed to a $780 million fine in 2009 with American authorities to settle charges that it helped American clients avoid tax. The firm also announced a $2.3 billion loss last year related to illegal trading activity by a former employee, Kweku M. Adoboli. Mr. Adoboli subsequently was sentenced to seven years, and British authorities fined UBS $47.5 million over the scandal.

UBS said it expected to report a net loss of up to $2.7 billion in the fourth quarter of the year because of the costs related to Libor and other legal matters. The figure includes around $2.3 billion of provisions of legal and regulatory costs, as well as $548 million in restructuring charges.

In the wake of the Libor scandal, UBS has been forced to beef up its compliance and rate-setting procedures, according to the Swiss regulator. The bank has also fired individuals connected to the rate-rigging.

“We are pleased that the authorities gave us credit for the important and positive changes we have already made,” the chairman of UBS, Axel Weber, said in a statement. “I have zero tolerance for inappropriate and unethical behavior of any of our staff.”

This post has been revised to reflect the following correction:

Correction: December 19, 2012

An earlier version of this post misstated a loss announced by UBS related to illegal trading activity by a former employee, Kweku M. Adoboli. It was $2.3 billion, not $2.3 million.

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DealBook: UBS Expected to Pay At Least $1 Billion to Settle Libor Case

Axel Weber, the chairman of UBS, which is in final negotiations with American, British and Swiss authorities.Michael Buholzer/ReutersAxel Weber, the chairman of UBS, which is in final negotiations with American, British and Swiss authorities.

10:00 p.m. | Updated

Federal prosecutors are close to securing a guilty plea from a UBS subsidiary at the center of a global investigation into interest rate manipulation, the first big bank to agree to criminal charges in more than a decade.

UBS is in final negotiations with American, British and Swiss authorities to settle accusations that its employees reported false rates, a deal in which the bank’s Japanese unit is expected to plead guilty to a criminal charge, according to people briefed on the matter who spoke of private discussions on the condition of anonymity. Along with the rare admission of criminal wrongdoing at the subsidiary, UBS could face about $1 billion in fines and regulatory sanctions, the people said.

The steep penalty, a surprise given the bank’s cooperation in the case, would represent the largest fine to date in the rate-rigging investigation. In June, the British bank Barclays agreed to pay $450 million to settle accusations that it influenced crucial benchmarks.

The settlement with UBS, which is based in Switzerland, could come as soon as Monday, the people briefed on the matter said. These people cautioned that the bank’s board had not yet approved the deal and it could still fall apart.

By pushing for a guilty plea, the Justice Department may be signaling a new aggressive stance.

Authorities have been reluctant to indict big banks, fearful of the potential for job losses and the ripple effect through the broader economy. If a bank pleads guilty to a crime, the case can be tantamount to a death sentence because the institution may lose its charter to operate.

Libor Explained

With UBS, federal prosecutors are trying to strike a balance. By levying a charge against the subsidiary, authorities send a powerful message, but stop far short of putting the company out of business.

Prosecutors decided against indicting HSBC over money laundering, concerned over the repercussions to the financial system. Instead, HSBC, the British bank, agreed on Monday to pay a record $1.9 billion in penalties.

On Thursday, Senator Charles E. Grassley of Iowa, the top Republican on the Senate Judiciary Committee, sent a letter to Eric H. Holder Jr., the attorney general, criticizing the Justice Department for an “inexplicable unwillingness to prosecute and convict those responsible for aiding and abetting drug lords and terrorists,” referring in part to the HSBC case. Mr. Grassley called the fine “hardly even a slap on the wrist,” given HSBC’s profit.

But the UBS case offers authorities a long-awaited moment to criminally punish a big bank. While the public is still simmering over the lack of prosecutions stemming from the financial crisis, the actions against UBS could help damp concerns that the world’s largest and most interconnected banks are too big to indict.

The Justice Department’s criminal division, which arranged the guilty plea with the Japanese subsidiary, could also strike a nonprosecution agreement with the parent company, the people briefed on the matter said. The deal will force UBS to continue cooperating with the wider rate manipulation case.

In a statement, a UBS spokeswoman said the bank continued “to work closely with various regulatory authorities to resolve issues relating to the setting of certain global benchmark interest rates. As we are in active discussions with these authorities, we cannot comment further.” The authorities leading the case — the Justice Department, the Commodity Futures Trading Commission, the Financial Services Authority of Britain and the Swiss Financial Market Supervisory Authority — declined to comment.

As the UBS investigation comes to a close, global authorities are fast-tracking several civil and criminal cases in connection to the manipulation of important benchmarks, including the London interbank offered rate, or Libor. Regulators and prosecutors have uncovered evidence that points to a systemic problem with the rate-setting process, which underpins trillions of dollars of financial products like mortgages, student loans and credit cards.

Authorities contend that some bank employees reported false rates to squeeze out extra trading profits and deflect concerns about their health during the financial crisis.

The fallout from the Libor case could be significant. The Royal Bank of Scotland has indicated that it could announce penalties before its next earnings release in a couple of months. Deutsche Bank also has set aside money to cover potential fines. In all, the investigation has ensnared more than a dozen big banks.

The push for criminal charges at UBS caught the bank off guard.

After settling a tax evasion case in 2009, the bank was eager to cooperate with authorities and gain leniency in the Libor case. UBS, for example, reached a conditional immunity deal with the antitrust arm of the Justice Department, which was supposed to protect the bank from criminal prosecution under certain conditions. But the deal did not extend to the Justice Department’s criminal division, giving authorities some leeway to take action.

With its reputation and profits on the line, the bank moved to dissuade the criminal division from pursuing charges. Bank officials have been meeting with authorities in Washington in a last-ditch effort to influence the outcome, according to the people briefed on the matter.

Eventually, the bank agreed to the broad contours of a settlement that included a guilty plea by the Japanese subsidiary. The bank is still negotiating the final elements of the deal.

Prosecutors are also expected to charge a former UBS trader who featured prominently in the investigation. On Tuesday, Britain’s Serious Fraud Office arrested three men in connection with the Libor case, including Thomas Hayes, a 33-year-old former trader at UBS and Citigroup, according to people with knowledge of the matter. The three men, which also included two people who worked at the British brokerage firm R P Martin, were released on bail the same day.

A lawyer for Mr. Hayes could not be located.

Mr. Hayes is expected to be a central figure in the case against UBS. The UBS settlement is likely to include accusations that Mr. Hayes and other employees colluded with traders at other banks to influence the direction of interest rates, as part of a broader scheme to increase their profits. Some UBS traders have been suspended or fired over the matter.

Mr. Hayes built his reputation as an interest rates trader at UBS. He worked at the Tokyo office of UBS from about 2006 to 2009 before departing for Citigroup. Citigroup fired Mr. Hayes the next year, for approaching a trading desk about influencing the yen-denominated Libor rates, and the bank reported his actions to regulators.

The role of Japanese operations came to the forefront last December when the country’s regulator sanctioned both UBS and Citigroup. Local regulators discovered that traders at the banks had tried to manipulate the Tokyo interbank offered rate, or Tibor, a main benchmark for borrowing in Japan.

The efforts to rig the rate were “unjust and malicious, and could undermine the fairness of the markets,” the Securities and Exchange Surveillance Commission of Japan said in a statement when recommending the nonfinancial penalties against UBS.

UBS has a big presence in Japan. The bank has more than 1,100 employees in the country, spread across its major business lines.

The guilty plea could have collateral consequences for the unit. For one, the guilty plea delivers a painful blow to its reputation, securities experts say. Depending on the details of the case, the group could also be subjected to an independent monitor and face some limitations on its business.

Charlie Savage and Hiroko Tabuchi contributed reporting.

A version of this article appeared in print on 12/14/2012, on page B1 of the NewYork edition with the headline: UBS Unit Is Said to Be Close to Guilty Plea in Rate-Rigging Scandal.

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DealBook: HSBC to Pay $1.92 Billion Fine to Settle Charges Over Laundering

HSBC's headquarters in London.Facundo Arrizabalaga/European Pressphoto AgencyHSBC’s headquarters in London.

4:37 a.m. | Updated

State and federal authorities decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system.

Instead, HSBC announced on Tuesday that it had agreed to a record $1.92 billion settlement with authorities. The bank, which is based in Britain, faces accusations that it transferred billions of dollars for nations like Iran and enabled Mexican drug cartels to move money illegally through its American subsidiaries.

HSBC said it had “reached agreement with United States authorities in relation to investigations regarding inadequate compliance with anti-money laundering and sanctions laws.” The bank is also expected to reach a settlement on Tuesday with Britain’s Financial Services Authority, according to a person with direct knowledge of the matter.

“We accept responsibility for our past mistakes,’’ HSBC’s chief executive, Stuart T. Gulliver, said in the statement. “We are committed to protecting the integrity of the global financial system. To this end, we will continue to work closely with governments and regulators around the world.”

While the settlement with HSBC is a major victory for the government, the case raises questions about whether certain financial institutions, having grown so large and interconnected, are too big to indict. Four years after the failure of Lehman Brothers nearly toppled the financial system, regulators are still wary that a single institution could undermine the recovery of the industry and the economy.

But the threat of criminal prosecution acts as a powerful deterrent. If authorities signal such actions are remote for big banks, the threat could lose its sting.

Behind the scenes, authorities debated for months the advantages and perils of a criminal indictment against HSBC.

Some prosecutors at the Justice Department’s criminal division and the Manhattan district attorney’s office wanted the bank to plead guilty to violations of the federal Bank Secrecy Act, according to the officials with direct knowledge of the matter, who spoke on the condition of anonymity. The law requires financial institutions to report any cash transaction of $10,000 or more and to bring any dubious activity to the attention of regulators.

Given the extent of the evidence against HSBC, some prosecutors saw the charge as a healthy compromise between a settlement and a harsher money-laundering indictment. While the charge would most likely tarnish the bank’s reputation, some officials argued that it would not set off a series of devastating consequences.

A money-laundering indictment, or a guilty plea over such charges, would essentially be a death sentence for the bank. Such actions could cut off the bank from certain investors like pension funds and ultimately cost it its charter to operate in the United States, officials said.

Despite the Justice Department’s proposed compromise, Treasury Department officials and bank regulators at the Federal Reserve and the Office of the Comptroller of the Currency pointed to potential issues with the aggressive stance, according to the officials briefed on the matter. When approached by the Justice Department for their thoughts, the regulators cautioned about the effect on the broader economy.

“The Justice Department asked Treasury for our view about the potential implications of prosecuting a large financial institution,” David S. Cohen, the Treasury’s under secretary for terrorism and financial intelligence, said in a statement. “We did not believe we were in a position to offer any meaningful assessment. The decision of how the Justice Department exercises its prosecutorial discretion is solely theirs and Treasury had no role.”

Still, some prosecutors proposed that Attorney General Eric H. Holder Jr. meet with Treasury Secretary Timothy F. Geithner, people briefed on the matter said. The meeting never took place.

After months of discussions, prosecutors decided against a criminal indictment, but only after securing record penalties and wide-ranging sanctions.

The HSBC deal includes a deferred prosecution agreement with the Manhattan district attorney’s office and the Justice Department. The deferred prosecution agreement, a notch below a criminal indictment, requires the bank to forfeit more than $1.2 billion and pay about $700 million in fines, according to the officials briefed on the matter. The case, officials say, will claim violations of the Bank Secrecy Act and Trading with the Enemy Act.

As part of the deal, one of the officials briefed on the matter said, HSBC must also strengthen its internal controls and stay out of trouble for the next five years. If the bank again runs afoul of the federal rules, the Justice Department can resume its case and file a criminal indictment. An independent auditor will also monitor the bank’s progress to strengthen its internal controls, and will make regular assessments on the firm’s progress.

Shares in the British bank fell less than 1 percent in morning trading in London on Tuesday.

The HSBC case is part of a sweeping investigation into the movement of tainted money through the American financial system. In 2010, Lanny A. Breuer, the head of the Justice Department’s criminal division, created a money-laundering task force that has collected more than $2 billion in fines from banks, a number that is set to double with the HSBC case.

The inquiry — led by the Justice Department, the Treasury and the Manhattan prosecutors — has ensnared six foreign banks in recent years, including Credit Suisse and Barclays. In June, ING Bank reached a $619 million settlement to resolve claims that it had transferred billions of dollars in the United States for countries like Cuba and Iran that are under United States sanctions.

On Monday, federal and state authorities also won a $327 million settlement from Standard Chartered, a British bank. The bank, which in September agreed to a larger settlement with New York’s top banking regulator, admitted processing thousands of transactions for Iranian and Sudanese clients through its American subsidiaries. To avoid having Iranian transactions detected by Treasury Department computer filters, Standard Chartered deliberately removed names and other identifying information, according to the authorities.

“You can’t do it. It’s against the law, and today Standard Chartered is being held to account,” Mr. Breuer said in an interview.

HSBC’s actions stand out among the foreign banks caught up in the investigation, according to several law enforcement officials with knowledge of the inquiry. Unlike those of institutions that have previously settled, HSBC’s activities are said to have gone beyond claims that the bank flouted United States sanctions to transfer money on behalf of nations like Iran. Prosecutors also found that the bank had facilitated money laundering by Mexican drug cartels and had moved tainted money for Saudi banks tied to terrorist groups.

HSBC was thrust into the spotlight in July after a Congressional committee outlined how the bank, between 2001 and 2010, “exposed the U.S. financial system to money laundering and terrorist financing risks.” The Permanent Subcommittee on Investigations held a subsequent hearing at which the bank’s compliance chief resigned amid mounting concerns that senior bank officials were complicit in the illegal activity. For example, an HSBC executive at one point argued that the bank should continue working with the Saudi Al Rajhi bank, which has supported Al Qaeda, according to the Congressional report.

Despite repeated urgings from federal officials to strengthen protections in its vast Mexican business, HSBC instead viewed the country from 2000 to 2009 as low-risk for money laundering, the Senate report found. Even after HSBC’s Mexican operation transferred more than $7 billion to the United States — a volume that law enforcement officials said had to be “illegal drug proceeds” — lax controls remained.

HSBC has since moved to bolster its safeguards. The bank doubled its spending on compliance functions and revamped its oversight, according to a spokesman. In January, HSBC hired Stuart A. Levey as chief legal officer to come up with stricter internal standards to thwart the illegal flow of cash. Mr. Levey was formerly an under secretary at the Treasury Department who focused on terrorism and financial intelligence.

On Monday, the bank said it was promoting Robert W. Werner, who oversaw the group at the Treasury Department that enforces sanctions, to run a specially created division focused on anti-money laundering efforts.

Regulators have also vowed to improve. The Congressional hearings exposed weaknesses at the Office of the Comptroller of the Currency, the national bank regulator. In 2010, the regulator found that HSBC had severe deficiencies in its anti-money laundering controls, including $60 trillion in transactions and 17,000 accounts flagged as potentially suspicious, activities that were not reviewed. Despite the findings, the regulator did not fine the bank.

During the hearings this summer, lawmakers assailed the regulator. At one point, Senator Tom Coburn, Republican of Oklahoma, called the comptroller “a lap dog, not a watchdog.”

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France Clinches Steel Investment, Saving Jobs

Workers at the plant said the announcement fell well short of what they had hoped from a government that won power in May on promises to combat industrial decline and mass job losses in Europe’s second-largest economy.

Prime Minister Jean-Marc Ayrault said ArcelorMittal, under fire for mothballing the site 18 months ago, would invest 180 million euros (146 million pounds) and had promised there would be no forced layoffs among some 630 workers there.

Ayrault said the two furnaces in Florange, a small town of some 11,000 people near the border with Germany, would not be restarted for now, given weak European steel demand.

ArcelorMittal would keep them in working order, however, for future use in a test project for environmentally friendly steel production.

“The government decided against the idea of a temporary nationalisation that was floated in recent days,” Ayrault told reporters, three hours before a midnight deadline to strike a deal. “It ruled that option out given the commitments secured from ArcelorMittal.”

Ayrault said the investment would reinforce cold-steel and packaging operations at Florange and secure jobs in those areas. ArcelorMittal had pledged its investment in Florange would not come at the expense of other sites in France.

The deal, the result of months of talks, came as the Italian Cabinet was meeting to approve a rescue plan for ILVA, Europe’s largest steel plant, which has 20,000 workers and is threatened with closure after accusations that emissions from the site had caused an environmental “disaster.”

Labour leaders from the Florange site responded angrily and vowed to fight on to make sure that what concessions had been wrung out of ArcelorMittal were respected.

“We’ve been betrayed,” said Martin Edouard, a member of the CFDT union at the Florange furnaces, told reporters.

“This is unbelievable, if that’s what politics is about, what a joke,” said Walter Broccoli of the FO union.

The European steel industry is struggling with overcapacity at a time of recession in the euro area and cheap competition in emerging markets.

Florange, located in France’s former industrial heartland, has become symbolic of the country’s long industrial decline and a test case for whether Socialist President Francois Hollande can make good on a vow to reverse a relentless surge in unemployment.

ArcelorMittal said earlier this year the Florange site’s two furnaces were not viable, but Hollande insisted they should be kept open and threatened a temporary state takeover of the site while the government sought a permanent buyer.

The two blast furnaces together employ about 630 out of the 2,700 workers at the entire site.

Ayrault offered no details on what workers would do beyond not being laid off, or a time frame for any future project to revamp the furnaces using European Union credits to produce environmentally friendly steel.


Hollande’s government faced roars of criticism from business leaders this week over its threat to nationalise Florange.

Industry Minister Arnaud Montebourg, who shocked foreign investors this week by saying Arcelor’s Indian chief executive, Lakshmi Mittal, was no longer welcome in France, had said the government had identified an industrialist ready to inject 400 million euros into the site.

Earlier on Friday, Montebourg huddled in a cafe with a group of orange-vested metal workers protesting near the Finance Ministry, telling them nationalisation was still an option.

Yet Hollande, who is battling to appease both left-wing voters angry at unemployment and foreign investors impatient to see structural reforms, is wary of the stigma even a temporary nationalisation would carry abroad.

Officials had defended the idea of a temporary nationalisation, saying it was a special case because ArcelorMittal had broken promises to keep the furnaces running.

But ArcelorMittal denies breaching commitments. Sources close to the group say Arcelor planned in 2003 – before its 2006 takeover by Mittal – to wind down inland blast furnaces in Europe, including the two in Florange, by 2010.

The group says overcapacity in Europe’s steel market, with demand 28 percent below peak 2007 levels, has made Florange’s furnaces uneconomical and that a buyer would have to absorb deep losses to take them on, even with the rest of the site.

Florange Mayor Philippe Tarillon relayed the extent of dismay with ArcelorMittal’s boss, telling French media: “I understand the workers would have preferred to get rid of Mr Mittal. And I will share a secret with you. Me too.”

(Additional reporting by Nick Vinocur and Emmanuel Jarry in Paris and Phil Blenkinsop in Brussels; Writing by Catherine Bremer and Brian Love; Editing by Sophie Hares and Peter Cooney)

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