Fabrice Coffrini/Agence France-Presse — Getty ImagesA branch of UBS in Lausanne, Switzerland. The bank paid about $1.5 billion in fines for its role in manipulating interest rates.
12:22 p.m. | Updated
LONDON — British prosecutors have filed eight fraud charges against a former UBS trader in the first criminal case in London in connection with the manipulation of benchmark global rates.
The case against the trader, Tom A.W. Hayes, comes after United States charges brought against him and a fellow trader late last year. UBS is one of more than a dozen global banks that have been ensnared in a multiyear investigation by United States, British and other authorities into manipulation of the London interbank offered rate, or Libor. Such benchmark rates help determine the borrowing rates for trillions of dollars of mortgages, business loans, credit cards and other financial products
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With the latest criminal charges, Britain has now escalated its part in the global crackdown on rate-rigging. The Serious Fraud Office of Britain said on Tuesday that Mr. Hayes had been charged that morning at a police station in London’s financial district with offenses of conspiracy to defraud in connection with the continuing Libor investigation. Mr. Hayes is scheduled to appear before a London magistrates’ court on Thursday morning, the agency said.
“He attended Bishopsgate police station this morning where he was charged by City of London Police with eight counts of fraud,” the Serious Fraud Office said in a statement.
A lawyer for Mr. Hayes, Lydia Jonson, declined to comment.
The charges are the latest blow to Mr. Hayes, 33, a British national who worked in Tokyo. Mr. Hayes and another former UBS trader, Roger Darin, 41, of Switzerland were already charged with conspiracy by the United States Justice Department in a criminal complaint that was unsealed in December. The Justice Department also charged Mr. Hayes with price fixing, stemming from an allegation that he collaborated with another bank to rig interest rates.
Libor Explained
The fresh round of charges comes nearly a year after the first settlement in the Libor case, when Barclays of Britain agreed to pay $450 million to British and American authorities. American and British authorities later struck a settlement with Royal Bank of Scotland, which agreed in February to pay $612 million over its role in the Libor scandal.
Mr. Hayes, who also previously worked for Citigroup, figured prominently in a separate case against UBS, whose Japanese subsidiary pleaded guilty last year to one count of felony wire fraud as part of a settlement with the Justice Department. Under a broader deal with American, British and Swiss authorities, UBS paid $1.5 billion to settle the case.
But while American and British authorities built these cases over several years, the Serious Fraud Office often appeared uninterested in the Libor investigation, at times irritating other prosecutors. Now, the British action against Mr. Hayes will test the somewhat tenuous relationship between the office and its American counterparts, setting up a potential turf battle over where the former trader will stand trial.
When announcing the first charges against Mr. Hayes last year, people close to the Justice Department in Washington privately expressed concern about extraditing the former trader to the United States. With the Serious Fraud Office issuing its own charges against Mr. Hayes, the Justice Department’s chances at trying a case in the United States grew even dimmer.
David Green, who took over the Serious Fraud Office last year, has said that cooperation with the United States is important, but that Britons who worked for British companies should be tried in Britain.
Mr. Hayes was one of three individuals arrested and questioned by the police and staff members of the Serious Fraud Office last December. Two employees of the brokerage RP Martin Holdings were also held, but all three were released on bail pending further investigations.
Mr. Hayes, who is from Surrey in southeast England, started his career as a trainee for the Royal Bank of Scotland, before joining UBS in 2006, where he became one of the highest-earning traders.
But he was also at the center of the rate-rigging activity, according to the Justice Department’s complaint, which cites his own instant messaging conversations as evidence of his actions. In a November 2006 instant message sent to a junior UBS employee, for example, Mr. Hayes explained that he and a colleague “generally coordinate” and “skew the libors a bit.”
Mr. Hayes, prosecutors say, later spread the scheme to other firms, enlisting the help of middlemen at brokerage firms. The brokers, prosecutors say, convinced other banks that set Libor to tamper with rates.
In an August 2008 e-chat, Mr. Hayes expressed appreciation for one broker’s effort, saying, “Yeah, I reckon I owe” this person “a lot more.” Another broker responded that the person was “ok with an annual champagne shipment,” and “a small bonus every now and then.”
Mr. Hayes ultimately left UBS and joined Citigroup, where he was a trader based in Tokyo. At Citigroup, he earned a director title, but spent less than six months trading. The bank suspended him in 2010 after he was suspected of approaching a London trading desk about improperly influencing the yen-denominated Libor rates, a person briefed on the matter said. He left Citigroup later that year, and the bank reported his suspected actions to authorities.
Julia Werdigier reported from London; Ben Protess reported from New York.
Article source: http://dealbook.nytimes.com/2013/06/18/britain-charges-former-trader-in-libor-investigation/?partner=rss&emc=rss