Former Brokers Stand Trial Over Libor -- Update

By Margot Patrick 

LONDON--Six former brokers with nicknames including "Lord Libor" and "Big Nose" helped convicted bank trader Tom Hayes rig interest-rate benchmarks for financial gain, a London court heard Tuesday on the first day of a criminal trial.

Prosecutor Mukul Chawla of Britain's Serious Fraud Office said the former employees of ICAP PLC, RP Martin Holdings Ltd. and Tullett Prebon PLC were "willing and enthusiastic" participants whom he alleged took kickbacks and bribes in their attempts to help Mr. Hayes manipulate rates.

Darrell Read, Colin Goodman, Danny Wilkinson, all former ICAP employees, Terry Farr and James Gilmour, who worked at RP Martin, and Noel Cryan, a former Tullett Prebon broker, are charged with conspiring to rig rates. Among the allegations is that the brokers encouraged or attempted to persuade traders at banks to submit false Libor rates.

All six men have pleaded not guilty.

At his own trial over the summer, Mr. Hayes was convicted of conspiring with others to manipulate the London interbank offered rate, or Libor, to make money for himself and his employers. He was sentenced to 14 years in prison and is seeking to appeal his conviction and sentence.

Mr. Chawla told the 12-person jury that in a period from August 2006 to September 2010, the six defendants interfered with the "critical financial process" of benchmark-setting in order to help Mr. Hayes and other traders make a profit.

Libor is the estimated rate banks charge to lend money to each other and is used as a benchmark to set rates on many consumer loans.

"They provided enthusiastic assistance for a simple motive: financial," Mr. Chawla alleged.

In a brief description of each broker's work history and responsibilities, Mr. Chawla referred to nicknames used by the defendants and their contacts, including Mr. Read's moniker "Big Nose" and Mr. Goodman's signoff on messages as "Lord Libor."

The Serious Fraud Office is expected to lay out its case over five days before presenting evidence and expert witnesses to the jury. Lawyers for the defendants will then present their cases around mid-November, in a trial that is scheduled to last up to 14 weeks.

Mr. Chawla told the jury that the alleged actions of the brokers led to the manipulation of an interest-rate benchmark that is linked to trillions of pounds in financial transactions, including home mortgages, and is crucial to market confidence.

As he described the case, Mr. Chawla urged jurors not to panic over financial jargon or the reams of written and phone communications that they would have to consider in reaching their conclusions about each defendant. He pointed them to a glossary of both financial terms and more-colloquial terms they would see in written evidence, such as "yard" for $1 billion and "poo" for champagne.

"At its heart, this is a simple case. You don't have to be bankers or in the financial industry to understand," Mr. Chawla said. "The focus...is whether these alleged conspiracies existed, and whether these defendants, by doing what they did, were dishonest."

As a taste of what the jury would see and hear in the coming days, Mr. Chawla played a recording of a conversation between Mr. Farr and Mr. Hayes in June 2009, in which Mr. Farr confirmed that he had followed Mr. Hayes's earlier, written instructions, also shown to the jury, to ask traders at various banks to raise the rate on their Libor rate submissions from the previous trading session.

"It's nothing more and nothing less than dishonest manipulation, dishonest rigging of the market," Mr. Chawla said.

A global investigation into Libor manipulation started in 2008 after an article in The Wall Street Journal and other reports questioned the accuracy of the rate in the lead-up to the financial crisis.

In 2012, Barclays PLC became the first bank to settle rate-rigging allegations with global authorities, sparking the resignation of top executives and leading to global regulatory reforms around market benchmarks.

In all, the probe has ensnared at least 18 financial institutions and around three dozen individuals. A U.S. trial of bank traders is scheduled to begin later this month.

Write to Margot Patrick at [e-mail]

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(END) Dow Jones Newswires

October 06, 2015 13:06 ET (17:06 GMT)

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