Tom Hayes the Banks Fall Guy – Could he have done this all on his own?

Posted on

Are we looking at the fall guy? I suspect we are as there were lots of people involved in the endemic corruption in the banking system around the world. Yesterday former City trader Tom Hayes was found guilty at a London court of rigging global Libor interest rates, did he do this on his own? I don’t think so and why were not more people in court such as the CEO’s of all the banking organisations involved?

Surely the culture that allowed this to happen would have been allowed from the top. There must be some culpability there? Or is there a degree of abandonment and looking for scape goats going on?

Mr Hayes was sentenced to 14 years in prison for conspiracy to defraud. The 35-year old is the first individual to face a jury trial for manipulating the rate, which is used as a benchmark for trillions of pounds of global borrowing and lending.

Many of the world’s leading banks have paid heavy financial penalties for tampering with the key benchmark. The jury found Hayes guilty on all eight charges of conspiracy to defraud. Hayes stood impassively as the foreman on the jury read out all eight guilty verdicts. His wife noted down the verdicts as they were read out. At one point, he shook his head and looked across at his wife, mother and stepfather in the public gallery, he was probably thinking about all of his former colleagues who would have been involved both here and overseas.

Get a second opinion on your current portfolio with a Second Opinion Report

Are you paying too much in industry fees? Do you know the impact this could be having on your portfolio?

Our Free Second Opinion Report is designed to help you get a better understanding of the real potential of your current portfolio.

88% of portfolios we’ve reviewed could have benefited from our SOS performance accelerator.

Get a free report

Hayes held his head in his hands while his lawyer read out a list of mitigating factors. Hayes was sentenced to 14 years, half to be spent in custody before any possibility of release on licence.

Justice Cooke said Hayes was the “centre and hub” of the manipulation, I would suggest that is a simplification and perhaps more about the establishment closing ranks to possibly ensure that the actual truth of the matter did not get out.

You cannot rig something as complex as the Libor rate on you own. He said: “You succumbed to temptation because you could … To gain remuneration, seniority and status,” adding that Hayes’ actions were “wrong and dishonest”. None of which I would disagree with however, the scandal is much wider than one person, it is ridiculous to suggest that one man can bring down the entire banking system.

If that is the case the entire banking system itself is utterly unsound.

The case was brought by the Serious Fraud Office, which said Hayes set up a network of traders and brokers spanning 10 financial institutions and cajoled or bribed them to help rig Libor rates for profit.

Meaning there are many others involved!

During the trial, jurors were told that Hayes promised to pay a broker up to $100,000 to keep the Libor rate “as low as possible”. Meaning it spanned continents– one man did this and is entirely to blame?

14 years for stealing Trillions of $’s? Rob a bank of a few thousand and you get life?

It took the jury one week to arrive at the verdicts. Defence barrister Neil Hawes asked the judge to take into account the prevalence of Libor manipulation at the time, and also that Hayes had been diagnosed with Asperger’s syndrome, a condition on the autism spectrum. Mr Hawes also said that managers and senior managers at Hayes’ bank knew of, and in some cases condoned, Libor manipulation.

Hayes, a former star trader originally from Fleet in Hampshire, rigged the Libor rates daily for nearly four years while working in Tokyo for UBS, then Citigroup, from 2006 until 2010. Citigroup says it has no comment about the verdicts.

UBS has said it was not a party to the case. Hayes’s trading activities were based around movements in theLibor rate – the London interbank offered rate. It is an interest rate used by banks around the world to set the price of financial products worth trillions of pounds.

Rigging even minor movements in the rate can result in bumper profits for a trader manipulating the rates, or the rate can be moved simply to make a bank look more creditworthy.

During the trial, the court heard that manipulating the Libor rate was so commonplace that an offer of a Mars Bar could get it changed. Hayes told a fellow trader: “Just give the cash desk a Mars bar and they’ll set wherever you want.”. Hayes confessed, saying that he did not want to be extradited to the US.

He claimed that the manipulation was widespread. Hayes initially co-operated with investigators, confessing to the manipulation. Four months after he was charged in 2013, he changed his legal team, and his plea.

He pleaded “not guilty” to the charges, resulting in the trial, which began on 26 May. Many involved, so endemic, the root cause is the culture yet only one man is charged? What is wrong with this picture?

Did he do this on his own? Certainly not he was not a loan rogue trader and why were not more people in court such as the CEO’s of all the banking organisations involved? 14 years for stealing Trillions of $’s? Rob a bank of a few thousand and you get life? Surely it should be several life sentences?

I have relied on Hannah for financial advice and support for a number of years now, in what has been a very turbulent time in the financial markets. Goldsmith continue to look for innovation and always strive to take the administration pain away. In a world where people in the financial services industry believe that they are owed a very good living by the rest of us that are not in that world, their approach is down to earth and their focus on supporting their clients is most welcome.

Dr R Fisher