Three former Barclays traders have been convicted of rigging the Libor inter-bank lending rate in the run-up to the financial crash in 2008.
Appearing at Southwark Crown Court yesterday after a three-month trial, Jay Merchant, Jonathan Mathew and Alex Pabon were convicted of conspiracy to defraud between 2005 and 2007. They will be sentenced on Thursday.
The jury was unable to reach a verdict on similar charges against two other defendants, Ryan Reich and Stelios Contogoulas.
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Libor - London inter-bank offered rate - is used by banks to set prices for financial products and "underpins trillions of pounds worth of loans and financial contracts for households and companies across the world", says the BBC.
The convictions are a "major victory" for the UK's Serious Fraud Office, which conducted the investigation.
They also come four years after 11 major banks and brokerages, including Barclays, received hefty fines over rate-fixing, prompting "a political and public backlash that forced out former CEO Bob Diamond, an overhaul of Libor rules and the criminal inquiry", says The Guardian.
The defendants argued they should not be found guilty "because they did not know they were behaving dishonestly and so did not meet the legal definition of fraud", reports the Daily Telegraph.
They said the bank's trading desks operated under a culture of bullying and that communicating demands for Libor to go up or down was expected of them by senior managers. This contradicts Barclays' consistent statements that executives knew nothing of the rigging.
However, the Serious Fraud Office argued that in the end "the key issue in this case was dishonesty", a sentiment evidently supported by the jury.
Ex-Barclays bankers claim 'bullying' as their Libor defence
02 June
Five former Barclays bankers on trial in London for fixing a global interest rate benchmark are "blaming a bullying culture in the office for their actions", says Business Insider.
Yesterday, defendants Jonathan Mathew, Stylianos Contogoulas, Jay Merchant, Alex Pabon and Ryan Reich each "took to the stand in their own defence", reports the Financial Times. They claimed that in one way or another, they were following orders, with the jury hearing of "the stress and pressure they felt".
"You definitely follow instructions from your boss," Pabon testified.
Mathew, meanwhile, described how his boss, Peter Johnson, called him a "deaf git" and would "humiliate" him by "whacking" him on the back of the head with a 12ins baseball bat.Johnson, the "main Libor submitter at Barclays", has "already pleaded guilty to conspiring to manipulate the rate", adds the FT. Mathew "submitted Barclays' daily estimates" when Johnson was away and says he was merely doing as he was told by his manager, who was "very highly regarded" within the bank.
Merchant, who was paid £2.2m in 2007, previously told the jury at Southwark Crown Court he found it "difficult to believe" that some of the most senior executives at Barclays' investment bank, including "former global head of fixed income Eric Bommensath, chief operating officer Mike Bagguley and Harry Harrison", were unaware of the artificial submissions, reports Bloomberg.
The three executives have already testified for the prosecution and said they were unaware of the traders' requests. Barclays itself, as well as other banks implicated in the fixing scandal, has always maintained that senior managers were unaware of the activities.
Barclays was one of 16 banks that submitted a daily estimate of the rate at which it would lend money to its peers. The average from this was used to set the Libor benchmark, against which billions of pounds of transactions are benchmarked, at around lunchtime each day.
Contogoulas, Marchant, Pabon and Reich are accused of entering into transactions that depended on Libor and then submitting requests to move the benchmark in ways that would be more profitable for their trades. Mathew is accused, along with other submitters at the bank, of changing rates estimates to comply with these requests and benefit the bank's trading book.The trial continues.
Barclays five were 'driven by money' to rig Libor rates, trial told
6 April
Five former Barclays bankers have gone on trial in London, accused of manipulating the key Libor interest rate, which is used as the basis for hundreds of billions of pounds of transactions around the world every day.
Jonathan James Mathew, Stylianos Contogoulas, Jay Vijay Merchant, Alex Pabon and Ryan Reich appeared before Southwark Crown Court yesterday. They have denied one count of conspiracy to defraud during a two-year period spanning 2005 to 2007, the BBC notes.
Jurors were told that Mathew was one of the team responsible for submitting the Barclays rate to a 16-bank panel that set Libor before lunch each day. Prosecution counsel James Hines told the court the other defendants would ask him to set the rate artificially higher or lower to benefit their own trading positions.
Libor - the London Interbank Offered Rate - is the aggregate rate at which banks are willing to lend money to each other and is a key benchmark for liquidity in the financial system. Mortgages, loans and a variety of financial instruments derive their value from it, meaning the manipulation affects "every company, every government, perhaps every household… directly or indirectly", the court was told.
"So this case is about employees of Barclays Bank rigging, for their own advantage, what is in fact a global benchmark interest rate. In doing so they were driven by money," said Hines, according to The Guardian.
"It is clear that the purpose of the agreement was specifically to prejudice the economic interest of the other parties… [who] were to lose out financially and economically. It really is not different from stealing."
Very few bankers have been punished for their roles in Libor rigging, which was widespread but has proven difficult to pin down due to the unregulated nature of the process at the time. One banker, Tom Hayes, was jailed last year for 14 years, reduced to 11 on appeal in December.
Barclays was one of a number of banking groups to have been punished at corporate level for the behaviour. It was fined £290m by UK and US regulators in 2012 for the activities of its bankers.
