Ex-Citigroup Trader Denies Wrongdoing in Tibor Probe

An ex-Citigroup Inc. executive accused in a probe by Japanese regulators of suspected interest-rate manipulation denied wrongdoing and said authorities never questioned him before they issued findings.

Christopher Cecere, who worked for Citigroup in Tokyo as head of G10 trading and sales for Asia until 2010, was identified as “Director A” in a Dec. 16 administrative case by Japan’s Financial Services Agency, according to two people with knowledge of the inquiry. The agency said Director A and another Citigroup trader engaged in “seriously unjust and malicious” conduct by asking bankers to alter data they submitted while setting a benchmark Japanese lending rate. Japan’s FSA penalized the firm and took no action against the employees.

During Citigroup’s internal investigation, the New York-based bank didn’t question Cecere about his conduct or indicate to him that it suspected he had acted improperly, he said in a Feb. 10 phone interview. Regulators also didn’t seek his version of events, he said. He left the firm in good standing, he said. He later joined Brevan Howard Asset Management LLP, a London-based hedge fund that manages about $33 billion.

Japan’s regulators were the first to announce findings as authorities in Asia, Europe and the U.S. conduct widening inquiries into whether employees at some of the world’s biggest banks sought to manipulate the London, Tokyo and euro interbank offered rates, known as Libor, Tibor and Euribor, respectively. The rates were used by investors to gauge the ability of firms to borrow money at the height of the 2008 credit crisis and can play a key role in derivatives trades.

British Bankers’ Association

Libor, a benchmark for about $360 trillion of financial products worldwide, is derived from a survey of banks conducted daily for the British Bankers’ Association in London. The lenders are asked how much it would cost them to borrow from one another for 15 different periods, from overnight to one year, in currencies including dollars, euros, yen and Swiss francs. After a predetermined number of quotes are excluded, those left are averaged and published for each currency by the BBA before noon.

According to the findings of Japan’s FSA, Director A repeatedly approached a Citigroup employee responsible for submitting rates for Tibor at least as far back as April 2010. Another employee, called Trader B, also approached people at other banks, the agency said. The pair sought to influence Tibor to benefit their derivatives transactions, the FSA said, without specifying whether they succeeded in changing the benchmark.

While Cecere asserted his innocence, he declined to comment on the FSA’s description of events, including whether he pressed someone to change rates for Tibor, saying he has no insight into the watchdog’s investigation or findings.


Citigroup was forced to write off $50 million as it exited trades made by Tokyo-based employees, a person familiar with the matter said last week. Thomas Hayes, a Tokyo-based trader for Citigroup, was dismissed for suspected involvement in the rate manipulation, according to two people familiar with the case. Contact information for Hayes couldn’t be found.

Cecere said the holdings that Citigroup recorded losses on were one of many businesses that reported to him in his role overseeing sales and trading units in Asia.

Banks including Citigroup, London-based Barclays Plc and UBS AG approached authorities with information about potential abuse of the rate-setting process after discovering e-mails or other evidence during internal probes, the Financial Times reported last week, citing people familiar with the matter.

Regulators Investigate

Regulators are investigating whether rate bids were low-balled during the financial crisis, if traders at banks and hedge funds sought to influence rate-setters to profit on interest-rate derivatives and whether traders received advanced word about which direction rates would move, the FT reported, without saying how it got the information.

Japan’s FSA said in December that Citigroup’s local securities unit would be banned from trading tied to the London and Tokyo interbank offered rates for two weeks from Jan. 10.

Toshiharu Mashita, a spokesman for the FSA, declined to elaborate on the regulator’s December report. The watchdog didn’t interview Cecere or Hayes during its inquiry because both had left Citigroup, according to a person briefed on the case.

Mika Nemoto, a Tokyo-based spokeswoman for Citigroup, declined to comment on Cecere’s remarks.

The agency also faulted Citigroup for allowing Director A to trade derivatives since Nov. 12, 2009, without first registering him as a Class-1 sales representative with the Japan Securities Dealers Association, the agency said. Director A wasn’t registered until June 16, 2010, it said.

Citigroup Review

Investigators had disagreed with Citigroup’s internal review. The FSA accused the bank of sending Japan’s Securities and Exchange Surveillance Commission a report on the Libor incidents that failed to describe how its employees had sought to manipulate Tibor and that relied on “an untruthful description” to draw conclusions. The agency didn’t elaborate.

Japan’s FSA is handling the international investigation of firms along with the U.S. Securities and Exchange Commission, Commodity Futures Trading Commission and Department of Justice, and the U.K. Financial Services Authority. European Union antitrust regulators and the Swiss Competition Commission also are examining Libor rates.

(Corrects to remove time reference in eighth paragraph.)
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