Hayes Asked Step-Brother for ‘Huge Favor’ on Yen-Libor Rate

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Former UBS Group AG trader Thomas Hayes tried to recruit his step-brother to help him manipulate benchmark interest rates, asking for a “huge favor” to set a Libor rate “on the low side.”

In a series of phone calls and electronic messages in 2007, Hayes asked Peter O’Leary, then a junior trader at HSBC Holdings Plc in London, to befriend the U.K. bank’s yen-Libor setter, Mukul Chawla, the prosecutor, told jurors Wednesday, on the second day of Hayes’s trial in London.

“Do you know the cash guy who sets yen libors at your place?” Hayes asked his brother in an April 20, 2007, message shown to jurors. “Can you do me a huge favor and ask him if he could set his 3m yen libor on the low side for the next few days as I have 1m usd of fixes.”

Hayes, 35, is accused of eight counts of conspiracy to manipulate the London interbank offered rate, the benchmark used to value more than $350 trillion of loans and securities, from 2006 through September 2010. The former trader, who worked at banks including UBS and Citigroup Inc., has pleaded not guilty to the charges.

When O’Leary said on a phone call later that day that he didn’t know the submitter well, Hayes suggested that his step-brother buy him “a few drinks.”

Change of Heart

After reminding his step-brother several times to approach the HSBC submitter, Hayes had a change of heart.

“I don’t think I’m going to bother asking for your help on Libors any more,” Hayes said on a June 29, 2007, call with O’Leary. “I don’t want to put you in that position.”

Hayes had more success with counterparts at other banks, including JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc, Chawla said.

“Could you do me a favour and ask your cash guys to try and keep 3m libor up today,” Hayes wrote to a derivatives trader at JPMorgan in an instant message on Jan. 25, 2007, that was shown to the court.

“Will do,” was the reply.

In a separate message to an RBS trader Hayes knew from his time at the bank, Hayes boasted about his relationships.

“3m is too high cause I have kept it artificially high,” Hayes said in an instant message on Feb. 2, 2007.

Cash Desk ‘Mates’

He explained that he was able to do this “by being mates with the cash desks.”

“Chase and I always help each other out,” Hayes said in the message, referring to JPMorgan Chase.

By the end of 2007, brokers were getting nervous about the language Hayes was using when he contacted them asking for their assistance in manipulating Libor, Chawla said.

“Had a lot of compliance pressure recently due to credit problems,” one broker wrote to Hayes in a Nov. 1, 2007, message. “We both need to be a little more subtle in our ’views.’”

Following that conversation the broker started adopting code words in his communications with Hayes, the prosecutor said.

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