• Tom Hayes discussed UBS Libor strategy with ICAP broker
  • UBS Told Libor Setters to `Err on the Low Side' in 2007

The decision of UBS Group AG managers to lowball Libor submissions during the financial crisis was openly discussed by Tom Hayes and a broker accused of helping him rig the benchmark rate, according to e-mails presented in a London court.

Darrell Read
Darrell Read
Photographer: Matthew Lloyd/Bloomberg

When Darrell Read, a broker at ICAP Plc on trial in London, complained in 2007 that the rates were low, Hayes blamed the problem on managers that instructed employees to keep the benchmark down.

"It’s all senior management mate," Hayes wrote back. "They want to show the world we’re the strongest bank."

Read, 50, is one of six brokers from ICAP, Tullett Prebon Plc and RP Martin Holdings Ltd. on trial for conspiring to defraud by helping Hayes rig a version of the London interbank offered rate tied to the yen. Hayes, a former trader at UBS, was convicted of similar charges in August and was sentenced to 14 years in prison.

The exchange between Hayes and Read came a month after a bank official sent around a note instructing rate setters to “err on the low side.”

"Can you please advise whoever contributes fixing our rates on the derivatives side to coordinate" with my team, Gaspare La Sala, the manager who oversaw rate-setting, wrote in an Aug. 9, 2007, e-mail to other managers, that was shown to jurors. "It is highly advisable to err on the low side with fixings for the time being to protect our franchise in these sensitive markets.”

In April 2008, when articles started to appear suggesting banks were low balling the rate to give the impression they were healthier than they were, managers switched their instruction and told employees to come back into “the pack.”

"Looks like our posted rates are lagging the panel and peer banks," UBS executive Marc Silverman wrote to fellow managers on April 22, 2008, in another message shown to jurors. "Spoke with Gaspare and agreed to adjust our posted levels upward to better reflect" cash markets.

The trial is scheduled to last 12 weeks and the defendants’ lawyers will respond to the allegations at a later point in the case. Hayes, who worked at UBS before Citigroup Inc., is appealing his conviction and the 14-year prison sentence.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE