Big Nose, Lord Libor Helped Hayes Rig Libor, Prosecutor Says

  • ICAP, Tullet Prebon brokers on trial in second Libor case
  • The motivation was simply `financial,' prosecutors say

Former ICAP Plc brokers known as “big nose” and “Lord Libor” helped Tom Hayes rig the London interbank offered rate “enthusiastically” over four years, prosecutors said on the first day of the second trial into benchmark manipulation.

The ICAP employees, Darrell Read and Colin Goodman, are among a half dozen brokers that are charged with manipulating the rate at a trial that started today in London. Also in court is their former boss, Danny "Blair" Wilkinson, and former employees at RP Martin Holdings Ltd. and Tullett Prebon Plc. All six have pleaded not guilty.

Hayes, who traded derivatives for UBS Group AG and Citigroup Inc. in Japan, was convicted Aug. 3 of conspiring with others to defraud by manipulating yen Libor between 2006 and 2010, and sentenced to 14 years. He is appealing the conviction and the sentence. 

"These six defendants agreed to abuse" a "critical financial process with which they had no interest," Mukul Chawla, the prosecutor for the Serious Fraud Office, said in his opening remarks. "The motivation in each case was a simple one: financial." They were "rewarded in various ways."

Libor is based on a survey in which several of the world’s largest banks are asked to estimate their borrowing costs each day at 11 a.m in London. Brokers, who line up buyers and sellers, don’t contribute to the rate or directly benefit from where it’s set, but are accused of using their position in the middle of the market to influence it on behalf of favored clients.

Everyday Word

"You don’t have to be a banker to understand it," Chawla told the 12-person jury. Dishonesty "is an ordinary everyday word that has the same meaning inside the court as outside it."

Hayes rewarded the brokers by using wash trades, where two parties carry out transactions that cancel each other out for the sole purpose of generating brokerage fees. RP Martin and Tullett Prebon were paid more than 450,000 pounds ($685,000) for wash trades involving Hayes, Chawla said.

The trial is scheduled to last 12 weeks and the defendants’ lawyers will respond to the allegations at a later point in the case. The case is being heard by Justice Nicholas Hamblen, a former barrister specializing in insurance and shipping cases.

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