Ex-Rabobank Rookie Describes `Subtle' Culture of Rigging

  • Japanese yen derivatives trader is third cooperator to testify
  • Two defendants in Libor-manipulation trial may testify

At Rabobank Groep, new hires on the cash-trading desk learned quickly what you had to do to thrive when trading derivatives tied to the London interbank offered rate, a former employee told a federal jury in Manhattan.

Takayuki Yagami, a former Japanese yen derivatives trader for Rabobank, said that soon after starting his training at the bank’s London office in 2000, his supervisor Paul Robson instructed him on the importance of accommodating rate-submission requests made by colleagues. 

Yagami testified as prosecutors wound up their case and lawyers for two defendants, former Rabobank traders Anthony Allen and Anthony Conti, said their clients may take the stand.

“I observed Mr. Robson and other traders on the money-market trading desk in London when I first joined Rabobank, they were exchanging their preferences,” Yagami said when asked by a prosecutor why he started manipulating the yen Libor. “At the time, I wanted to be part of it.”

Then, he took his new skills home to Japan.

Yagami’s testimony shows how the benchmark manipulation spread through offices of the Utrecht, Netherlands-based bank, which in 2013 agreed to pay $325 million to resolve a U.S. federal investigation of the manipulation of benchmarks tied to more than $350 trillion of loans and securities. 

Yagami said he was instructed by Robson and other colleagues to be “subtle” when making requests, to evade the notice of those who weren’t participating in the scheme, and took the skills overseas when he returned to Rabobank’s Tokyo office, he said.

Last Witness

Yagami is the last former bank employee to testify at the trial of former colleagues Allen and Conti. After pleading guilty and cooperating with the U.S., Yagami has told jurors that Allen, Conti, his boss Tetsuya Motomura, Robson and another trader, Lee Stewart, all participated in the scheme. 

After returning to Rabobank’s Tokyo office, where he began trading interest-rate swaps tied to Japanese yen Libor, Yagami said he realized he could make money by getting help on Libor submissions from his London colleagues.

Yagami said he was instructed by Allen and others to be “subtle” in his requests, because they “wanted to be sure traders who were not in the scheme or in this Libor-requesting culture would not notice.”

The prosecution said it expects to finish it presentation of evidence as early as Monday.

Defense Testimony

Allen and Conti, who have pleaded not guilty to the charges, face as long as 30 years in prison if convicted. Based in Rabobank’s London office, both men are accused of conspiring to manipulate the benchmark. 

After court recessed for the day, Allen’s lawyer Michael Schachter and Conti’s attorney Aaron Williamson told U.S. District Judge Jed Rakoff that they expected their clients to testify. Schachter told Rakoff that Allen may reconsider. The judge gave both men until Sunday to decide.

If both men do take the stand, prosecutors argued, the government should have access testimony they gave to U.K. authorities during a separate Libor investigation.

Schachter said that because the two were compelled to answer questions before the U.K. Financial Conduct Authority, using their testimony would violate U.S. constitutional prohibitions against self-incrimination. Rakoff said he would wait to see lawyers’ submissions before ruling.

First Case

The case is the first U.S. trial tied to the alleged manipulation of interest rates tied to more than $350 trillion of loans and securities.

Seven Rabobank employees, including Allen and Conti, were charged by the U.S. Yagami, Robson and Stewart pleaded guilty to the scheme and testified at the trial while two other men are considered fugitives. One of them, Paul Thompson, has been arrested in Australia, according to a person familiar with the matter.

The defense on Friday also asked to introduce evidence that Allen and Conti waived extradition and came to the U.S. voluntarily to face trial, showing their “consciousness of innocence.”

“We believe Mr. Allen’s waiver of extradition is significant, unlike several co-defendants who are still at large,” Schachter said.

“Mr. Thompson has been arrested this afternoon,” Rakoff replied. He didn’t rule on the request.

The case is U.S. v. Allen, 14-cr-272, U.S. District Court, Southern District of New York (Manhattan).

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