Ex-Rabobank Traders Avoid Lengthy Prison Terms Over Libor

  • Judge rejects U.S. request for tougher sentence for Allen
  • U.S. said scheme to rig Libor affected thousands of victims

Two former Rabobank Groep traders in London avoided lengthy prison sentences for manipulating a key financial benchmark as a judge brushed aside a U.S. call to severely punish those responsible for wrongdoing in the banking world.

Anthony Allen and Anthony Conti were the first bankers to go to trial in the U.S. in the government’s investigation of industrywide collusion to rig the London interbank offered rate. Allen got two years in prison while Conti was sentenced to one year for manipulating Libor, a measure that helps set the rate for more than $350 trillion of loans and securities. Prosecutors had sought a sentence of more than nine years for Allen and five years for Conti.

The case tested the U.S. Justice Department as it stepped up the pursuit of bankers after facing sharp criticism that it wasn’t aggressive enough in going after individuals tied to the financial crisis. Prosecutors asked for harsh prison terms for both men, saying Libor manipulation was among “the most significant financial fraud cases in recent history.”

Eleven other bankers were accused by the U.S. of rigging the rate, and there are more probes under way into possible collusion in the treasuries and agency bond markets, as well as additional Libor investigations. The sentences Thursday may set the standard for future penalties.

Hayes Case

In London, the ringleader of a Libor-manipulation scheme, Tom Hayes, a former trader at UBS and Citigroup Inc., was sentenced last year to 14 years behind bars. The sentence was cut to 11 years after an appeal, and Hayes will be eligible for parole after serving half the sentence.

U.S. District Judge Jed Rakoff in New York took Hayes’ sentence into account as he meted out punishment to Allen and Conti.

“The reality is that Mr. Hayes, as everyone here agrees was in various ways
more culpable than everyone here, in the end, he received a sentence of 5 1/2
years,” he said. Allen and Conti can remain free pending appeal, the judge said.

Allen, the global head of liquidity and finance in London, was convicted in November of overseeing a system in which the bank submitted a daily Libor rate skewed to favor the positions of Rabobank’s traders. Conti made those fraudulent submissions.

Borrowing Costs

The two men abused the trust which the British Banker’s Association placed in them to submit a "good faith estimate" of the bank’s borrowing costs, said Andrew Weissmann, chief of the Justice Department’s Fraud Section. Instead, Weissmann said, “both Allen and Conti treated Libor like a joke.”

The rigging of Libor affected not only thousands of financial institutions but also any credit card holder, mortgagor and derivative trader, according to prosecutors. The four-year fraud crossed borders, hurting the economies in the U.S., U.K. and other countries, prosecutors said.

Losses worldwide topped $600 billion over four years, prosecutors said.

Financial Crisis

In court on Thursday, Rakoff rejected Allen’s and Conti’s request that they stay out of prison. He noted that the U.S. had failed to punish bankers after the financial crisis.

“The offense is too serious” not to impose a prison term, Rakoff said. “You can’t go around, as in my view Mr. Allen and Mr. Conti were doing, in helping rig one of the most important markets in the world and not pay the price.”

"I constantly ask myself what I could have done differently,” Allen, near tears, told the judge. “I so wish that when requests from swap traders were sent to me, that I’d just said, ‘no.’"

Allen’s lawyer, Michael Schachter, said his client’s behavior was common throughout the industry.

“This did not just happen at Rabobank,” Schachter told Rakoff. The government’s “agreements with other institutions have revealed identical, significant conduct by more than 125 people at at least 10 different financial institutions. There’s no dispute that the exact same thing happened elsewhere.”

Rakoff called Conti "less culpable" than Allen.

‘Libor Time’

Former Rabobank trader Paul Robson testified at the trial that just before Rabobank would make its daily formal daily Libor submission a shout would go out, "It’s Libor time," which beckoned the bank’s traders to submit a rate to suit their positions.

Allen testified that he typically ignored written requests to manipulate the Libor rate or didn’t hear them when shouted. Conti didn’t take the stand.

Three jurors said in interviews following their verdict that Allen’s account was undercut by e-mails he sent, especially a message in which he told a colleague that he was “FAST TURNING INTO YOUR LIBOR B-TCH!!!!”

Of the 11 other people charged in the U.S., four pleaded guilty and the rest are abroad. Six ex-brokers accused of helping Hayes were cleared by a U.K. jury in January.

The case is U.S. v. Allen, 14-cr-00272, U.S. District Court, Southern District of New York (Manhattan).

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