Bullied Ex-Barclays Trader Did as He Was Told, Lawyer Says

  • Third U.K. criminal trial of bankers accused of rate rigging
  • Mathew only set U.S. dollar rate when boss was away: lawyer

Jonathan Mathew, one of the ex-Barclays Plc employees accused of manipulating a key benchmark interest rate, is on trial merely for following the orders of a bullying boss, according to his lawyer.

Mathew, who joined Barclays when he was 19 and worked in IT before moving to the money desk, was trained "on the job by a man who had been in the job for longer than he had been alive," Bill Clegg, his lawyer, said in a London court Friday.

Mathew, 35, Stylianos Contogoulas, 44, Jay Merchant, 45, Alex Pabon, 37, and Ryan Reich, 34, all deny conspiracy to defraud charges dating from June 1, 2005 to Aug. 31, 2007. The traders are accused of “cheating” the system by doing something “they must have known was dishonest,” prosecutors said. It’s the third criminal trial in the U.K. of bankers and brokers accused of rigging benchmark rates underpinning trillions of dollars in securities and loans.

Lawyers began their defense of all five accused men Friday, claiming their clients were acting under instructions from superiors and that traders talking to rate setters was a common and accepted practice throughout the industry.

Mathew’s boss Peter Johnson, who ran the U.S. dollar desk and isn’t on trial, was "something of a bully," and much of his bullying was focused on Mathew, Clegg said. Mathew was once made to stand on a chair in the middle of the trading room and answer a quiz on capitals of the world from his boss because he didn’t know where the Philippines were, Clegg said.

‘In the Dock’

"He is in the dock for doing what he was told to do at work when he was 24 years old," Clegg said. "It was never his job to set the U.S. dollar rate except on the occasion his boss was on holiday or away." Johnson has been named by prosecutors as a co-conspirator.

Out of the 500 trading days during the indictment period, the prosecution have identified 26 occasions when Mathew complied with a request from a trader to adjust the rate for the following day, Clegg said.

"Doing it openly, spoken about openly, e-mails not deleted, nothing secret about it," he said.

Mathew, who lived with his parents in 2005, only "got the job because Dad worked at the bank. Thanks a lot Dad, look where that has got me," Clegg said.

Market knowledge

Barclays was the first bank to be fined for attempts to fix Libor, paying a 290 million-pound ($408 million) penalty in June 2012. Since then, global regulators and prosecutors have fined a dozen lenders a total of about $9 billion for their role in the scandal.

Merchant’s lawyer Hugh Davies said the practice of traders requesting the next day’s Libor rate was common practice across the banking industry prior to 2005 and known by his client’s senior managers. Merchant had never met Pabon or Reich prior to the trial.

"Do you really believe he recruited them in a criminal matter just like that," Davies said, referring to Merchant. "Or was it an existing practice in the bank."

Between 2005 band 2007 Merchant earned 5.2 million pounds in salary and bonuses as a derivatives trader at the bank. "You don’t risk your kingdom for a horse," Davies said. "There would have to be a sufficient financial motive for Mr. Merchant to risk that future for this activity."

Messages

The defendants regularly communicated with each other between New York and London, discussing where their preferred rate would be, prosecutors said. "Our desk has a big position," one of the message reads. "We are very much in a favor of a crazy low setting."

Pabon, who left the bank in the summer of 2006, "openly and completely accepts that he made requests," of the Libor setters, Tom Allen, his lawyer, said. "He had no idea it was wrong or in some way a criminal offense. He was told to do it by his boss, and he did it."

Reich’s lawyer said his client was the victim of a cover-up by senior banking executives that has left the junior traders taking the blame for a practice they knew was going on.

"All you have left is the unpleasant crunching sound of a few expendable traders thrown under the bus," Adrian Darbishire, his lawyer said. Reich, a Princeton-educated U.S. citizen who joined Barclays as a 24-year-old in July 2006, "knew absolutely nothing that was said or done prior to his arrival at Barclays."

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