Did Rabobank Traders Violate Dress Code While Manipulating Libor?

Step 1: Plan your outfit. Step 2: Adjust Libor submissions to maximize profit.

There's not really much new in the Libor fraud charges that U.S. prosecutors filed yesterday against three former Rabobank Group NV traders. Rabo itself settled various Libor investigations a few months ago, admitting that "employees inappropriately sought to influence certain Rabobank Libor and Euribor submissions," and today's charges will mostly cut down on those traders' vacation options; all of them are foreign citizens living abroad with, presumably, no immediate plans to come to America to be put in prison. Still, it's always fun to read Libor e-mails and instant messages and phone logs. Prosecutors know that, of course, which is why they helpfully provide a separate packet of those communications.

My favorite of these might be Tab 2, in which an unnamed trader asks Paul Robson, the Rabobank rates trader and Libor submitter charged yesterday, an important question:

Hi mate
Can I ask what kind of dress code LDN office has? Is there any difference between Mon-Thu and Fri?
Please advise me.

Robson answers:

Hi mate its smart-casual - some people wear jeans ( tho we are not supposed to ) either that or chinos and a shirt should do you - but some people still wear a suit - its really your choice mate

There's some further clarification about exactly what goes on on Fridays (nothing special is the answer) and then Trader R changes the subject:

OK great mate cheers
As for the today's libors. Could you set 6m at 0.97% please? Moto 1 has big fixings over the next couple of weeks so that it would be nice if you could keep it as low as possible for some time.

I like this model of financial scheming: Trader R -- not charged for some reason -- didn't just come straight out and say "hey let's do bad fraud stuff." He started out talking about clothes for a bit, and then moved on to the -- I was going to say "the more important things," but of course it's the opposite. Trader R was coming to London and his priority was figuring out what to wear. After that was sorted, he could move on to chatting about moving Libor. The Libor stuff was an afterthought. He didn't think it was all that important, certainly not compared to planning his outfit.

The real interest in all these Libor messages is trying to figure out what these guys were thinking: It sure looks fraudy in hindsight, but at the time the question of whether you could make up a made-up number to make yourself money, instead of for the noble purposes for which that number was supposed to be made up, seems to have been a complex one that people did not spend a lot of time pondering. The Wall Street Journal quotes a prosecutor saying, "You can see that the conduct here seemed to be almost routine at the bank, and that's obviously of significant concern to us," and, yeah, everyone does seem to be pretty chill about it. Occasionally there's a pang of conscience. At one point Robson says on a phone call:

When he comes back and I find out who's putting the LIBORs in I'll just say for choice put it higher rather than lower I just ... I don't like to tell them in too black and white but Pookie always understands that er ...

Always great to describe your strategy of not putting things "in too black and white" on, you know, recorded phone calls. 2

Still, the "everyone was doing it" defense might carry some weight, in my heart if not in a court of law. (That's okay; these guys seem unlikely to be tried anywhere other than in my heart.) Tab 1 has an e-mail exchange between Paul Robson and Paul Thompson, another defendant. 3 Thompson asks Robson "if you can sneak your 3m libor down a cheeky 1 or 2 bp." Robson replies "No prob mate I mark it low." And Thompson replies:

Thx mate, was the other sods that made it higher.. Thx anyway

Thompson may not have been imagining this: Sometimes Rabo really did manipulate Libor one way while other banks were manipulating it the other. In that world, submitting "accurate" Libors would not only have cost Rabobank money, it would lead to "inaccurate" results skewed by the other banks. They'd almost have been crazy not to manipulate Libor. Though, as always, it would have been better not to do it in writing.

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  1. Moto is Tetsuya Motomura, another Rabo trader charged yesterday.

  2. He has other pangs of conscience, too, including once saying, "will be setting an obscenely high 1m again today." Also, at one point in a chat in Tab 14 he says "my little yellow friend in tokyo wants a high 1m fix from me today." Umm, okay.

  3. I know.

To contact the author on this story:
Matthew S Levine at mlevine51@bloomberg.net

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