Blind, but vengeful.

Photographer: Dan Kitwood/Getty Images

Attempted Murder? At Least He Didn't Commit Fraud

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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Earlier this year, a British judge sent Peter Adlington to prison for 15 years for trying to kill his former partner by stabbing her in the chest with a kitchen knife. Earlier this week, a different U.K. judge handed a sentence of similar length, 14 years, to Tom Hayes for conspiring to distort money-market interest rates. One of these sentences seems disproportionate to the crime -- and it's not the one handed to the guy who told his ex that "if you break my heart, I will stab you in yours."

Broken Benchmarks

Too many bad things have happened in banking for too many years, and not nearly enough jail time has been handed out to the perpetrators of the global financial crisis. But it's hard to shake the impression that Hayes, the first trader tried in the courts for distorting Libor, has been singled out as a scapegoat not just for destroying people's faith in market benchmarks, but for the entire market catastrophe that started to tip most of the world's economies into recession beginning in 2008 and needed billions of dollars of taxpayer money to repair.

There's no question that Hayes was guilty of making money from lies about the cost of borrowing and lending Japanese yen during his years working first at UBS and later at Citigroup. But there's also no doubt that the rotten culture within which he operated was corrosive -- as attested to by the $9 billion in fines which the major investment banks have paid so far for their collective role in rigging Libor.

Here's how Judge Jeremy Cooke condemned Hayes's deceit on Monday after a London jury found the 35-year old guilty on all eight of the offenses he was charged with:

The conduct involved here has to be marked out as dishonest and wrong and a message sent to the world of banking accordingly. The reputation of Libor is important to this city as a financial center and to the banking industry in this country. Probity and honesty are essential, as is trust which is based upon it. The Libor activities in which you played a leading part put all that in jeopardy.

In the first half of 2013, Hayes admitted to rigging Libor and gave details of his activities to the Serious Fraud Office after signing a cooperation agreement. In a series of interviews, Hayes "admitted each and every ingredient of the offenses," as the judge put it, to avoid extradition to the U.S. Once it was clear he'd be tried in the U.K., though, he decided to fight the case instead of pleading guilty. That looks like a tactical error.

In pretrial hearings in October, the judge told Hayes's lawyers that he viewed the proceeds as "an open-and-shut case." That prompted Hayes to ask the judge to recuse himself from the case, an application that was rejected.

Anticipating the risk that the judge might want to make an example of Hayes, his lawyers argued this week that the insights he gave during 82 hours of interviews with the SFO should nevertheless count in his favor. Renewed regulatory scrutiny of how benchmarks are set combined with recent changes in the law that specifically make benchmark rigging a criminal offense mean other traders were unlikely to copy Hayes, the defense team said:

Whilst of course your Lordship has to think of deterrent when looking at Mr Hayes's sentence, in terms of the wider effect of the sentence on the financial markets our submission is a simple straightforward one, that that deterrent effect for the wider market has already been achieved.

The judge was clearly unimpressed by Hayes's switch to denying guilt from cooperating with the authorities:

I make it clear that I do not increase the sentence on that account, but it does mean that there is little to be said by way of mitigation, even though some information supplied may help the prosecution in pursuit of lines of enquiry against others.

The 14-year sentence levied on Hayes is twice what Kweku Adoboli received in 2012 after his $2.3 billion trading loss (also when he worked at UBS) led to his conviction for fraud. It beats the six-and-a-half years Nick Leeson got for bringing down Barings in the 1990s, and the three-year term Jerome Kerviel got after losing more than $5 billion at Societe Generale.

I have no sympathy for the position Hayes put himself in. Arguing that everyone else involved in Libor was doing the same is no defense. And it's about time jail sentences became the norm rather than the exception for those who recklessly destroy trust in the financial system.

But 14 years is an awfully long time for a crime whose practical effect all parties acknowledge can't be quantified. And it does seem likely that Hayes's superiors knew what was going on. Many bankers deserved a bashing in recent years for their casual disregard for ethics, morality and decency, but the tendency to scapegoat individual traders while their managers higher up the food chain avoid censure or prosecution smacks of revenge, rather than justice. It certainly doesn't feel like Hayes should find himself facing almost the same judicial outcome as a would-be murderer.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor on this story:
Cameron Abadi at cabadi2@bloomberg.net