So Tom Hayes Is Guilty. Who Else Is?

By James Kwak

Tom Hayes was a trader at UBS and Citigroup who was very, very good … at rigging LIBOR. This week, he was convicted in the United Kingdom of conspiring to manipulate the benchmark interest rate and sentenced to fourteen years in prison.

There’s little doubt that Hayes was guilty as charged. In his defense, he argued that he had no idea what he was doing was wrong. But contrary to what some armchair attorneys think, that doesn’t matter. In general, the famous mens rea (guilty mind) requirement isn’t that you know you are breaking the law at the time; it suffices if (a) you know you are doing a thing and (b) that thing is against the law. There’s no question that Hayes knew he was conspiring to rig LIBOR, and that’s enough for the prosecution.

And on one level, it’s good that he was convicted and got a stiff sentence. That prospect should help deter criminal activity of all kinds by bankers and traders who have historically been shielded by prosecutors’ unwillingness to go after individual defendants (except in insider trading cases).

But … Tom Hayes as the evil architect of the LIBOR-fixing scheme? Not so much.

As in so many cases, there are only two logical possibilities. Either Tom Hayes’s bosses at UBS and Citi knew what he was doing, in which case they are guilty as well. Or they didn’t know about a widespread conspiracy being conducted across the electronic communications systems of some of the most technologically sophisticated companies in the world, in which case they are recklessly incompetent.

When it comes to Tom Hayes, there is a lot of evidence for the former. Apparently, when he was being recruited from UBS in 2010, he boasted to a Citi executive about how he rigged LIBOR. Back in 2007, that same executive had said in an internal email, “We will continue to pressure the brokers to talk [LIBOR] down and generally press lower” — when asked by a colleague to help lower Citi’s own LIBOR submissions. When Citi attempted to hire Hayes, his boss at UBS tried to arrange a large bonus for him to stay, citing his “strong connections with Libor setters in London.”

It’s hard to believe that senior executives at UBS and Citi didn’t know that LIBOR was being fixed. If they weren’t in on it directly, it’s likely that they turned a blind eye — precisely because they knew that it was good for the bottom line. Hayes himself generated $260 million in profits for UBS in just three years.

When people make that kind of money for the bank — in markets that are supposed to be highly competitive — executives don’t want to know too much about what they’re doing.

As time goes by, it gets harder and harder to figure out how much of the largest banks’ profits is due to their legitimate operations and how much is due to their tolerance of illegal activity (money laundering, rate fixing, bribery, etc.). Maybe bank executives are so inept when it comes to internal wrongdoing because they like things that way. They want their employees pushing the limits of the law to maximize profits. (“If you ain’t cheating, you ain’t trying.”) And when people like Tom Hayes get caught, the bank itself gets away with a slap on the wrist because it’s too big to jail — and the CEO gets away by claiming ignorance. It’s a win-win strategy.

[Also posted on Medium.]

12 thoughts on “So Tom Hayes Is Guilty. Who Else Is?

  1. The bosses knew. By throwing Hayes under the bus, they will skate away completely free. Sound familiar?

  2. Justice Integrity Project
    Whistleblower Summit Provided Powerfare Investigative Fare
    Posted: 01 Aug 2015 01:45 AM PDT
    The annual Whistle Blower Summit provided by shocking and inspirational material for anyone concerned about the nation’s future.
    Highlights on the positive side included an unprecedented commitment by U.S. Senators to speak of their commitment to create a Whistleblower Caucus. Senate Judiciary Committee Chairman Chuck Grassley was the leader on that.

  3. “In February of this year, OFR released a jaw-dropping report showing dangerous levels of systemic and interconnected risk among some of the same Wall Street players that held pivotal roles in the crash of 2008. The report found that five Wall Street banks had high contagion index values — Citigroup, JPMorgan, Morgan Stanley, Bank of America, and Goldman Sachs.”
    “On June 11, OFR released a paper warning that banks were up to their old tricks again, using dodgy “capital relief trades” with unknown counterparties in order to hold less capital than would otherwise be required against potential losses. And regulators remain in the dark about the extent of these trades because the banks have reporting loopholes.”
    (Hyperlinks at the article will get you through to the original source materials and reports) here:

    Last Thursday, the OFR was back on its bully pulpit again, this time warning that transparency as to what hedge funds are really up to is as clear as mud, despite efforts…(see the article)

  4. Back when I was a practicing CPA I worked for a “Big Eight” firm. Similar events happened then. For starters there was Enron that threw people in jail.
    Best of all it caused the collapse of Arthur Andersen for having its hand in the honey jar. They were not to big to fall

    More on Citi… !
    Citigroup’s Unchecked Crime Wave Proves that America
    Is Headed in the Wrong Direction
    By Pam Martens and Russ Martens: August 5, 2015
    Also of interest: From the WSJ itself:
    Citigroup Part of Regulators’ Investigation Into Student Loans
    Investigation believed to be part of Consumer Financial Protection Bureau’s broader probe
    By Christina Rexrode
    Aug. 3, 2015 9:10 a.m. ET
    Citigroup Inc. said Monday that regulators are looking into its practices around servicing student loans.

  6. @Woych, You never heard about this book because some “religionists” decided that you were too stupid to read it, and they decided this even before you were born, go figure….From the Urantia Book “195:5.9 (2075.12) A lasting social system without a morality predicated on spiritual realities can no more be maintained than could the solar system without gravity.”

    Having “THE MARKET” set prices also counts on a solar system spinning just like an “elite” cabal want it to spin – without any “gravity”…

    195:5.9 (2075.12) A lasting social system without a morality predicated on spiritual realities can no more be maintained than could the solar system without gravity.

    USA may have set the global economy in motion, but it certainly is not setting a direction for what kind of global culture provides “gravity”: Wrong direction, indeed….

  7. So returning full circle to Occupy Wall Street and their chant, “Banks got bailed out, We got sold out”….

    “We” bailed out BANKS that were committing crimes against US, it appears.

    Even with THIS much proof, no talk about “claw back”?!

    I guess sycophants continue to gather up “claw back” that, under LAW, SHOULD go back to the injured party! Instead, we have a CYNICAL schtick of people being “hired” to pump up the job numbers so that the FRB can raise rates – the new JOBS they are hired to do is to collect the “fees” banks are paying for their “guilty” plea which, lo and behold, goes right bank into the bank.

    One big circle jerk – a solar system operating without gravity….


    The Patriot Act was the ENABLER, and, indeed, it was put in place to SCARE the USA Taxpayer, that same INDIVIDUAL taxpayer who was not worthy of “saving” but who would be fed into the “derivative” to “save” the Too Big To Fail banksters who have pled “Guilty” to an enormous amount of shenanigans. The Patriot Act was NEVER about keeping us safe from “terrorists” – can anyone prove me wrong? No, you can’t. All Prima Facie evidence points to FACTS that explain how dark pool derivatives operate – they operate to PAY the goons in Homeland Security assigned to protect “too big to fail” banksters.

    The only way to tie up ALL the threads of this massive heist is to get that list of “anti-Semites” that is STILL the target list used by FOREIGN plants/spies in Homeland Security, IRS. Human Resources, payroll services and, of course, the BANKS.

    The “guilty” fees go right back into the guilty bank’s accounts. How CYNICAL is that circle jerk?

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