On 3 August 2015, Tom Hayes, a former trader at UBS and Citigroup, was sentenced to 14 years imprisonment for rigging the London Interbank Offered Rate, known as LIBOR.
This week, commentators have deemed the lengthy sentence appropriate, but are questioning why Hayes’ senior managers have not been prosecuted as well.
A landmark momentThe Guardian argues that for Hayes to have been able to rig LIBOR for so long, his bosses must have either failed to supervise him properly or ignored his actions. Regulators, it says, must extend accountability beyond the trading floor if they are to look credible in their attempt at a ‘cultural clean-up’, or else the situation will “look like a depressing hunt for scapegoats”.
But the article concedes: “The supervisors’ plea of ‘I didn’t know’ is hard to counter.”
The article explains how the new Senior Managers Regime, which “means ignorance can no longer be an excuse”, should guarantee that supervisors face accountability, ensuring that “senior officials. . . show they were awake and took reasonable steps to prevent misbehaviour”.
The Guardian supports the sentence handed down to Hayes, as it demonstrates “that serious cases of fraud on the trading floor can be prosecuted successfully”, and acts as “a landmark moment in the clean up of the city after the financial crisis”.
However, it wants to see the regime “work in practice and [be] applied broadly”. So far, Hayes is the only banker to be prosecuted over rigging this key global rate.
The Guardian comment
Conspiracy is a team gameJohn Mullin of
The Independent adopts a more personal tone in his untangling of events in and out of court. He speaks of Hayes as a “shy and socially inept” character and “something of an oddball”.
Mullin goes on to describe how Hayes “picked apart even his own defence council”, and “grew frustrated at explaining the complexities of how LIBOR works to the jury”. He considers that this all amounted to Hayes being used as a scapegoat, and says: “It’s about fairness, and that’s why I feel uneasy about the sentence in this case”.
“One man receiving such a hefty sentence may well, as Mr Justice Cooke wanted, send a signal to bankers. But it may not be the right one”Mullin suggests that Hayes is a man incapable of orchestrating such an intricate machine without help, and reminds readers that “conspiracy is a team game”.
Hayes said in evidence that “his manager knew. His manager’s manager knew. Even the chief executive knew”. If this is true, Mullin asks, why have these people not been brought to trial? He says that “one man receiving such a hefty sentence may well, as Mr Justice Cooke wanted, send a signal to bankers. But it may not be the right one.”
The Independent article
The bosses: Guilty or recklessly incompetent?Writing for news website
billmoyers.com, James Kwak, an Associate Professor of Law at the University of Connecticut, argues that there is hard-to-deny evidence of a wider conspiracy. “When Citi[group] 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’,” he says.
He goes on to claim that if Hayes’ seniors weren’t “in on it directly”, it is likely that they “turned a blind eye – precisely because they knew that it was good for the bottom line. Hayes himself generated $260m in profits for UBS in just three years”.
“Either Hayes’ bosses at UBS and Citi[group] knew what he was doing, in which case they are guilty as well,” says Kwak, “or they didn’t know about a widespread conspiracy. . . across the. . . systems of some of the most technologically sophisticated companies in the world, in which case they are recklessly incompetent.”
If the former is the case, why would banks take such a risk? Kwak suggests that perhaps banks “want their employees pushing the limits of the law to maximise profits”. After all, Kwak argues, the punishment for the bank is still mild. “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,” he says. “It’s a win-win strategy.”
billmoyers.com opinion
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