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The fact that only one person faces Libor-fixing charges suggests a deal might have been cut with the SFO
Details of the charges faced by Tom Hayes, the former UBS and Citigroup trader, have now been made public following his appearance at the Westminster Magistrates Court.
They focus on conspiracies to manipulate the Yen Libor rate and divide between Hayes’ employment at UBS Securities Japan between August 2006 and December 2009, and at Citigroup Global Markets -Japan between December 2009 and September 2010.
The breadth of the alleged conspiracies is striking. Alleged co-conspirators include employees at RBS, JP Morgan Chase, Deutsche Bank, Rabobank, ICAP, RP Martin, HSBC and Tullett Prebon. Ordinarily this would suggest that many more will face charges.
Why is it that Hayes alone faces charges at this stage? One reason could be that the SFO was forced to accelerate its investigation to prevent US prosecutors removing a key figure from the inquiry. But another reason might be that Hayes is on the cusp of doing a deal with the SFO which would involve an early guilty plea followed by an agreement to give evidence against others. In return, he would receive a substantially reduced sentence. This is a tactic favoured by the SFO as it can shorten investigations and encourage others to do the same.
In January Hayes is reported as having sent a text to the Wall Street Journal stating: “This goes much, much higher than me”.
To convict a company under English law of a criminal offence such as fraud, prosecutors must be able to prove that the “directing mind and will” of the company was complicit in the offending. This is a much higher hurdle than in the US where prosecutors need only prove an extended form of vicarious liable for the acts of their employees. Many, including the director of the SFO, see this aspect of English criminal law as outdated and out of step with the corporate world.
If Hayes (and possibly others) -implicates senior management, the SFO could find itself with a difficult decision. On the one hand there is a powerful public interest in the banks facing prosecution and, many will ask, if the SFO has the evidence why shouldn’t it prosecute? In all likelihood the banks would plead guilty or enter into a Deferred Prosecution Agreement (shortly to be introduced into UK law) in order to avoid the negative PR, cost and uncertainty of a contested prosecution.
But on the other hand, many of the banks have already been fined hundreds of millions of pounds by UK and US authorities for regulatory breaches, and any sanction imposed by an English criminal court may be dwarfed in comparison and seen as serving little purpose.
For this reason, the more likely scenario is that any SFO Libor prosecutions will focus on individuals rather than companies. The interesting question is – how senior will these individuals be?
And, if the incriminating email chains do not extend to senior management, will the word of more junior figures who have cut a deal be deemed a sufficiently reliable basis for the prosecution of more senior personnel?