News Column

Fines, Criminal Charges Issued in Libor Scandal

September 25, 2013

By Jill Treanor,

The major financial firm run by former Conservative Party treasurer Michael Spencer has been fined 55m ($88.5 million) by regulators and three of its former employees facing criminal charges in the United States as result of the ongoing global investigation to Libor rigging.

Spencer insisted none of the senior staff of the Icap broking firm he runs were involved in the rigging.

But he said he regretted the actions of the one-time employees who each face 30 years in jail for each of the three charges leveled against them by the US department of justice (DoJ) in the US.

Darrell Read, who resides in New Zealand, and British citizens Daniel Wilkinson and Colin Goodman known as "Lord Libor" according to the DOJ have been charged with conspiracy to commit wire fraud and two counts of wire fraud in a criminal complaint which was unsealed in a Manhattan federal court earlier. In the US a criminal complaint is not evidence and a defendant is presumed innocent until convicted.

"In exchange for bigger bonus checks, the three defendants undermined financial markets around the world by compromising the integrity of globally used interest rate benchmarks," said Scott Hammond, deputy assistant attorney general for the antitrust division's criminal enforcement program.

In the fourth fine leveled by the Financial Conduct Authority and its predecessor bodies forLibor rigging, Icap will pay 14m while the US authorities have fined the company 55m for the manipulation of the yen Libor rate. According the FCA one of the brokers received 5,000 every quarter in "corrupt bonus payments".

The authorities link the activities to those of UBS, the Swiss bank which has so far faced the largest Libor fines of 940m after being found to have made corrupt payments to brokers in an "extensive and widespread" attempt to manipulate key benchmark interest rates. According to the FCA there were 300 written requests to change Libor rates to brokers at Icap, while theCommodity Futures Trading Commission published details of electronic chats showing discussions about a curry night out, a Ferrari and "bubbly on its way" in return for moving the rates, and other coffee, The ICAP brokers referred to the panel bank submitters as "sheep".

According to the regulators, Goodman distributed a daily email to individuals outside of Icap, including derivatives traders at several large banks as well as those responsible for providingLibor submissions to the British Bankers' Association.

Libor stands for London interbank offered bank offered rate and is a benchmark rate based on submissions by major banks about the price they think rivals would charge them to borrow money over different periods of time.

It in turn is used a benchmark against which financial contracts around the world are set, affecting the price at which companies borrow money for instance.

"Goodman's email contained what was termed his "SUGGESTED LIBORS," purported predictions of where yen Libor ultimately would fix each day across eight specified borrowing periods. Read and Wilkinson, along with Goodman himself, often referred to Goodman as "Lord Libor"," the DoJ said.

The way Libor is set has been overhauled since the rate ringing scandal emerged first via a 290m fine for Barclays and later a 390m penalty for Royal Bank of Scotland. The BBA's role in overseeing Libor is being replaced by the body which runs the New York Stock Exchangeand the number of Libor rates scaled back.

The US attorney general, Eric Holder, said: "By allegedly participating in a scheme to manipulate benchmark interest rates for financial gain, these defendants undermined the integrity of the global markets. They were supposed to be honest brokers, but instead, they put their own financial interests ahead of that larger responsibility."

Spencer, who had initially played down the firm's connection to the Libor scandal, said the firm had assisted regulators with the inquiries.

"We deeply regret and strongly condemn the inexcusable actions of the brokers who sought to assist certain bank traders in their efforts to manipulate yen Libor. Their conduct contravenes all that Icap stands for," said Spencer.

"None of the three individuals at the center of the activity remains with the firm. Others are either no longer with the company or are being disciplined," Spencer added.

Original headline: Libor: Icap fined 55m as ex-staff face criminal charges

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Source: (c) 2013 Guardian Newspapers Limited

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