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December 12, 2012

First Libor Arrests Net Three Former Low-Level Traders

Posted in: Uncategorized

Bank of Scotland

Despite rumblings, Royal Bank of Scotland and other banks still have not been sanctioned

Lots of people are weighing in today on HSBC’s too big to jail status, and the fact that they scored a deferred prosecution agreement for obvious money laundering criminality. The flip side to this is that, when the federal regulatory apparatus does decide to hold bankers accountable for criminal conduct, they typically seek out the lowest traders on the ladder on whom they could possibly pin the conduct.

A former UBS and Citigroup banker and two others had their homes raided early on Tuesday morning and were taken in for questioning as part of the Serious Fraud Office investigation into the manipulation of Libor interest rates [...]

The SFO and City of London police arrested three men aged 33, 41 and 47 after searching a house in Surrey and two properties in Essex. The three were taken to a London police station to be interviewed “in connection with the investigation into the manipulation of Libor”.

The three are understood to be Tom Hayes, who has worked for a number of banks including UBS and Citigroup, and two men who worked for City-based inter-dealer broker RP Martin – Terry Farr and Jim Gilmour. They are either on leave or have left the company. Citi and UBS declined to comment. RP Martin stressed it was co-operating with the authorities but not under investigation.

So in an effort at accountability for a multi-year fraud scheme that involved trillions of dollars in structured finance products, where bank executives admitted in documents to fixing the benchmark interest rates, so far law enforcement in both the US and Britain have only arrested three former traders. The banks themselves have been able to secure settlements without prosecution, in the case that they get charged at all.

And by the way, they were only taken in for questioning at this stage, and will probably be released on bail without being charged.

Now, maybe at some point, banks will face prosecution or at least fines in the Libor case. Everyone expects UBS, the Royal Bank of Scotland and several others to face some sort of sanction. But we’ve been hearing about imminent charges for months now, with nothing to show for it. Banks have individually terminated people they claim are responsible for the rate-rigging, but that internal discipline has been the only kind on offer.

This about sums it up:

Terry Smith, chief executive of City broker Tullett Prebon, said: “At the time I was astonished that no one thought those involved in Libor manipulation could be prosecuted without new and specific legislation. It is a modern illusion that an act cannot be prosecuted as a crime just because there is not a specific piece of legislation which proscribes it. We have some perfectly good laws, they just need to be applied.”

But they won’t be applied, because it might hurt a few banks. So the rampant criminality and fraud continues.

Photo by DOS82 under Creative Commons license


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