The Libor scandal continues unfolding as British prosecutors have identified twenty-two individuals as potential co-conspirators in an investigation of suspected London Interbank Offered Rate (“Libor”) manipulation. Libor, the estimated average interest rate charged by London banks for inter-bank borrowing, is linked to over $300 trillion in loans, financial products and contracts.
The individuals, who were also named in criminal charges brought earlier this year against former Citigroup trader Tom A.W. Hayes and two former brokers at RP Martin Holdings, were notified of the investigation in mid-October. Some of the individuals identified could face additional criminal charges in the United States.
The investigations come in the wake of charges filed this summer by the UK Serious Fraud Office against Hayes for conspiring with employees from numerous financial institutions to manipulate the yen Libor rates over a four-year period. Mr. Hayes was similarly charged in the U.S. last December. Two other brokers, Terry Farr and James Gilmour, were also charged in July with conspiracy to defraud for their part in the manipulation of Libor. All three men are scheduled to enter pleas in December, with Hayes’ trial expected to start as early as January.
A domino effect has left banks settling and pleading out to various charged. Barclays PLC was the first big bank to settle, agreeing in June 2012 to pay U.S. and European regulators $454 million. In its settlement order, the CFTC said the bank’s manipulation of overnight lending rate data involved “high levels of management within Barclays Bank.” The CTFC also said the submission of artificially low rate data by Barclays “occurred regularly and was pervasive,” beginning in 2005. Following Barclays’ settlement, the company’s chairman Marcus Agius and its CEO Bob Diamond both resigned.
UBS in December of last year agreed to pay $1.5 billion to settle LIBOR probes with several regulators, and the company’s Japanese subsidiary even plead guilty to a Justice Department charge of rate-rigging. The Justice Department also charged two senior UBS traders with criminal conspiracy.
Royal Bank of Scotland in February agreed to pay $610 million to regulators to settle LIBOR. The bank also entered into a deferred prosecution agreement with the Justice Department, pledging to continue to cooperate in several investigations.
Then on Tuesday, Rabobank, headquartered in Utrecht, the Netherlands, announced it had agreed to pay various regulators 774 million euros ($1.068 billion) to settle investigations into the bank’s “historical Libor and Euribor submission processes.” Rabobank’s chairman Piet Moerland announced his resignation, “as a matter of principle,” although the bank denied any involvement by senior management in rate manipulation.
JPMorgan on Friday in its third-quarter 10-Q filing with the Securities and Exchange Commission said it was cooperating with numerous regulatory requests for information relating to “the process by which interest rates were submitted to the British Bankers Association” in connection with the setting of Libor. The company is also a defendant in a class action lawsuit and various individual lawsuits over Libor.
Manipulation of the rate has been a serious concern for both British and American authorities in recent months, as investigators search for evidence that traders and bankers may have colluded to benefit their own trades. Investigators are also concerned that lenders may have understated borrowing costs reported in 2008.
Thanks for info on LIBOR. It is amazing to think of the scale of this.