‘...You will go to prison for 14 years...’
In those words, Mr Justice Cooke, sealed the fate of Tom Hayes, the first organised criminal to be convicted of manipulating the LIBOR rate.
Others are waiting in the wings!
But the Judge did more than that. He also set the seal on the final determination of the character of the reputation of the City of London banking sector, identifying, once and for all, its inherently organised criminal nature.
The Judge has sent a very loud message to the UK banking industry, warning that its ‘dishonest and wrong’ conduct would not be tolerated any more. The Judge identified the core nature of the illegal and dishonest conduct of the financial sector when he said that senior bankers had ‘...condoned, embraced and even encouraged Hayes’ activities...’ and a message needs to be sent to the world of banking accordingly.
The Judge hammered home the need for the reputation of products such as LIBOR to be maintained, and that probity and honesty was essential in the running of the Square Mile.
So, let us hear no more of the so-called ‘fine reputation and clean record’ of the City banking sector. Let the message go out to the BBA, and all the other cosy clubs and trade associations in the Square Mile which seek to support the banking industry, that their dreadful criminal reputation has been finally nailed to the door of history for everyone to see.
One of their own, a man in a position of immense trust and financial power has been held out to dry in the eyes of a disbelieving world as a crook, a cheat, a sponger, a man who pimped the reputation of his desk to steal inordinate profits for his house, and to make money for his back trouser pocket in the form of massive bonuses.
He was the man whose existence is always denied by the senior bankers in their plush offices on the 5th floor when the word starts to trickle out that something is rotten in the financial sector.
So, no more ‘rotten apple’ theory please, no more ‘rogue trader’ nonsense, Tom Hayes is the gatekeeper to a procession of shabby white socked yobs, spivs and wideboys who will soon be appearing in a Palais de Justice near you, to be tried for their alleged crimes.
But this is not the end of the story.
Oh no, this is just the start, because behind what you may have read reported, there lies another, altogether too fanciful tale of deviousness, and shocking cynicism, which might have succeeded but for some superb investigation and a lot of moral courage on the part of the Serious Fraud Office.
Running in parallel with the SFO criminal investigation, was a US investigation, and Tom Hayes was firmly in their sights. They wanted Hayes in the United States being sweated in the hot seat, and had the US authorities been successful in obtaining his extradition, Hayes would have been facing a lengthy prison sentence in a state penitentiary, coupled with the need to have provided full cooperation with the US authorities to bring prosecutions against other defendants.
So Tom Hayes, the man who had spent years, gaming the LIBOR system, decided to game the Criminal Justice process. In so doing, the man who had so manifestly flouted any vestige of ethical conduct in his commercial dealings, set out to flout the ethical process of the English prosecution system.
In the course of preparing for a criminal trial, it is perfectly proper for a putative defendant’s lawyers to approach the prosecutor and seek to ascertain their view to a selected series of pleadings to specific charges. However, once an agreement has been reached, it is ethically improper for a defendant then to seek to avoid the consequences of his agreements.
According to Hayes, the FBI’s interest – and specifically the possibility of extradition to the US and a theoretical 90-year prison sentence – shaped what happened next.
Terrified of extradition to the United States, he hired lawyers to approach British investigators to offer his cooperation with their investigation.
"I had one focus and one focus only which was not to be flown to El Paso in Texas, a maximum security prison, without my wife, without my son," he said at trial. "I didn't think about innocence, guilt or anything. My only consideration at the time was getting charged (in Britain) and avoiding extradition."
So, we are now expected to believe that Hayes made up all these hours of interviews and admissions simply in order to get charged with offences in the UK, believing, wrongly, that this would pre-empt his extradition to the USA.
His lawyers wrote to the SFO in January 2013 saying Hayes had decided to cooperate, and during a subsequent 82 hours of interviews he appeared to acknowledge his crimes and implicated 25 other conspirators.. When asked if he admitted acting dishonestly in the manipulation of Libor, he replied: “Yes, I admit that I was dishonest and was dishonest within an environment that was prevalent among all the banks, yeah.”
Hayes added: “There is no way that I’m the only Libor manipulator in the world. It’s just not possible. I might be the most open about it and I’ve left reams of evidence.”
The SFO’s case was that Hayes had become the “ringmaster” of Libor rigging to increase his own trading profits and that he rewarded brokers influencing the rate on his behalf with so-called “wash trades” – trades that were financially neutral for Hayes on which he paid brokerage fees. “I don’t care, right, just get me any fucking trade which pays you basically today, mate,” he messaged one alleged co-conspirator. “If you keep [Libor] unchanged today, yeah, I will fucking do one humungous deal with you.”
The SFO had every reason to believe that Hayes was going to cooperate and give evidence against others, as he had agreed to during his interviews. This was why he appeared at Court on his own, without other defendants, because in order to give evidence against any others, he would have had to have pleaded guilty and been sentenced before any new trial.
But how were the SFO to know that the man who had so routinely avoided complying with any ethical rules of the market he traded, was going to be just as cavalier with the agreements the SFO had thought he was making with them.
If SFO officers believed their suspect was about to plead guilty, they were to receive a very rude awakening. At his trial, having changed his lawyers (for reasons we may only guess at but I suspect that his original lawyers felt they could not go back on their agreements with the SFO), Hayes pleaded not guilty at Southwark crown court to eight counts of conspiracy to defraud.
This is always the problem with people who have lost all sight of any moral precept or ethical standard, you cannot trust them in anything, because they will say anything they think will help their cause no matter how daft it turns out to be.
Hayes attributes his change of heart to a sense of anger and betrayal at the behaviour of his employers in hanging him out to dry and blaming all the wrongdoing on him. I do not believe this.
This so-called very clever man, was not sufficiently clever by half, because by pleading not-guilty after all the hours of making self-implicating statements and admissions to the SFO in interviews, the only route left for him was to seek to claim that his conduct was not dishonest.
This of course, was the only legal avenue left open to him, and I am very surprised that his new lawyers (who were granted legal aid for some bizarre reason to defend this multi-millionaire) connived in the change of plea. They must have advised him of the huge risks he was running and although they were within their rights to accept the change of plea if their client’s instructions were that he genuinely believed he was not acting dishonestly, they must have first asked themselves why he made the self-incriminating statements in the first place, and if they formed the view that he was just gaming the system, then they would have warned him of the consequences he faced in sentencing.
I suspect (and let me say I have no evidence to support this, except for 40 years of police and criminal justice experience), that in the interim period between giving his statements to the SFO and his trial, that Hayes and his evidence on tape to the SFO, and his offer to give evidence against his co-defendants would have become known right across his former operating sector.
Many City traders are unethical and criminogenic by nature, and there is a strong degree of likelihood that Tom Hayes would have been aware of the risks he would run in giving evidence against others. There are plenty of dangerous and vicious men in London who mix in the same milieu as the drug-snorting, champagne-swilling high-octane world of the millionaire bank broker, men who would think nothing of taking a contract to eradicate Hayes if the right money was on the table.
I suspect that fear for his future well-being drove Hayes’s decision to change his plea and in many respects, this would have suited all the other defendants because they would have been given a chance to see the strength of the SFO’s case, as well as reflect on any sentence Tom Hayes might receive.
Well, he has got 14 years, and rarely was a sentence so richly deserved.
He has been given what is called a deterrent sentence, one which is intended to send a very important message to the market sector in which Tom Hayes once worked.
The Judge has let it be known that the Courts will not tolerate criminal behaviour by the City elites and that their adherence to honesty and good conduct is as important as to anyone else.
This trial has sent a clear message to the City spiv demi-monde that they are subject to the same rules and regulations as any other person and dishonesty will be punished severely.
The purpose of a deterrent sentence is aimed at deterring the offender from ever committing a similar offence, but more importantly in some sectors, deterring others from committing similar offences.
We have long needed such a finding such as this because the City has been allowed to become a moral sink, an ethical desert, and widespread criminal offences have been committed by brokers and traders, enriching their employing institutions, and by so doing, being paid huge bonuses.
Some may say that 14 years is too long and not a deterrent.
Well, I say that it is a fine sentence, the sort I have been advocating for years, and will send a very strong message to the market. The judge has laid down an important benchmark, ‘...you commit these kind of crimes, and this is the sort of sentence you can expect...’
Financial traders and brokers are the arch exponents of calculating the risk/reward ratio for every trade they do. After today, the risks will far outweigh the rewards.
I expect that the telephones in the SFO’s offices are ringing off the hook today with solicitors phoning for appointments to come in and discuss plea bargains for their clients still awaiting trial on LIBOR manipulation charges. There is no way that any other accused person is going to try and run the gauntlet with this kind of sentence waiting to be collected for guessing wrong.
Oh, and guess what, Tom Hayes can and probably will still be extradited to the US to face investigation for his breach of US laws, so he has got that to look forward to as well.