Libor manipulation and defining dishonesty

Libor manipulation and defining dishonesty

Discussing the recent Barclays Libor trial, Charles Bott QC, head of Carmelite Chambers, suggests that the most interesting—and unresolved—issue is the extent to which the manipulation of Libor and other financial benchmarks was part of unspoken banking policy at the time.

Briefly, can you describe the background to and the result of the Libor trial?

This was the third criminal trial for Libor manipulation in the UK. The other two (R v Tom Hayes and R v Reed and others) occurred between May 2015 and January 2016. Those trials both related to the manipulation of Yen Libor between 2006 and 2010, covering periods when Hayes, a Tokyo based derivatives dealer, worked for UBS and then Citibank.

This trial related to the manipulation of Dollar Libor between 2005 and 2007. Although not directly linked to the Hayes or Reed trial, it arose, as they did, from a decision taken by the Serious Fraud Office (SFO) in 2012 to make Libor manipulation the subject of criminal prosecution in addition to regulatory sanctions. This decision was announced days after Barclays had agreed to pay regulatory fines of £59.5m imposed by the Financial Services Authority. (Barclays was also fined the equivalent of approximately £230m by the US Department of Justice and Commodities Futures Trading Commission).

Five defendants stood trial in these proceedings: Jonathan Mathew was a junior and subordinate Dollar Libor setter at Barclays and Jay Merchant, Alex Pabon, Ryan Reich and Stylianos Contogoulas were traders.

Merchant, Mathew and Pabon were convicted. They received prison sentences of six and a half years, four years and two years nine months respectively.

The jury could not reach verdicts in the cases of Contogoulas or Reich and the SFO has announced that they are to face a retrial in February 2016.

A more senior Barclays setter, Peter Johnson, had pleaded guilty in October 2014. He was sentenced to four years imprisonment. All the sentences were discounted to reflect personal mitigation and the fact that some defendants would

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