By Margot Patrick and David Enrich
LONDON--British prosecutors filed criminal charges Monday
against three former bank traders for alleged fraud, opening a new
front in a global investigation into alleged rigging of benchmark
interest rates, with more charges in the pipeline.
The U.K.'s Serious Fraud Office said it is charging three former
Barclays PLC traders with "conspiracy to defraud" for their alleged
roles rigging the London interbank offered rate, or Libor. The
agency, which opened its criminal investigation in July 2012, also
is likely to file charges against three former ICAP PLC brokers for
allegedly helping bank traders manipulate rates, according to
people familiar with the case.
Monday's charges bring to 13 the number of individuals
criminally charged in the U.S. or U.K. investigations into Libor, a
benchmark used to set interest rates on trillions of dollars of
loans and other financial contracts.
The SFO's latest charges represent a broadening of the Libor
investigation, which got under way in 2008. They serve as a
reminder of the scandal's scope and the pervasive nature of the
alleged misconduct, even as the Libor investigation begins to be
overshadowed by nascent criminal and civil examinations into
potential manipulation of other financial benchmarks.
Until now, criminal charges filed against individuals in the
U.S. and U.K. have all been in connection with an alleged
rate-manipulation ring led by a single trader: Tom Hayes, who used
to work in Tokyo for UBS AG and Citigroup Inc. and who has pleaded
not guilty to U.K. charges.
But the charges against the former Barclays employees-- Peter
Johnson, Jonathan Mathew and Stylianos Contogoulas--don't appear to
relate to that investigation. Most of their alleged activity took
place during a different time period, and Barclays wasn't part of
Mr. Hayes's alleged ring, according to people familiar with the
U.S. and U.K. investigations. A lawyer for Mr. Mathew declined to
comment. Lawyers for Messrs. Johnson and Contogoulas didn't respond
to requests for comment.
Other alleged rings remain under scrutiny. Authorities in the
U.S., U.K. and European Union have been investigating a group of
former traders from several banks for allegedly working together to
manipulate the euro interbank offered rate, or Euribor, according
to people familiar with that case.
The likely U.K. criminal charges against the former ICAP
brokers-- Colin Goodman, Darrell Read and Daniel Wilkinson--are
notable in part because the U.S. Justice Department last September
charged the men with similar fraud-related offenses. They haven't
entered pleas to the U.S. charges.
"We would not be surprised to find that he would be charged,"
said Matthew Frankland, a London lawyer representing Mr.
Wilkinson.
After the U.S. filed charges, lawyers for the former ICAP
brokers were in the unusual position of pushing the SFO to file
criminal charges against their clients, according to people
familiar with the case. The reason: Being charged in the U.K.
likely would preclude the men from being extradited to the U.S. to
face similar charges, these people said. The former brokers would
prefer to be tried in Britain because the penalties they would face
if convicted are much lighter than in the U.S.
Relations between the Justice Department and the SFO soured in
late 2012 over a similar incident. U.S. officials informed their
British counterparts at the time that they planned to file criminal
charges against Mr. Hayes. Within days, the SFO arrested Mr. Hayes,
a move that the Justice Department perceived as impeding the U.S.
from nabbing a prime suspect, these people say. The dispute was
escalated to senior officials on both sides of the Atlantic.
People close to the SFO said the agency has been in close
contact with the Justice Department about its decisions about whom
to charge and that the two agencies have patched up their
relationships since the 2012 fracas.
The flurry of announced and anticipated charges by the SFO comes
as the agency tries to regain momentum in its Libor case. People
involved in the investigation say it was nearly derailed last year
when Mr. Hayes, who had been cooperating with the agency, changed
his mind and decided to fight the charges against him. The SFO had
been counting on Mr. Hayes to testify against his alleged
co-conspirators, and without his help it became much harder to
bring charges against other individuals, these people said.
The former ICAP brokers allegedly worked with Mr. Hayes and
other bank traders to rig rates, according to the Justice
Department. ICAP, which serves as a middleman for large
institutions looking to buy and sell financial products, last
September settled the U.S. and British Libor investigations,
agreeing to pay $87 million. Its chief executive at the time
apologized for the firm's misconduct.
Barclays was the first bank to resolve its case, paying about
$450 million in June 2012 and admitting wrongdoing. A political
furor over the settlement led to the abrupt resignations of
Barclays' chairman, chief executive and chief operating
officer.
Write to Margot Patrick at margot.patrick@wsj.com and David
Enrich at david.enrich@wsj.com
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