LONDON—Former trader Tom Hayes told British investigators he was
"not concerned" when the London interbank offered rate, or Libor,
came under scrutiny from media and regulators in 2008; because his
employer had never questioned his trading activities, a London
court heard Tuesday.
Mr. Hayes, a former UBS AG and Citigroup Inc. trader, is on
trial for conspiring to defraud through attempted benchmark
interest rate rigging. In an interview with the investigators in
May 2013 he said he didn't understand why there was "all this
cloak-and-dagger stuff" from authorities about his actions, when
emails showed that UBS paid a brokerage firm to provide him with a
"Libor service" and his manager knew Mr. Hayes had made an
agreement with a trader at another bank on rate submissions.
A UBS spokeswoman declined to comment.
The interviews were read out and emails were shown to a jury
hearing the trial of Mr. Hayes, who is charged with eight counts of
fraud related to alleged manipulation of Libor. Mr. Hayes, who has
pleaded not guilty, is accused of working with brokers in a
conspiracy to manipulate benchmark interest rates to benefit his
holdings of derivatives. Lawyers for Mr. Hayes say that multiple
banks and traders were engaged in similar activities to manipulate
Libor and other benchmark rates that are set daily by panels of
banks based on their anticipated borrowing costs.
Mr. Hayes said he thought his contacts at the brokerage firm
providing the "Libor service" were being "paranoid" when they asked
him in January 2008 to start using coded language and tone down
requests to them to help influence global interest rate benchmarks.
He said he hadn't seen any red flags raised over Libor setting by
his colleagues or counterparts at other banks, and so didn't take
the brokers' concerns seriously.
When it became known months later that authorities were probing
Libor rates and the submission process, following an April 2008
article in The Wall Street Journal questioning the integrity of the
rates, Mr. Hayes said he thought any investigation would only
relate to "low balling" by banks in the financial crisis to make
themselves appear healthier.
He told the investigators that banks had submitted low Libor
rates in the crisis that were "100% wrong" in contrast to his own
"mucking around" on the margins of Libor rates. "I honestly didn't
think that the rates that we were submitting were outside of where
cash was trading," Mr. Hayes said in the interview.
The jury was shown emails and chats between brokers and Mr.
Hayes that suggested traders at other banks requested moves in
Libor rates to benefit their trading books.
"I wasn't the only one around the world who did all this stuff,
you know, it was really common practice in the industry," Mr. Hayes
said in the interview read out in court.
The jury also heard that the former UBS and Citigroup trader
accepted a £ 1,000 ($1,571) dinner from a broker in late 2009, just
before Mr. Hayes was due to start a new job at Citigroup Inc. In an
email to the broker, Mr. Hayes said he would soon send some
business the broker's way in return.
Write to Margot Patrick at margot.patrick@wsj.com
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