Five former Barclays bankers accused of conspiring to rig Libor interest rates were “driven by money” and their offence “is no different from stealing,” a court has been told.
Jonathan James Mathew, 35; Stylianos Contogoulas, 44; Jay Vijay Merchant, 45; Alex Pabon, 37; and Ryan Michael Reich, 34, are accused of manipulating the US dollar Libor, or London interbank offered rate between 1 June 2005 and 1 September 2007. They all deny one count of conspiracy to defraud.
UK and US regulators fined Barclays £290m in 2012 for manipulating Libor, which prompted the UK’s Serious Fraud Office (SFO) to launch an investigation. Libor is a crucial financial benchmark that determines the cost of borrowing on mortgages and loans for households and companies.
The SFO claims the five men “dishonestly agreed to procure or make submissions of rates by Barclays, a panel bank, into the dollar Libor setting process which were false or misleading”.
Opening the case against the five men at Southwark crown court in London, the prosecutor James Hines QC said: “This is a fraud case. The defendants were employees of Barclays Bank and the prosecution case is that they conspired to defraud the people with whom they trade by dishonestly rigging the Libor rate.”
He explained that Libor, the interest rate at which major banks borrow money from each other, is calculated and published shortly before midday every day. Billions of trades in the financial world are conducted daily on the basis of it.
“So this case is about employees of Barclays Bank rigging, for their own advantage, what is in fact a global benchmark interest rate. In doing so they were driven by money ... to make more profit on their trading.
“It is clear that the purpose of the agreement was specifically to prejudice the economic interest of the other parties … those parties were to lose out financially and economically. It really is not different from stealing.”
Hines stressed that the losses involved were “not simply paper losses” but “real money”, adding that the dollar Libor rate affected deals worth more than $300tn (£212tn) .
The court heard that the Libor system was operated by the British Bankers’ Association and was not subject to a regulator. Hines said: “If Libor is to be used effectively as a benchmark … it absolutely must be trusted by the industry. Without credibility and integrity the financial world simply wouldn’t use it.”
The jury was told Barclays was one of 16 banks on a panel that set Libor each day, and that Mathew and his co-conspirator Peter Johnson were responsible for submitting the Barclays rate.
Hines said that four derivatives traders – Merchant, Pabon and Reich, based in New York, and Contogoulas in London – told Mathew and Johnson, also in London, whether they wanted the rate to go up or down, and the pair then tried to do their best to ensure this happened.
The jury heard that in one conversation requesting a low rate submission, Contogoulas joked: “Also, can you please tell me what next week’s lottery numbers are? I would appreciate it.”
Another message exchange read: “We just need to f****** smash it. Have him set it low”.
This article was written by Julia Kollewe, for theguardian.com on Tuesday 5th April 2016 18.56 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010