A group of former Barclays bank employees accused of conspiring to rig Libor interest rates were paid big bonuses and offered each other wine and coffee in return for favourable rates, a court has heard.
Jonathan James Mathew, Stylianos Contogoulas, Jay Vijay Merchant, Alex Pabon, and Ryan Michael Reich deny conspiring to manipulate the US dollar Libor, or London interbank offered rate for more than two years, between 1 June 2005 and 1 September 2007.
The third Libor trial in the UK comes after the scandal rocked the financial world and led to billions of dollars in fines for major banks, including Barclays, Royal Bank of Scotland and Deutsche Bank.
On the second day of his opening speech at Southwark crown court in London, James Hines QC, a prosecutor for the UK’s Serious Fraud Office, said: “Making money was the name of the game.”
He told the jury that Merchant, then director of US fixed income in New York and the line manager of Pabon and Reich, was the highest paid of the group, with a £1.3m package for 2006 and £2.2m for 2007, almost entirely made up of bonuses.
Hines told the court the traders were dealing with “eye-watering” sums of money. They stood to gain or lose hundreds of thousands of pounds if they succeeded in manipulating Libor, a key global financial benchmark that determines the cost of borrowing for households and companies. Hines said that moving the Libor rate even by tiny amounts could have a “huge impact on the profitability of the Barclays book”.
In February 2006, Pabon wrote in an email: “We are making money trading like this, so lets keep it up. Hopefully we can get another 200K tomorrow. We are almost there.”
Reich was paid $800,000 in 2007, including a $690,000 bonus, while Mathew’s pay package was £280,750. Pabon was paid a $125,000 salary and a $200,000 bonus in 2005, while Contogoulas received a £60,000 salary and a £140,000 bonus.
Both left Barclays in the summer of 2006, but Contogoulas continued to send requests to the Barclays submitters after he joined a rival bank, Merrill Lynch.
The jury heard that on numerous occasions, four derivatives traders – Merchant, Pabon and Reich, based in New York, and Contogoulas in London – asked the Libor rate submitters Mathew and co-conspirator Peter Johnson, both based in London, to submit rates that suited their trading at the daily setting of Libor, carried out by 16 banks, including Barclays.
In one email in December 2005, Merchant bluntly stated which rate he wanted: “4.48 fixing” – or “I will get slaughtered”, as he wrote in another message.
The email exchanges presented by the prosecution showed that Contogoulas repeatedly offered the Libor submitters coffee or wine in return for favourable rates. In one message he said: “He [Johnson] has been doing a very good job, I gave him a bottle of wine on Friday to say thank you.”
On another occasion Contogoulas joked in an email to Johnson: “Remember when I retire and write a book about this business your name will be written in golden letters … and you’ll have an open invitation to my bar in the Greek islands he he.”
Johnson replied: “I would prefer this not to be in any books!”
Hines told the jury: “The defendants in this case are all very successful, intelligent, well educated and experienced professionals. These men were trusted by Barclays Bank to trade in deals worth billions of dollars.”
The case continues.
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