Brokers 'enthusiastically' aided Libor conspiracy, prosecutor tells court

By Kirstin Ridley
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Former ICAP broker Darrell Read leaves Southwark Crown Court in London, Britain

Former ICAP broker Darrell Read leaves Southwark Crown Court in London, Britain October 06, 2015. REUTERS/Neil Hall

By Kirstin Ridley

LONDON (Reuters) - Six former interdealer brokers with nicknames such as "big nose" and "Lord Libor" were rewarded with kickbacks and bribes for "enthusiastically" helping a trader rig a global interest rate, a prosecutor told London's second Libor trial.

Mukul Chawla, counsel for Britain's Serious Fraud Office (SFO), said the actions of former UBS and Citigroup trader Tom Hayes were the key to a "simple" case about dishonesty and conspiracy scheduled to run into the New Year.

Hayes, a former Tokyo-based derivatives trader, was convicted on Aug. 3 of conspiring with others to manipulate Libor, the London interbank offered rate, between 2006 and 2010.

The 12-member jury is tasked in part with determining whether each defendant in this new trial entered into a conspiracy with Hayes and others.

The six former ICAP, RP Martin and Tullett Prebon employees, aged between 44 and 53, are the first brokers to be tried over the alleged rigging of Libor, used for setting interest rates on about $450 trillion of financial contracts worldwide, from complex derivatives to student loans.

They were paid thousands of pounds in commissions from extra trades and "wash" trades - in which two identical trades cancel each other out in a move solely to generate broker fees.

The SFO alleges that ex-ICAP brokers Darrell "big nose" Read, Colin "Lord Libor" Goodman and Danny Wilkinson, former RP Martin brokers Terry Farr and James Gilmour, and Tullett's Noel Cryan, were experienced employees who willingly conspired with Hayes and others to rig yen-denominated Libor rates for profit.

"They were rewarded in various ways to corrupt a process that should not have been corrupted," Chawla said in his opening speech to the jury, which is expected to last five days.

"The prosecution says they offered enthusiastic assistance," Chawla said.

The men, who have pleaded not guilty, each face one or two counts of conspiracy to defraud. Each count carries a maximum jail sentence of 10 years, although such terms are often served concurrently. Lawyers for the defendants have not responded to requests for comment.

TRADING POSITIONS

Chawla alleged Hayes made millions of pounds for his employers by persuading the brokers to influence rates to favour his trading positions. The brokers were all based in London, apart from Read, who moved in 2007 with his family to New Zealand, where Hayes became his "principal" client, Chawla alleged.

The trial comes more than seven years after U.S. regulators first examined how Libor rates were set, sowing the seeds of a global inquiry that culminated in authorities fining some of the world's biggest banks and brokerages $9 billion, charging 21 men and overhauling how market benchmarks such as Libor are policed.

Interdealer brokers became a focus for the inquiry because of the role they play when sharing information with their networks of traders and matching buyers and sellers of bonds, currencies and swaps, for which they charge a fee.

The prosecution alleges Read, Goodman and Wilkinson conspired with at least seven others, including Hayes, to rig Libor between August 2006 and December 2009.

Goodman and Read are charged with a second count of conspiracy with Hayes and others between December 2009 and September 2010, when Hayes left UBS to join Citigroup in Tokyo.

Farr and Gilmour are charged with conspiring to rig rates with Hayes and others between August 2006 and December 2009. Farr faces a second count of conspiracy between December 2009 and September 2010 with Hayes and others.

Cryan allegedly conspired with Hayes and others between February and December 2009.

The men are expected to start laying out their defence in about mid November.

(Editing by Greg Mahlich and David Holmes)