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In the months that followed, Hayes did his best to rebuild his life. Days after his dismissal, he returned to England and married Tighe in a lavish ceremony at the Four Seasons hotel in rural Hampshire. In 2011, they had their first child, Joshua, and bought the Old Rectory, a six-bedroom former vicarage in a pretty village outside London. They paid the £1.2 million ($1.9 million) price in cash, with no mortgage, according to land records. Hayes signed up for a British MBA course, and Tighe kept up her work as a lawyer. Together they began to remodel their hillside idyll, adding a new wing and filing plans to build a six-foot electronic gate to keep out intruders.
Meanwhile, U.S. investigators were grinding ahead with their case. Hayes heard rumors but had no way of knowing he was one of the prime targets. He sent a Facebook message to Mirhat Alykulov, a trader who’d sat next to him for years at UBS Tokyo, and one day several weeks later, he got a call back. Hayes cut off any chitchat and asked: Had the bank said anything about speaking to the Justice Department? Unbeknownst to Hayes, Alykulov was calling from his criminal lawyer’s office in Washington on a recorded line the FBI had set up to appear as if it originated in Tokyo. As casually as he could manage, Alykulov asked Hayes what he planned to do. Alykulov, who was facing Libor fraud charges of his own, had cut a deal with the feds—they agreed not to prosecute if he told them everything he knew and helped pin Hayes. If Hayes suggested they lie to the government, he could be charged with obstruction as well as fraud.
Hayes paused, as if somehow aware of the trap. “The U.S. Department of Justice, mate, you know, they’re like the dudes who, you know, you know, absolutely like, you know, you know—put people in jail,” Hayes said. “Why the hell would you want to talk to them?” (Alykulov, through his lawyer, declined to comment.)
Two weeks before Christmas in 2012, at 7 a.m. on a Tuesday, Hayes heard a knock at the door. More than a dozen police officers and Serious Fraud Office investigators swept through the property, gathering computers and documents into boxes. Hayes was arrested, taken to a London police station, and told he was suspected of conspiracy to defraud.
Hayes declined to comment and was released. Eight days later, he would later testify, Hayes was watching TV when a bulletin cut to a press conference in Washington. Before flashing cameras, U.S. Attorney General Eric Holder announced that UBS had been fined $1.5 billion and had pleaded guilty to rigging Libor at its Japanese arm. The DOJ was also criminally charging Hayes and a former colleague, Roger Darin, and seeking to extradite them. Hayes had had no idea.
Hayes considered the evidence against him. Investigators on three continents had thousands of his incriminating e-mails and audio recordings. The only way to avoid extradition to the U.S. and its harsh sentencing laws, Hayes’s lawyers told him, was to enter a “supergrass” (informer) deal in the U.K., confessing everything and giving up everyone he’d collaborated with. The British were eager to cut a deal. They’d been late to the investigation but still wanted a guilty plea at home.
So began a period of intense unburdening. Over the next three months, Hayes’s life eased into a familiar routine. At least once a week, he would make his way to the SFO, just off Trafalgar Square. After signing in under a false name—usually some former legend from his beloved Queens Park Rangers soccer team—he took the elevator to the fourth floor, walked past the vending machines, and stepped into his confessional: a stark white room with a desk, a projector, his lawyer, and two investigators in suits. They barely had to prod to get him to talk.
“The first thing you think,” Hayes said early on, “is where’s the edge, where can I make a bit more money, how can I push, push the boundaries, maybe, you know, a bit of a gray area, push the edge of the envelope.” He finally paused for breath. “But the point is, you are greedy, you want every little bit of money that you can possibly get because, like I say, that is how you are judged, that is your performance metric.”
The shorter, stockier investigator began: “At the time that the conduct took place, do you think you knew at that point, that what you ….”
“Well look, I mean it’s a dishonest scheme, isn’t it?” Hayes interrupted. “And I was part of the dishonest scheme, so obviously I was being dishonest.” Hunched over a desk in the cramped interrogation room, he stared vacantly ahead as he launched into another cathartic torrent.
Hayes seemed to relish reliving moments from his past, his voice speeding up when he described heady days piling into positions, squeezing the best prices from brokers, and playing traders against each other. “Trading a large derivatives book,” he said during one exchange, “is like looking after a big, living organism. After trading for years and years you get an innate feeling for how everything relates.”
In June, after 82 hours of interviews, Hayes was formally charged. He had identified more than 20 people as co-conspirators, including his own stepbrother. (O’Leary is not facing charges, nor Pieri, Hoshino, and McCappin.) The list included traders at JPMorgan, RBS, Deutsche Bank, and HSBC, as well as brokers at the two biggest interdealer brokerage firms. For Hayes, betraying the men was rational. Knowing that he would serve a likely shorter sentence in the U.K. and not the U.S. prison system, Hayes said, made him feel like a man who’d been diagnosed with cancer and then given the all-clear.
As the scope of the Libor scandal grew that summer, making headlines around the world, Hayes’s relief was corroded by anger. Over the course of his confession, investigators had shown him pieces of evidence that he couldn’t forget.
As much as they illustrated the strength of the case against him, he thought they also proved the unfairness of it all. Hayes spent the summer at a desk inside his house poring over documents that fueled his indignation: e-mails from senior managers condoning his efforts; transcripts that showed manipulation predating his hiring; even what he believed were internal bank guidelines on cheating the system. A rage built inside him. Libor-rigging was an industrywide practice. Why should he take the fall?On Oct. 9, as the SFO was finalizing its case against Hayes and his co-conspirators, a white envelope arrived. It was from Hayes’s lawyers. “As a matter of courtesy we are now in a position to advise that Mr. Hayes will plead Not Guilty to all Counts,” the letter said. “Accordingly he now formally withdraws from the process.” Having avoided extradition, the natural born trader was taking the biggest risk of his life, reneging on the deal and entrusting his fate to random jurors in a London courtroom.
“I’d rather put my fate in the hands of 12 people than plead guilty to a politically driven process,” Hayes later said. “I may not agree with what they decide in the end, but I will accept it.”
On May 26, 2015, seven years after investigations began, the first individual to face trial for rigging Libor walked nervously past a packed gallery and took his seat in Court Two of Southwark Crown Court, an austere brown-brick cube on the bank of the River Thames. Dressed in chinos, a black sweater, and wearing no tie, his blond hair atypically neat, Hayes looked meek—and not at all like the aggressive bully the prosecution wanted to portray. His mother looked on from a reserved seat among the press pack.
The jury, seven men and five women, was told about Hayes’s Asperger’s diagnosis early in the proceedings. The disorder didn’t affect his ability to distinguish between honest and dishonest acts, the judge said, but might help explain the brusque nature of his answers. Because of his condition, Hayes was allowed to sit behind a desk with his legal team rather than alone in the dock, an enclosed glass box in the center of the courtroom. Next to him throughout the trial was an intermediary whose role was to monitor Hayes for signs of stress and who would mouth “calm down” when he became irate, which often included shaking his head wildly and scribbling notes to his lawyers.
The SFO’s chief prosecutor, Mukul Chawla, an amiable bear of a man in a black robe, with a mane of silver hair and an e-cigarette he chugged on during breaks, presented the case against Hayes in measured tones. “You may think, having heard the evidence, that here the motive was a simple one,” Chawla said during his opening. “It was greed. Mr. Hayes’s desire was to earn and to make as much money as he could. The more that he earned for his employers, the more they would value his services and inevitably, he hoped, the more that they would pay him.”
There was no disputing what Hayes had done, but to get convictions, Chawla needed to demonstrate that he knew what he was doing was dishonest. The prosecutor’s greatest weapons were the trader’s own words.
“I knew that, you know, I probably shouldn’t do it,” Hayes said in one 2013 interview with the SFO, played at high enough volume through the court’s speakers that they started to distort. “But, like I said, I was participating in an industrywide practice that predated my arrival at UBS and postdated my departure.”
When it was Hayes’s turn on the stand, he disavowed the SFO interviews, claiming he’d exaggerated his culpability to make sure he would be charged in the U.K. During two weeks of testimony, Hayes argued that he wasn’t dishonest because the practice of trying to influence Libor was so common across the industry he had no idea it was wrong. His counsel backed up his claims with documents showing managers at UBS encouraging his behavior, and the BBA sanctioning lowballing during the crisis.
At one point Hayes broke down in tears. “I don’t think I’ve done anything,” he said, looking to his wife in the gallery, her blonde hair tied neatly back and her hands clasped in her lap. She nodded back in support.
When the prosecution played audio clips of Hayes joking around with his contacts in the market, he looked down and smiled to himself, caught up in the memories. “It could be the worst job in the world,” Hayes testified. “It could make you want to jump off a bridge and it can make you feel physically sick every time you went into work.” Still, one of the hardest things about his current situation, he said, was that he was no longer allowed to trade. “I was, and to a lesser degree now, still obsessed with the markets, the financial markets, and very, very, very much miss my old job,” he said. “I very much miss my old career. It was a big, big part of my identity, that job and that career for me.”
By the end of Hayes’s first week on the stand, what had begun as an open-and-shut case was slipping away from Chawla. The young man came across as straightforward, affable, naïve—as much a victim of the system as the perpetrator of a crime.
But any hope for Hayes drained dramatically upon cross-examination. Asked to confirm basic facts, such as what instruments he traded, the trader turned evasive and combative. Physically, he tensed up, clenching his jaw and narrowing his eyes. When Chawla probed Hayes on the evidence against him, Hayes changed the subject, decrying the investigation as lacking any rigorous analysis and claiming he was a victim of a struggle for supremacy between the U.K. and U.S. authorities—a “fugitive from American justice.” At one point, the judge intervened, telling Hayes to answer the questions and refrain from speeches. A member of the defense team moaned to a reporter during a break: “Two years of my life over in two minutes.”
Ten weeks after the trial began, the jury was sent away to deliberate. After five days, they returned a unanimous verdict: guilty on all counts.
Half an hour later, Hayes walked back into the packed, hushed courtroom for the final time. On this occasion he couldn’t avoid the dock. Before entering, he asked a uniformed guard if he could kiss his wife goodbye. Dressed in a blue shirt and light blue sweater and carrying an overnight bag, he was led into the glass cell, and the door locked behind him.
Hayes barely reacted when the judge announced he would be imprisoned for 14 years, a sentence at the very highest end of the spectrum for white-collar criminals in the U.K. His wife shook her head, bent forward toward her lap, and grasped the arm of Hayes’s mother, who stared straight ahead, silently shaking.
“What you did, with others, was dishonest, as you well appreciated at the time,” the judge said in his closing remarks. “What this case has shown is the absence of that integrity which ought to characterize banking.”
Hayes is now incarcerated at Her Majesty’s Prison Wandsworth, a Victorian fortress south of the Thames known for its poor conditions and violent residents. In October, the six brokers accused of using their sway over the banks to help Hayes push around Libor will follow his path up the steps of Southwark Crown Court for their own trials. The SFO says privately it plans to charge further co-conspirators in the months ahead.
The investigations into Libor kick-started by McGonagle and his colleagues at the CFTC have resulted in close to a dozen firms being fined a combined $10 billion. More than 100 traders and brokers have been dismissed or have left the industry. For those who remain in banking, the trading floor in the post-Hayes era looks like a very different, more chastened place. Emboldened by their success on Libor, regulators have successfully settled manipulation probes in foreign exchange, precious metals, and derivatives markets. Banks have built up their compliance staffs. Gone are the firm-funded trips to Val d’Isère and the $1,000 meals at Le Gavroche. Traders today describe living in a state of paranoia that their past conversations will be raked over and used against them. The draining of excess from banking in recent years is commonly attributed to the financial crisis. But as the public well knows, nobody who ranked on Wall Street went to jail over subprime mortgages. With Hayes behind bars, and others set to follow him to the dock, Libor and the related collusion cases have an equal if not greater claim to the new, subdued reality.
Adapted from The Fix: How Bankers Lied, Cheated and Colluded to Rig the World’s Most Important Number, by Liam Vaughan and Gavin Finch (Wiley, 2016).
http://www.bloomberg.com/news/articles/2015-09-14/was-tom-hayes-running-the-biggest-financial-conspiracy-in-history-
