Alleged Libor ringleader motivated by greed, trial hears

By Kirstin Ridley

LONDON (Reuters) - Tom Hayes, a former trader on trial for allegedly conspiring to rig benchmark interest rates, has admitted to being motivated by greed and was fired by U.S. bank Citigroup (C.N) in 2010, prosecutors told a London court on Tuesday.

Hayes is the first person to be prosecuted over manipulation of the London interbank offered rate (Libor) after a seven year, global inquiry that has led to banks and brokerages paying around $9 billion (6 billion pounds) in fines and sparked an overhaul of how financial benchmarks such as Libor are policed.

Opening the case for the prosecuting, Serious Fraud Office (SFO) senior lawyer Mukul Chawla told the court that Hayes, 35, was at the centre of a conspiracy to rig Libor and had admitted during 82 hours of interviews with prosecutors that he had put his trading book and pay above other concerns.

"In his own words, he was greedy," Chawla told the jury, alleging that between 2006 and 2010 Hayes set out to manipulate Libor at his bank and others on an "almost daily basis".

The former yen derivatives trader is charged with eight counts of conspiracy to defraud between 2006 and 2010, a criminal offence that carries a maximum jail sentence of 10 years. He has pleaded not guilty and his defence team has yet to respond to the allegations in court.

Hayes earned around 4.8 million pounds ($7.4 million) working at UBS and Citigroup from 2006 to 2010, but almost two years into a legal battle he has been granted legal aid, state funding for those unable to afford lawyers.

The high-profile trial is expected to last 10 to 12 weeks and the courtroom was packed with members of the media taking seats in the dock usually reserved for the accused.

Hayes, diagnosed with mild Asperger's, a form of Autism, was given leave to sit with his solicitor so he could more easily instruct his legal team. He sat making notes and occasionally shook his head and frowned at comments by the prosecutor.

HIGHLY INTELLIGENT

The SFO alleges Hayes was a central figure in a conspiracy with staff from at least 10 banks and brokers to rig Libor, an average interest rate used to price an estimated $450 trillion of financial contracts from derivatives to loans for households and individuals worldwide.

Prosecutors allege Hayes conspired with others to request or make false or misleading submissions to benefit his own trading book, deliberately disregarding the proper basis for making submissions and prejudicing the economic interest of others.

Hayes, the prosecution said, was a highly intelligent and successful trader, with a degree in mathematics and engineering, who earned around $300 million for UBS (UBSG.VX) while trading for the Swiss bank in Tokyo.

Prosecutors alleged Hayes started attempting to manipulate Libor from his very first day of trading for UBS on Sept. 29, 2006, when he contacted a broker to ask for higher Libors, according to computer chats read out in court.

In one audio tape played to the court, Hayes tells SFO investigators UBS probably realised in early 2007 how valuable he was because of his contacts with London brokers.

The prosecution alleged he used brokers' relationships with traders at other panel banks to seek to influence others and increase his trading profits by cajoling and even begging them.

In return, he raised broker rates and put additional trades through brokers so they could earn additional fees. He also allegedly incentivised them with kickbacks and bribes such as "wash" trades, which have no legitimate purpose apart from generating broker fees, the prosecution alleged.

In one online chat, a broker discussed a 50 pound curry with Hayes. He responds, "Seriously, whatever it takes. Bill me."

FINANCIAL REWARDS

By September 2009, however, Hayes became dissatisfied with his financial rewards at UBS, resigning to join Citigroup in Tokyo. He started trading at Citi in February 2010 and re-connected with his "web of contacts" to continued his "dishonest rigging of Libor", the prosecuting lawyer alleged.

But after a complaint in June, he was sacked in December 2010, the lawyer said, without giving details. Hayes then returned to the United Kingdom and was arrested two years later.

Hours of subsequent interviews with the SFO might appear oppressive, Chawla said. But he alleged this was because Hayes volunteered he had acted dishonestly and offered evidence "against a large number of other people".

The court heard Hayes implicated traders and interdealer brokers including his half-brother, Peter O'Leary, a former trader at HSBC (HSBA.L). Reuters was unable to reach O'Leary for comment.

"He named others and he set out precisely what he had done with them," Chawla said.

But despite the evidence, documents and admissions, Chawla said Hayes was in court because he "now claims what he was doing ... was not dishonest."

A number of those listed in the indictment had been charged with offences and were awaiting trial. But Chawla said Hayes stood alone in court because "his actions stood apart from and above all others".

($1 = 0.6494 pounds)

(Editing by Mark Potter and David Holmes)