July 28 (Reuters) - New details from court documents and
sources close to the Libor scandal investigation suggest that
groups of traders working at three major European banks were
heavily involved in rigging global benchmark interest rates.
Some of those traders, including one who used to work at
Barclays Plc in New York, still have senior positions
on Wall Street trading desks.
Until now, most of the attention has involved traders at
Barclays, which last month reached a $453 million settlement
with U.S. and UK authorities for its role in the manipulation of
rates. Now, it is becoming clear that traders from at least two
other banks - UK-based Royal Bank of Scotland Group Plc
and Switzerland's UBS AG - played a central role.
Among them, the three banks employed more than a dozen
traders who sought to influence rates in either dollar, euro or
yen rates. Some of the traders who are being probed have worked
for several banks under scrutiny, raising the possibility that
the rate fixing became more ingrained as traders changed jobs.
The documents reviewed by Reuters in analyzing the traders'
involvement included court filings by Canadian regulators who
have been investigating potential antitrust issues; settlement
documents with Barclays filed by the U.S. Department of Justice
and the U.S. Commodity Futures Trading Commission in Washington
and by the Financial Services Authority in the U.K.; and a
private employment lawsuit filed by a former RBS trader in
Singapore's High Court.
The scandal, which began to come to light in 2008, has
become a time bomb for regulators and a big focus for
politicians on both sides of the Atlantic. At issue is the
manipulation between at least 2005 and 2009 of rates that are
used to determine the cost of trillions of dollars of
borrowings, including everything from home loans to credit card
rates.
One former Barclays employee under scrutiny, Reuters has
learned, is Jay V. Merchant, according to people familiar with
the situation. Merchant, who oversaw the U.S. dollar swaps
trading desk at Barclays in New York, worked for the bank from
March 2006 to October 2009, according to employment records
maintained by the U.S. Financial Industry Regulatory Authority
(FINRA).
Merchant currently holds a similar position at UBS, where he
works out of the Swiss bank's offices in Stamford,
Connecticut, according to FINRA. He did not return requests for
comment.
People familiar with the investigation said authorities are
looking at whether some individuals on Merchant's trading desk
tried to influence the rate on Libor by communicating with other
traders in London to get a higher return on certain swaps the
desk was trading. His specific role is unclear.
The Department of Justice declined to comment.
Merchant's attorney, John Kenney of Hoguet Newman Regal &
Kenney, did not respond to requests seeking comment.
A UBS spokeswoman said that the bank has "no reason to
believe Mr. Merchant has engaged in any improper conduct at
UBS." The spokeswoman, who noted that Merchant is on a two-week
vacation, declined to comment on the broader investigation.
Barclays declined to comment. In a statement, an RBS
spokeswoman said the bank is cooperating with the investigation.
SPREAD FROM BARCLAYS
Earlier this week, Reuters reported that federal prosecutors
in Washington have begun reaching out to lawyers for some of the
individuals under scrutiny as they get closer to bringing
possible criminal charges.
The dollar and euro rate-rigging appears to have begun in
earnest in early 2005 in the dollar market, according to the
documents reviewed by Reuters. By August of that year, Barclays
traders were reaching out to traders at other big global banks
to manipulate their rates to make them favorable to Barclays'
trading positions.
Soon, the trading had crossed to the euro rate markets,
according to the settlement documents filed in the Barclays
investigation. And by 2007, traders at RBS and UBS were seeking
to influence the yen rate market, according to documents filed
in 2011 in Singapore's High Court and in Canada's Ontario
Superior Court.
Traders at Barclays are believed to have participated in
manipulating the rate for the dollar and the rate for the euro
known as Euribor, according to documents filed in the Barclays
settlement last month.
RBS and UBS traders are a focus of the global investigation
because of their alleged involvement in seeking to influence
yen-denominated rates.
Two RBS traders in London, Brent Davies and Will Hall, are
alleged to have agreed to help a trader at UBS, Thomas Hayes, to
manipulate yen Libor, according to court documents filed by the
Canadian Competition Bureau.
UBS is cooperating with Canadian and U.S. authorities,
according to people familiar with the situation.
Hayes worked at UBS from 2006 to 2009. He later moved to
Citigroup where he remained until 2010, after which he left the
bank. Hayes, Davies and Hall could not be reached for comment.
The documents reveal that Hayes also contacted traders at
other banks in London to get them to manipulate yen rates. They
include Peter O'Leary at HSBC Holdings Plc, Guillaume Adolph at
Deutsche, and Paul Glands at JPMorgan. A second UBS employee
sought to get a Citigroup trader, who formerly had worked at
UBS, to influence rates.
None of these traders could be reached for comment.
CONDONED
In addition, a former trader at RBS, Tan Chi Min, said in a
wrongful termination lawsuit filed in the Singapore High Court
in 2011 that he was forced out for "improperly seeking to
influence" the setting of Libor. Tan, who ran a trading desk at
RBS, said in the suit that improper rate-rigging was known by
some at the bank and condoned.
Tan denied trying to manipulate Libor, and alleged in the
2011 court filing, and one in March this year, that about a half
dozen other RBS traders openly tried to request specific rates.
Tan's attorney, N. Sreenivasan, declined to comment because
the court case is ongoing.
Beyond traders at the three European banks, authorities are
still probing the role of others.
For example, traders at JPMorgan Chase & Co also
interacted with some of the traders under scrutiny who worked
for Barclays and RBS, according to a person familiar with the
situation and court documents filed in Singapore.
Similarly, Deutsche Bank AG also had several
employees whose trading is under scrutiny by authorities,
according to people familiar with the situation and court
documents filed in Canada.
JPMorgan and Deutsche Bank declined to comment.
