‘Lord Libor’ trio put ICAP at heart of rate-rigging scandal

The London-based interdealer broker paid £55m to settle civil investigations by the US and UK regulators as it accepted findings that the three ex-employees helped a former UBS trader in his “relentless” attempts to manipulate yen Libor between 2006 and 2011.

 

Emails and transcripts of calls between the brokers and the trader, who already faces criminal charges over alleged Libor manipulation, laid bare a world where brokers pushed “sheep” at other banks to submit rates they suggested in exchange for nearly £2m in brokerage fees from UBS. The authorities say the rates were purposefully false.

The three “are accused of repeatedly and deliberately spreading false information to banks and investors around the world in order to fraudulently move the market and help their client fleece his counterparties,” said Mythili Raman of the US Department of Justice.

DoJ’s probe into ICAP continues, even as the company settled with the UK’s Financial Conduct Authority and the US Commodity Futures Trading Commission.

Libor, which helps determine the price of $350tn products worldwide, from student loans to complex derivatives, is calculated daily by averaging submissions from a group of banks. By influencing submissions, brokers facilitated the trader’s desire to move yen Libor in a certain direction, the authorities allege.

The allegations counter earlier statements by Michael Spencer, ICAP’s founder and a former Conservative party treasurer, that the company played a peripheral part in the worldwide probe, in which ICAP is the fourth institution to settle.

The opposition Labour party were quick to make political capital from ICAP’s settlement and demanded that the Tories – to whom Mr Spencer is still close – return £4.8m in donations. Mr Spencer told journalists the alleged conspiracy was a “very carefully concealed collaboration” and that “we failed to pick it up”.

Colin Goodman, Darrell Read and Daniel Wilkinson, now face three criminal counts of wire fraud and conspiracy filed by the DoJ. Each count carries a 30-year maximum jail sentence. All three are Britons and Mr Read lives in New Zealand. None has had an opportunity to respond to the charges.

Mr Goodman, a former cash broker who was known by his peers as “Mr Libor” and “Lord Libor”, sent banks that submitted to the yen-Libor process daily rate forecasts.

The DoJ alleges that Mr Goodman, at Mr Read and Mr Wilkinson’s behest, altered his forecasts in line with rates that would be favourable to the ex-UBS trader’s positions. In exchange, Mr Goodman demanded quarterly bonus payments derived from UBS’s brokerage fee to the desk, or else there would be “no more Mr Libor”.

The FCA described these payments totalling £50,000 in its own anonymised findings as “corrupt”.

Mr Wilkinson replied to Mr Goodman’s demand for a bonus: “As for kick backs etc we can discuss that at lunch,” according to an email published by the DoJ.

Their potential extradition could lead to a repetition of the NatWest Three; bankers extradited in 2006 to face Enron-related US charges after the UK’s Serious Fraud Office declined to prosecute them.

The SFO has its own investigation into Libor. This includes current and former ICAP employees, people familiar with the situation said.

“These people are in the bizarre twilight zone of actually wanting the SFO to prosecute them here in the hope that at least they get a fair trial,” said Matthew Frankland, a solicitor for Mr Wilkinson, who denies wrongdoing and who has two sons and a serious medical condition. “I see no justice or common sense in the decision to prosecute this man in the States.”

Lawyers for Mr Goodman and Mr Read declined to comment.

With additional reporting by Lina Saigol in London and Gina Chon in Washington