The first signs of trouble for prosecutors came three weeks into the trial. Their witness was a government investigator called to lay out details of an inquiry into the alleged rigging of a key interest rate by a group of brokers, who faced up to 20 years in prison.
But as the investigator went through a calendar that his agency had compiled, listing days on which the rates had allegedly been manipulated, his team admitted some of the dates were wrong. Philip Hackett, QC, one of the defence lawyers, asked if the prosecution was “making this up as they go along”.
Sitting near the front of the courtroom, Mukul Chawla, the chief prosecutor for the Serious Fraud Office (SFO), shook his head. The case was supposed to have been another triumph for authorities seeking to punish those held responsible for abuses uncovered in the years since the 2008 global financial crisis. Instead, the jury acquitted the defendants after less than a day of deliberations.
In the same courtroom at London’s Southwark Crown Court five months before, Mr Chawla had won a landmark conviction in the case of Tom Hayes, the alleged mastermind in the rigging of the yen version of Libor, who was sentenced to 14 years in prison. Reduced on appeal to 11 years, it was still one of the harshest penalties for a white-collar defendant in the UK.
Biggest business scandals in pictures
Biggest business scandals in pictures
1/17 Rogue trader
A French court cut the damages owed by rogue trader Jerome Kerviel from €4.9bn (£4.2bn) to just €1m (£860,000). The court ruled on that Kerviel was “partly responsible” for massive losses suffered in 2008 by his former employer Societe Generale through his reckless trades. Kerviel has consistently maintained that bosses at the French bank knew what he was doing all along.
2/17 Lloyds chief apologises for damage caused by affair allegations - August 2016
Antonio Horta-Osorio, the chief executive of Lloyds Bank, has broken his silence over allegations about his private life admitting he regrets any "damage done to the group's reputation". In a message sent to the bank's 75,000 employees, the banker said that anyone can make mistakes while insisting that staff had to maintain the highest professional standards.
3/17 Christine Lagarde faces court over £340m Bernard Tapie payment - July 2016
The head of the International Monetary Fund (IMF), Christine Lagarde, must stand trial in France over a payment of €403 million (now £340m, then £290m) to tycoon Bernard Tapie, a France's highest appeals court has ruled. The court rejected Ms Lagarde's appeal against a judge's order in December for her to stand trial over allegations of negligence in her handling of the affair. Ms Lagarde could risk a maximum penalty of one year in prison and a fine of €15,000 euros if convicted.
4/17 HSBC senior manager arrested in FX rigging investigation at JFK airport in New York - July 2016
A senior executive at HSBC has been arrested at New York's JFK airport for his alleged involvement in a conspiracy to rig currency benchmarks, according to reports. Mark Johnson, global head of foreign exchange cash trading in London, was reportedly arrested on Tuesday. He will appear before a federal court in Brooklyn on Wednesday charged with conspiracy to commit wire fraud, Bloomberg said.
5/17 Former PwC employees found guilty in 'Luxleaks' tax scandal - June 2016
Two ex- PricewaterhouseCoopers staffers were found guilty in Luxembourg of stealing confidential tax files that helped unleash a global scandal over generous fiscal deals for hundreds of international companies. Antoine Deltour and Raphael Halet face suspended sentences of 12 months and 9 months and were ordered to pay fines of €1,500 (£1,230) and €1,000 (£822) for their role in the so-called LuxLeaks scandal. Despite the minimal sentences, the ruling was described by Deltour’s lawyer as “shocking” and “a terrible anomaly.” The ruling “puts on guard future whistle-blowers,” Deltour told reporters.The LuxLeaks revelations sped beyond Luxembourg, causing European Union regulators to expand a tax-subsidy probe and propose new laws to fight corporate tax dodging, while EU lawmakers created a special committee to probe fiscal deals across the 28-nation bloc.
6/17 Goldman Sachs dealmakers lavished Libyan officials with prostitutes to win contract - June 2016
A former Goldman Sachs dealmaker trying to persuade Gadaffi-era Libya to invest $1 billion with the investment bank procured prostitutes and invited Libyan officials to lavish parties in the hope of winning the business, the High Court heard on Monday June 13.The Libyan Investment Authority sovereign wealth fund is suing Goldman Sachs for inappropriately coercing its naïve staff into giving its sovereign wealth fund cash to the bank to invest in products they did not understand. The products were designed to generate big profits for Goldman, the LIA claims.Goldman denies wrongdoing and says the LIA was treated as an arms-length customer
7/17 Former boss of BHS said his life was threatened - June 2016
Darren Topp, the former boss of BHS, has said former owner Dominic Chappell threatened to kill him when he challenged him over a £1.5 million transfer out of the business. MPs on the Business, Innovation and Skills Committee asked Mr Topp about a £1.5 million transfer Mr Chappell made from BHS to a company called BHS Sweden.
8/17 Sports Direct founder Mike Ashley admits paying workers below the minimum wage - June 2016
Mike Ashley admitted paying Sports Direct employees below the minimum wage at a hearing in front of MPs. The company founder said that workers were paid less than the statutory minimum because of bottlenecks at security in an admission that could result in sanctions from HMRC.
9/17 Mitsubishi admits ‘improper’ fuel tests - April 2016
Mitsubishi has admitted to using false fuel methods dating back to 1991. The scale of the scandal is only just coming to light after it was revealed in April that data was falsified in the testing of four types of cars, including two Nissan cars.
10/17 Panama Papers: Millions of leaked documents expose how world’s rich and powerful hid money - April 2016
Millions of confidential documents have been leaked from one of the world’s most secretive law firms, exposing how the rich and powerful have hidden their money. Dictators and other heads of state have been accused of laundering money, avoiding sanctions and evading tax, according to the unprecedented cache of papers that show the inner workings of the law firm Mossack Fonseca, which is based in Panama.
11/17 Google's tax avoidance
Google reached a deal with the HM Revenue and Customs to pay back £130 million in so-called “back-taxes” that have been due since 2005. George Osborne championed the deal as a “major success”. But European MEPs have since called for the Chancellor to appear in front of the committee on tax rulings to explain the tax deal.
12/17 Turing Pharmaceuticals and Martin Shkreli
Martin Shkreli became known as the “most hated man in the world” after his drug company, Turing, increased the price of a 62-year-old drug that treated HIV patients by 5,000% to $750 a pill. He was charged with illegally taking stock from Retrophin, a biotechnology firm he started in 2011, and using it pay off debts from unrelated business dealings. Shkreli, who maintains he is innocent, and says there is little evidence of fraud because his investors didn't lose money.
13/17 Volkswagen emissions scandal
VW admitted to rigging its US emission tests so that diesel-powered cars would looks like they were emitting less nitrous oxide, which can damage the ozone layer and contribute to respiratory diseases. Around 11 million cars worldwide were affected.
14/17 Quindell, the scandal-ridden insurance firm
Quindell was once a darling of AIM but its share price fell in April 2014 when its accounting practices were attacked in a stinging research note by US short seller Gotham City. In August the group was forced to disclose that the £107 million pre-tax profit it had reported for 2013 was incorrect, and it had in fact suffered a £64million loss.
15/17 Toshiba Accounting Scandal
The boss of Toshiba, the Japanese technology giant, resigned in disgrace in the wake of one of the country’s biggest ever accounting scandals. His exit came two months after the company revealed that it was investigating accounting irregularities. An independent investigatory panel said that Toshiba’s management had inflated its reported profits by up to 152 billion yen (£780m) between 2008 and 2014.
16/17 FIFA Corruption Scandal
Fifa, football's world governing body, has been engulfed by claims of widespread corruption since the summer of 2015, when the US Department of Justice indicted several top executives. It has now claimed the careers of two of the most powerful men in football, Fifa President Sepp Blatter and Uefa President Michel Platini, after they were banned for eight years from all football-related activities by Fifa's ethics committee. A Swiss criminal investigation into the pair is ongoing.
17/17 Libor fraudster
City trader Tom Hayes, 35, has become the first person to be convicted of rigging Libor rates following a trial at London's Southwark Crown Court. Hayes worked as a trader in yen derivatives at UBS before joining the American bank Citigroup in Tokyo. He was fired from Citigroup following an investigation into his trading methods. He returned to the UK in December 2012 and was arrested following a two-and-a-half year criminal investigation by the SFO.
The case against the brokers looked like a slam-dunk. To begin with, Hayes had admitted conspiring with the six men to rig the rate to boost his trading profits. Reams of email and instant-message evidence showed the defendants discussing the alleged crimes with Hayes. Two of the firms they worked for – Icap and RP Martin – had already been fined $90m (£62m) by British and American regulators for failing to curb the brokers’ behaviour.
Mr Chawla appeared relaxed as he took his position on a bench near the front of Courtroom Two on 6 October last year, the opening day of the trial. Forget the jargon and esoteric nature of rigging, he urged the jurors in his opening statement; think of it as a simple case of cheating, like fixing a horse race and betting on the outcome. But before the first day was out, Mr Chawla had used terms like “derivatives,” “interest-rate swaps” and “ISDA definitions”. By day four, one of the jurors had fallen asleep. The testimony only got more complex.
In financial markets, brokers are like real estate agents, lining up buyers and sellers and pocketing a small commission on every trade. Lower-paid and often less well-educated than bankers, brokers inhabit a position in the finance hierarchy several steps below their clients. But while they don’t set Libor, they can play a significant role in determining where it ends up through what they tell the rate-setters.
Hayes had been convicted of paying his brokers to skew the guidance on market interest rates that they gave to the bankers who set Libor each day. When that benchmark moved his way, he made millions on the bets he’d taken out.
Mr Chawla took the jurors through dozens of messages in which Hayes discussed with the defendants how he planned to move that day’s rates. The brokers in the dock told the court they had received more than £450,000 from Hayes for promising to assist in the alleged rigging.
But as Mr Chawla laid out his case, even some of his own witnesses seemed to undermine it. In the second week, the prosecutor called John Ewan, a former director of the British Bankers’ Association, which oversaw Libor until 2013, in an effort to explain how the system worked.
By his second day on the stand, Mr Ewan was taking long pauses and looking into space before answering questions. A defence barrister provoked laughter when he later described cross-examining Mr Ewan as “like interviewing a clairvoyant”. Even the judge stifled a giggle.
The following week, Mr Chawla called an SFO investigator. The testimony descended into argument when it emerged that the SFO had changed the dates it claimed rigging took place. The initial version had some defendants accused of manipulation on days when they had been on vacation.
Even when the prosecutors had what they thought was compelling evidence, the defence was sometimes able to undermine it. Former Tullett Prebon broker Noel Cryan, for example, had exchanged dozens of instant messages with Hayes in 2009 in which he pledged to help manipulate the rate.
But Mr Cryan testified that it had all been a ruse. He’d never actually followed through on Hayes’s requests, he said, but only deceived him to allow his firm to pocket more than £200,000 in commissions.
When Mr Chawla asked Mr Cryan how he justified lying to one of his best customers, Cryan cracked a wide smile. “It’s called broking, Mr Chawla,” he said. Members of the jury rolled their eyes when defence counsel revealed that the SFO didn’t have any proof that Mr Cryan had actually passed on Hayes’s requests.
Defence counsel portrayed the brokers as simple family men at the lowest rungs of the financial-industry ladder who were being made scapegoats. They gave each other nicknames like “Big Nose” and “Lord Libor”. Several of them had left school at 16, making their way in unskilled jobs such as construction before stumbling into the City.
In their telling, life as a broker was well paid but highly stressful and demoralising.
The tension burst into the open one afternoon, when jurors returned from lunch to find an empty chair in the dock. Defendant Danny Wilkinson had been taken to hospital and would be unable to attend the remainder of the trial, the judge said. Just a few days before, he had appeared red-faced and sweating on the stand.
The defendants had all paid a heavy price, their barristers pointed out to the jurors, several of whom had by now taken to smiling sympathetically at the men in the dock as they left the courtroom each day.
After rendering their verdict, some jurors didn’t hide their emotions. On the steps outside the courthouse, one, wiping a tear from her eye, embraced the wife of one of the defendants, who leaned in and mouthed “thank you”.
Back in the courtroom, alone, Mr Chawla slowly gathered his belongings from the desk where months previously he’d had his greatest victory. “I’m just very tired,” he said and turned away.
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