Libor scandal: Discovering what lay behind Tom Hayes' decision to rig interest rates

Tom Hayes was a misfit at work, driven to colossal fraud by a desire to do his job 'perfectly'

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To his colleagues, Tom Hayes was Tommy Chocolate – so called because he preferred cocoa to alcohol when out drinking with City friends. In court, Hayes, 35, who has a wife and child, complained he was being portrayed as “the Jesse James of Libor, the Bobby Dazzler of Libor”. At the end of his trial, the former trader was confirmed not only to have been a “gambler” but the “ringmaster” of the “biggest banking crime in history”.

Perhaps it’s natural that the first man to be convicted as a result of the momentous scandal – which saw bankers rig a key global lending rate that determines the cost of loans worth trillions of pounds, from mortgages to student loans – should have so many names and labels placed on him. The one likely to stick to Hayes the longest, however, may be “Rain Man”.

Before the trial, Hayes was diagnosed with mild Asperger’s syndrome, a form of autism. The former trader was surprised to be told he was afflicted by the developmental disability, saying: “I don’t think there’s anything wrong with me.” Yet he added: “It does explain certain character traits I have. The obsessionality.” Hayes admitted this trait made him “different” to others in his office and led them to give him the nickname of the Dustin Hoffman character in the Oscar-winning film Rain Man. He told Southwark Crown Court: “They thought I was a little bit strange, I took things very literally. They used to laugh at me.”

One source of amusement was the fact that, even in his late twenties, Hayes still had the same superhero duvet cover on this bed that he had gone to sleep under as an eight-year-old. “It still served its purpose so I didn’t see what was wrong,” he explained.

There were serious ramifications for the trial, however. The judge, Mr Justice Cooke, told jurors that the diagnosis meant Hayes tends to only see the world in “black and white” and has difficulty in social situations – and warned that his speech could be rapid and peppered with jargon.

The answers he gave doctors during a medical assessment were literal, intense and lacking in social niceties, Mr Justice Cooke added; they contained no irony or humour.

Throughout the proceedings, in which he was repeatedly asked to slow down by his lawyer during his testimony, Hayes sat in court with an independent intermediary who would intervene on his behalf to ask for a break from questioning. And when probed by the prosecution about matters which went to the heart of the morality and criminality of some of his trades, Hayes would focus solely on the technical aspect of the question in ways which might have made him seem evasive. Hayes said he was obsessed with financial markets, and missed his former career after this case brought it to an end.

“It was a huge part of my identity,” he said, and according to his lawyer, Hayes “lived, breathed and slept Libor all because he wanted to do a good job for the bank”.

“I’ve always wanted to do my job as perfectly as I could, whether I was cleaning a deep-fat fryer or deboning a chicken,” Hayes said. “They always gave me those jobs because they knew there would be no chicken left on the bone and no fat left in the fryer.”

So how did he come to be at the heart of an operation that cost banks billions in fines and led to global outrage? Hayes was born and raised in Hammersmith, west London. He and his brother Robin, four years his junior, grew up in a comfortable middle-class home. His parents divorced and remarried other partners. He excelled academically and studied maths and engineering at university. Even before graduation, a host of banks were inviting him for interviews at their offices.

He joined RBS in 2001 as a junior trader. After a period working for the Royal Bank of Canada, he joined Union Bank of Switzerland in 2006 in its Tokyo office selling yen derivatives. It was there, the court heard, that his Libor-rigging education began by “osmosis – picking it up from the people he sat next to”. The Financial Conduct Authority concluded the bank’s Libor culture was “evasive” and the practice of submitting rates to suit its trading position was an “open and accepted practice”. But soon, the prosecution said, Hayes had learned to “cajole,” “beg,” and “bribe” other brokers into “corrupt” trades to fix the rate.

He was a “ringmaster” orchestrating colleagues, rival dealers, and independent brokers to secure Libor fixes that benefited his trades. On one occasion this even involved asking his younger stepbrother, Peter O’Leary, to buy a “few drinks” for a colleague at HSBC to influence the rate, and offered to hand over $100,000 to another associate if he helped.

Hayes claimed he was anything but a rogue trader, saying that pretty much everyone was at it. But he would later admit to investigators that, while it was commonplace, he was a “serial offender”.

The motive was simple greed. Hayes could win millions of pounds for every point (one hundredth of one per cent) the Libor rates moved in his favour – and following his arrest in 2012, he told investigators: “You want every little bit of money you can get.”

Hayes earned UBS more than £260m in three years trading. His reward was a pre-tax salary of £1.8m a year – but he did not think this adequate. His skills did not go unnoticed and several rival banks tried to hire him, including  Goldman Sachs.

When he eventually joined US bank Citigroup, his pre-tax salary jumped to £3.5m. Despite his new salary, his colleagues said he maintained a low profile, eschewing Tokyo’s expensive night life, preferring instead to dine in fast-food restaurants. Nor did he look like a suited and booted City trader: he could usually be seen wearing jeans and jumpers worn thin with use.

His time at Citigroup was brief and bloody. His attempt to manipulate Libor was noticed by the bank’s legal department, which ordered an investigation. Hayes insisted he was unaware he had done anything wrong. In September 2010, two weeks before his marriage to 35-year-old lawyer Sarah Tighe in England, he was sacked – but he kept his £2.2m signing-on bonus. The couple have made their home in Fleet in Hampshire. Throughout the trial his wife and mother, Sandra, have attended in support.

The US bank reported the incident to US, UK and Japanese regulators, resulting in both the US and the UK seeking his arrest. The case reportedly sparked a rare spat between the Serious Fraud Office and the US Justice Department. Yesterday’s outcome will help rebuild transatlantic co-operation.

His fear of a US jail sentence prompted him to “tell-all” to the SFO to ensure he faced charges in the UK. In more than 80 hours of interviews, he outlined in great detail how every bank was endeavouring to influence the rate. His confession, he said, was born out of fear of being taken away from his wife and newborn child.

However, the judge concluded that he was “by nature a gambler” – which extended to his remarkable decision to later plead not guilty despite having confessed to his methods, Mr Justice Cooke said in a pre-trial hearing.

The judge said the evidence showed it was an “open and shut case” but that Hayes hoped the jury might be bamboozled by technicalities and let him off. “He may gamble with a jury but what I am not having is a long trial which is confused by the sort of material that has been put forward.”

It was a bet he lost, at the cost of 14 years in jail.

Fixing libor: What Hayes said

“Do me a favour and get the Libor rate up?”

An email Hayes sent on his first day of trading with UBS

“If you keep sixes [6-month Libor rate] unchanged today, yeah, I will f***ing do one humongous deal with you all right? Like a 50,000-buck deal whatever. I need you to keep it as low as possible. If you do that, then I’ll pay you $50,000, $100,000 whatever you want alright, and I’m a man of my word.”

Hayes in a phone call to a fellow broker on 18 September 2008

“Hi mate, we have a big 1m fixing position over the next month... My question is can I use some balance sheet in the market for 1m? We really need to get the fixing down.”

Hayes in an email on 1 July 2008

“3m libor is too high cause I have kept it artificially high”

Hayes in an email to a RBS counterpart

“Ask him if he’ll set his 3m yen libor on the low side for the next few days as I have 1m USD of fixes, wd be a massive help, if u can’t don’t worry!”

Hayes to his stepbrother in April 2008