Commerse, Investing and Finance :: Money news

Former trader tom hayes jailed over international rate rigging scandal


HE was known as “Rain Man” and “Tommy Chocolate” and now, the first to take the rap for what’s been called the most shameful episode in financial history.

Tom Hayes, a trader who worked for finance giants UBS and Citigoup, has been jailed for 14 years by a London court after being unmasked as the ringleader of a scam working to rig interest rates worldwide.

Hayes had always wanted to do every job perfectly, but on Monday became the first person to be found guilty by a jury of fixing the London Interbank Offered Rate an estimate of the average interest rate for banks borrowing from other banks.

Though the 35-year-old insisted he had acted with complete transparency my managers knew, my managers manager knew, he told the court the verdict seemed to come as a surprise to his colleagues and family.

Hayes didnt seem to fit the profile of a white-collar criminal, or even of a greedy banker.

He was different, and admitted he did not always fit in with his high-flying colleagues.

While the other bankers would down beers at social and networking events, Hayes would load up on hot chocolates, earning him one of his nicknames hot chocolate.

The other nickname rain man came from his high level of intelligence and quick speech, something frustrated lawyers noted during the trial when he was asked to slow down several times.

The court was told the trader had recently been diagnosed with a mild form of Asperger's syndrome, meaning he saw issues in black and white rather than shades of grey.

He kept the same superhero-themed bedding for more than 25 years because he couldnt see the point in replacing it.

They used to laugh at me, Hayes said of his colleagues.

I had the same superheroes duvet cover since I was eight. I didnt see the point in buying a new one when that one was perfectly adequate.

While Hayes diagnosis was brought up at the trial, the judge said this was of no relevance to the issue of dishonesty.

Behind his quirks, Hayes was motivated by greed and a desire to impress his bosses and make millions, jurors heard.

The court found the 35-year-old to be the ringmaster of more than a dozen traders who worked to rig the Libor rate which is used as a key reference for financial products around the world, from consumer loans to savings accounts.

It is estimated to underpin some $A683.81 trillion of contracts, from mortgages to the cost of corporate lending.

However, the system has been found to be open to abuse, with some traders lying about borrowing costs to boost trading positions or make their bank seem more secure.

Business commentator Terry McCrann explains the Libor interest rate scandal and predicts the fallout has only just begun

Hayes didnt seem to see the problem with what he was doing. He had denied eight counts of conspiracy to defraud between 2006 and 2010 and told investigators that influencing the daily calculated rate was commonplace. When he eventually confessed, he referred to himself as a serial offender.

Emails sent by Hayes explicitly discussing fixing the Libor rate were shown to the jury.

He said to a colleague: Do me a favour and get the Libor rate up?, in an email on his first day at UBS in 2006.

On another occasion he engaged his stepbrother to buy a few drinks for a colleague at another bank to influence the rate, offering a deal of up to $100,000 in return.

The judge found Hayes was motivated by greed and described him as by nature a gambler. He had a base salary of around $2 million at UBS but earned more than 100 times that in three years trading.

He stared ahead, emotionless, as the verdict was read out while his wife and parents sat in court with bowed heads.

I acted with complete transparency to my employers. My managers knew, my managers manager knew. In some cases the CEO [chief executive] was aware of it, Mr Hayes told the court.

Banks including Barclays, UBS, Royal Bank of Scotland and Deutsche Bank have been fined billions of dollars for manipulating the rates and Hayes is the first criminal conviction arising from a British investigation into Libor.

Ben Rose, a partner at law firm Hickman and Rose with experience in the financial services industry, said the conviction was a boost for the Serious Fraud Office which had a number of other Libor cases in the pipeline.

However, he said it emphasised how odd it was that no institutions have been prosecuted for their role.

When an entire industry ... is complicit in a practice it can seem very harsh to pick off isolated individuals, he said.

With AFP, AP

Vw diesel cheat fix revealed for australia but still no compensation for local owners




AUSTRALIAN owners of Volkswagen vehicles found to have software that can cheat emissions are being denied any compensation even though US buyers have already each received a $500 voucher.

The troubled car maker has outlined the upgrades to more than 80,000 effected cars in Australia but says there will be no major mechanical changes to the cars in Australia and instead they will simply get a computer upgrade.

The rollout of the updates is due to start in late January 2016, but VW Australia is still yet to announce what impact the changes will have on fuel economy, performance and servicing.

More than one in four owners of the affected Volkswagens in the US approximately 120,000 customers have taken up the companys offer of a $500 voucher as an initial goodwill gesture.

But the newly-appointed managing director of Volkswagen in Australia, former Porsche executive Michael Bartsch, told News Corp no decision had been made on what compensation if any would be offered to local owners.

Its a completely different environment. To start with, what theyre dealing with in the United States is nothing like what were dealing with here in Australia, said Mr Bartsch, referring to the different emissions standards in both countries.

But consumer advocates say that if its good enough for American customers to be compensated due to false claims, then its good enough for Australian owners.

This wasnt an accident, this wasnt a mistake, the Volkswagen Group perpetuated a fraud against millions of motorists globally, almost 100,000 of which live here in Australia, said the spokesman for the National Roads and Motorists Association, Peter Khoury.

VW Australia should seriously consider their position on offering compensation to local motorists. What theyre doing in the US is not the benchmark, it should be the minimum. They have lost the trust of the Australian public.

Mr Bartsch said the $500 compensation deal in North America was a decision by Volkswagen USA on the way they thought it was best to manage (the crisis) with their customers.

The Volkswagen Australia executive said the goodwill of our customers is not taken for granted, we will be making the appropriate gestures once we have all the facts in place.

While the company is already facing a class action in Australia of up to $100 million, it is now trying to address the impending slide in the resale values of its cars as buyers lose confidence in the brand.

However, Mr Bartsch insists there will be no impact on these vehicles that should adversely affect residual values. It is for the market to decide but one of the drivers of residual value is technical integrity.

One senior Volkswagen Australia dealer, who wished to remain anonymous, said local dealerships have experienced a 25 per cent slowdown in showroom traffic since the scandal broke.

The recall affects 83,981 Volkswagen and Skoda models sold in Australia, and 16,085 Audi vehicles.

Audi Australia spokeswoman Anna Burgdorf said its diesel engines will get the same computer upgrades as VW.

The list of affected diesel cars includes:

Volkswagen

Golf (2009-2013)

Polo (2009-2014)

Jetta (2010-2015)

Passat CC (2008-2012)

Volkswagen CC (2011-2015)

Passat (2008-2015)

Eos (2008-2014)

Tiguan (2008-2015)

Caddie (2010-2015)

Amarok (2011-2012)

Audi (certain versions of the following models)

A1 (current generation)

A3 (previous generation)

A4 (current generation)

A5 (current generation)

A6 (current generation)

Q5 (current generation 2.0 TDI)

TT (previous generation)

Skoda

Octavia (2009-2013)

Yeti (2011-2015)

Superb (2009-2015)

This reporter is on Twitter: @JoshuaDowling