LONDON (Reuters) - Tom Hayes, a former trader charged with conspiring to rig benchmark interest rates, had become such a powerful player in 2008 that Goldman Sachs (GS.N) tried to hire him with a $3 million (2 million pounds) signing-on bonus, a London court was told on Thursday.
Hayes, who worked for Swiss-based bank UBS UBSN.S at the time, is the first person to face a jury trial over alleged manipulation of the London interbank offered rate (Libor) after a global investigation that led to banks and brokerages paying around $9 billion in fines.
Mukul Chawla, prosecuting for Britain’s Serious Fraud Office (SFO), alleged that Hayes, who joined UBS in Tokyo in 2006, was taking larger and larger trading positions and had become an “increasingly dominant force” in the market in 2008.
In an email exchange shown to the court dated June 24, 2008, former senior UBS manager Sascha Prinz disclosed Goldman’s offer to another senior manager Jerker Johansson and asked for approval to offer “one of my most talented young traders in Tokyo” an attractive bonus as an incentive to reject Goldman’s “aggressive” pursuit.
Hayes, who Prinz said in the email had made about $80 million for UBS over the previous 18 months, promptly received a letter from his bosses offering him a discretionary $2.5 million bonus if targets were met for 2008, double his 2007 bonus.
Hayes rejected Goldman’s advances even though the bank had also offered him significantly more responsibility and although he had been disappointed with his 2007 bonus at UBS, Chawla said. But as the financial crisis struck later in 2008, Hayes never got the full bonus from UBS, Chawla said.
Goldman Sachs declined to comment. Prinz and Johansson did not immediately respond to a Reuters request for comment via professional network LinkedIn.
Hayes, a 35-year-old former derivatives trader, has been cast by prosecutors as a ringleader of a conspiracy involving around 25 staff at 10 big banks and brokerages to rig Libor, which is used to price an estimated $450 trillion of financial contracts and loans worldwide.
He is charged with eight counts of conspiracy to defraud between 2006 and 2010, a criminal offence that carries a maximum jail sentence of 10 years. He has pleaded not guilty and has not yet had a chance to lay out his defence.
Prosecutors allege that computer chats and recorded phone conversations played in court show how Hayes, who they say was driven by greed, conspired with colleagues, other traders and brokers to request false or misleading rates to benefit his own trading book.
In return, he raised broker rates, passed additional trades through brokers so they could earn extra fees and also allegedly incentivised them with kickbacks and bribes such as “wash” trades, when a financial security is bought and sold simultaneously with no legitimate purpose apart from generating brokers fees, the prosecution said.
While at UBS, he allegedly organised 14 wash trades that cost UBS thousands in brokerage fees.
In one computer chat exchange shown to the jury on Thursday, Hayes asks a broker to try and lower rates, promising a fee in return “...if that happens, it’s a 62,000 buck trade for you, alright?”
“Is this anything other than a bribe?” Chawla asked.
The trial is scheduled to last 10-12 weeks.
Editing by Jane Merriman