LONDON (Reuters) - A former senior Deutsche Bank banker, who “ruled the roost” in Frankfurt, was part of an elite group that gamed the global financial system, seeking an edge over counterparties in a five-year rate rigging plot, a London trial heard on Tuesday.
Such was the sway of German Andreas Hauschild, a former managing director, that he only accommodated convicted Deutsche Bank star trader Christian Bittar’s rate requests when it suited his own trading needs, a prosecutor alleged.
Hauschild, a 54-year-old who ran the bank’s team responsible for rate submissions, denies any wrongdoing and sat impassively in the glass-surrounded dock as James Waddington outlined the UK Serious Fraud Office’s (SFO) case against him.
Opening the case for the prosecution, Waddington told the jury there could be conflict between Hauschild and Bittar, a former London-based Deutsche Bank colleague he called one of the world’s leading interest rate traders.
“Where there was ... a conflict, Mr Hauschild got his own way. Mr Bittar was not accommodated because Mr Hauschild’s wishes prevailed because he ruled the roost in Frankfurt,” Waddington told the jury at Southwark Crown Court.
Hauschild is charged with conspiracy to defraud over the alleged manipulation of Euribor (the euro interbank offered rate), a Brussels-based benchmark that helps determine rates on around $180 trillion of global financial contracts and loans.
Euribor, like its Libor (London interbank offered rate) counterpart, is designed to reflect the cost of borrowing between banks and is set after submitters at a panel of major banks report their estimated costs of borrowing over various periods to an administrator, who calculates an average.
Hauschild, who appeared in court wearing an open-necked, white shirt and spectacles, is accused of conspiring with others at Deutsche Bank, Barclays, Societe Generale and other banks between January 2005 and December 2009.
The jury heard that Bittar has already been convicted over the conspiracy alongside one-time Barclays trader Philippe Moryoussef, ex-Barclays senior rate submitter Colin Bermingham and former Barclays derivatives trader Carlo Palombo.
Waddington said the convictions proved a conspiracy and it was up to the jury to decide whether Hauschild was part of it.
Prosecutors allege bankers rigged rates by nudging them up or down to benefit trading positions, deliberately ignoring rules that they should be set independently of commercial interests.
Waddington said that Hauschild, who joined Deutsche Bank in 1988, left toward the end of 2006 and was in charge of money markets in continental Europe, sometimes ignored Bittar’s rate requests because they interfered with his own “similarly dishonest money-making plans”.
He said Hauschild had told SFO investigators he had thought at the time it was acceptable for Euribor rates to accommodate the financial interests of the bank if rates were set with a reasonable range of figures available in the market.
But Waddington added: “It is common ground in this case that a panel (rate submitting) bank is not permitted to submit rates that take into account a trading advantage.”
The trial is the seventh brought by the SFO over allegations of benchmark rate manipulation.
Reporting by Kirstin Ridley; Editing by Alexander Smith