ICAP fined $87m and employees charged for Libor rate rigging

US AND British authorities yesterday fined ICAP, the world’s biggest interdealer broker, $87m and criminally charged three former employees for their role in the Libor benchmark rate rigging scandal.

The scandal, which has laid bare the failings of regulators and bank bosses, has triggered a sprawling global investigation that has already seen three banks fined $2.6bn, four individuals charged, scores of institutions and traders grilled and a spate of lawsuits launched.

The US justice department charged New Zealand resident Darrell Read, alongside Daniel Wilkinson and Colin Goodman, both from England, with conspiracy to commit wire fraud and two counts of wire fraud, in a criminal complaint.

The US Commodity Futures Trading Commission and UK Financial Conduct Authority ordered ICAP’s European unit to pay $65m and £14m, respectively, to settle claims of wrongdoing.

“These three men are accused of repeatedly and deliberately spreading false information to banks and investors around the world in order to fraudulently move the market and help their client fleece his counterparties,” said acting assistant attorney-general Mythili Raman of the justice department’s criminal division. They each face a maximum penalty of 30 years in prison for each count in the event of a successful conviction.

ICAP, run by London businessman Michael Spencer, is the first interdealer broker sanctioned for manipulating benchmark rates such as Libor — the London interbank lending rate — used to price trillions of dollars worth of products such as derivatives and mortgages worldwide. Brokers such as ICAP, which match buyers and sellers of bonds, currencies and swaps, have faced allegations that their employees actively colluded with traders seeking to fix rates for personal gain — and were handsomely rewarded.

Mr Wilkinson, employed in the London office of ICAP, supervised a group of derivatives brokers, including Mr Read, who specialised in yen-based products.

According to the charges, the desk’s biggest client between 2006 and 2009 was Tom Hayes, the former UBS and Citigroup trader also facing criminal charges in Britain and the US.

Mr Read talked to Mr Hayes almost daily, prosecutors said, and a

Brokers such as ICAP have faced allegations that their employees colluded with traders … and were handsomely rewarded

big part of the ICAP traders’ compensation was tied to the business generated by him.

Mr Goodman, a cash broker in ICAP’s London office nicknamed “Lord Libor”, was, meanwhile, in contact with derivatives traders at other banks and sent out a daily e-mail of “suggested Libors”, prosecutors said.

Mr Hayes allegedly sent requests in through derivatives traders, who passed them on to Mr Goodman. In 2006, prosecutors said, Mr Read asked Mr Goodman to suggest a high six-month rate, saying: “The trader from UBS Tokyo will come over and buy you a curry himself!”

The conduct stretched into 2010 — well after allegations of Libor manipulation had surfaced.

“We deeply regret and strongly condemn the inexcusable actions of the brokers who sought to assist certain bank traders in their efforts to manipulate yen Libor,” Mr Spencer said in a statement.

Financial Conduct Authority enforcement head Tracey McDermott said the misconduct cast a shadow over the financial services sector. She denounced the “cavalier disregard” the ICAP subsidiary had shown for its regulatory obligations and the interests of the markets.

Britain’s Barclays and RBS and Switzerland’s UBS have paid about $2.6bn to date to secure civil settlements for rate rigging with UK and US regulators.

Britain’s Serious Fraud Office has levelled criminal charges at three individuals, and US prosecutors have now charged five. Both have charged Mr Hayes, a Briton being prosecuted in the UK, who once complained in a text message to the Wall Street Journal: “This goes much higher than me”.