Former Conservative Party firm and major party donor fined for LIBOR fixing

[David Guyatt]

The City as it really is - chummy kickbacks:

'Let's discuss kickbacks over lunch': Tory donor's firm fined £55m over Libor fixing

Traders' emails reveal shocking conspiracy at Icap, the financial company owned by former Conservative treasurer and prominent party donor Michael Spencer - now bankers face 30 years in jail

JAMES MOORE , OLIVER WRIGHT


THURSDAY 26 SEPTEMBER 2013

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One of the Conservatives' most powerful and generous donors is at the centre of a political and financial storm after City watchdogs savaged his firm for its role in the Libor interest-rate fixing scandal.
Icap, the company founded by the former Tory treasurer Michael Spencer, has been fined a total of £55m by regulators on both sides of the Atlantic £14m in Britain and £41m in the US while three former employees responsible for the misconduct have been charged in New York with conspiracy to commit fraud and wire fraud. The New Zealand national Darrell Read and Britons Daniel Wilkinson and Colin Goodman face up to 30 years in prison if convicted.
The news is particularly uncomfortable for the Conservatives as it emerged on the same day that George Osborne announced he had launched a legal challenge against the European Union's planned cap on bankers' bonuses.
The Labour leader Ed Miliband sought to draw a distinction this week between his party as a champion of ordinary people, and the Tories as the friends of the rich and powerful.
Labour MPs have demanded that the Conservatives either return Mr Spencer's party donations which have reached almost £5m or give them to charity. Though he stepped down as Treasurer in 2010, Mr Spencer remains close to many senior Conservatives and gave £76,000 to the party as recently as March.
Regulators found that brokers at the firm colluded to fix yen Libor interest rates, making 300 written, and potentially many more verbal, requests to alter the reported rate. This manipulation was designed to help Tom Hayes, the trader from Swiss bank UBS at the centre of the rate-fixing affair who was one of their top clients and revenue earners.
Libor or London Inter-Bank Offered Rate is an interest rate that is used to price a huge range of financial transactions and products. During the active phase of the fixing scandal it was calculated under the auspices of the British Bankers' Association in London, with banks submitting what they expected to pay to borrow in a variety of currencies. The Icap brokers played an important role in the fixing because the company acts as a middleman and its brokers have relationships with many of the banks that are involved in setting the yen Libor rate. Icap staff referred to these banks as "sheep" and actively sought to mislead them about the state of the market to benefit their clients' positions.
In return for keeping Mr Hayes happy, Mr Goodman who became known as "Lord Libor" received kickbacks from his colleagues. They began with curry and champagne and progressed to money, with Mr Goodman eventually receiving, according to the US regulator the Commodities & Futures Trading Commission, $72,000 (£45,000) from different divisions of Icap.
The Icap office in the City of London (Reuters)
The payments came after Mr Goodman warned his colleagues that without him they would lose their lucrative business with UBS, which was fined close to £1bn for its role in what has become one of the most damaging financial scandals in City history.
Regulators, who have been investigating Libor-fixing since Barclays was fined £290m in 2012 said that Icap's yen desk had not been audited at all between October 2006 and November 2010, when compliance was the responsibility of the desk head who was involved in the fixing. Since then Icap has spent millions of pounds boosting its compliance function and strengthening its internal controls.
Despite this the bad times may not yet be over as Icap is still embroiled in an investigation over possible fixing of another of the City's "benchmark" prices. Tracy McDermott, the head of enforcement at the Financial Conduct Authority one of the new regulators which has assumed part of the function that used to be performed by the discredited Financial Services Authority lambasted what she called the "cavalier disregard" for the rules of the Icap brokers.
Speaking on a conference call to the media yesterday, Mr Spencer said: "I deeply regret and strongly condemn the inexcusable actions of these brokers. They have tainted the reputation of Icap and the financial markets as a whole. Their behaviour was simply wrong."
He added: "It is extremely disappointing for all of us who work at Icap that these events occurred. I take some comfort from the findings that no senior management were involved."
John Mann, a Labour member of the Treasury Select Committee, wrote to Mr Cameron demanding that the Conservatives give Mr Spencer's money to forces' charities. All Libor fines levied by British authorities on banks including Barclays, RBS and Lloyds have been given to the Armed Forces Covenant Fund. "Michael Spencer's donations to the Conservative Party got him access to the Prime Minister at Chequers," he said. "Now his firm Icap has been fined for fixing the Libor rates. I have called on [the Prime Minister] to confirm that he will ensure that [these] donations go to armed forces charities."
Michael Dugher, Labour's vice-chair, echoed Mr Miliband's conference speech when he said Mr Cameron was standing up "for the privileged few rather than ordinary people".
"He fought tooth and nail to avoid launching a proper inquiry into the scandal of rigging interest rates, the very scandal which has now engulfed one of his big donors," he said.
"In the end it's a privileged few whose voices he hears, and whose interests he acts in. The Tories should now return this money."
But a Conservative spokesman said the party would not be returning the money and pointed out prosecutors had made clear that no senior executives at Icap knew what had been going on. "They ought to be very careful what they are insinuating," he said.
Mr Spencer, who founded Icap in 1986 and remains one of its biggest shareholders, confirmed that he and senior colleagues will feel the impact of the affair in their wages, but declined to say how much they would be cut by. "I have no involvement in setting my compensation," he told reporters.
It also emerged that at least some of the seven Icap dealers involved at a more "peripheral" level are still with the firm. Mr Spencer declined to say how many, however, confirming only that they had been disciplined. The company has not attempted to claw back bonuses from those involved in the affair who have since left.
Nonetheless Mr Spencer insisted that the majority of Icap's more than 5,000 employees worked hard for their clients and had been let down by "bad apples". He added: "I have responsibility here and I bear it profoundly… This is a cleaning up act… I believe and hope that financial markets can get back to what they should be doing… and we can hold our heads up again."
Spencer: A ruthless boss who knew every inch of his business
Unlike so many of the bosses whose reputations have been stained by the financial crisis, Michael Spencer did it the hard way.
Icap's chief executive is a genuine entrepreneur, one of Britain's finest, who started the business with a couple of screens.
Since then it has grown into a financial powerhouse, and he into a member of Britain's corporate and political elite.
While he stepped back from his role as Tory treasurer in 2010, he remains close to senior figures in the party and is an active donor. He attended a dinner at George Osborne's flat as recently as last October and has a network of similarly well-connected friends.
Spencer is a charming host and confirmed oenophile, whose estimated £500m fortune allows him to indulge in some of the finest vintages Bordeaux has to offer.
He also has a thick skin and a streak of ruthlessness without which he would never have thrived in the rough and ready world of money-broking, which once saw a rival openly consider having him killed.
The first time I met him was in the group's then-HQ, a pokey office in Finsbury Square. He was the personification of charm, but the mask slipped when he briefly had to take a call from a subordinate. He didn't swear, or even raise his voice much. But his tone would have turned my legs to jelly had I been on the other end of the line.
You were left with the clear impression that this was a man who knew every inch of his business. Yet as Icap grew he has been forced to become more distant from the floor, and has become surrounded by the trappings of the big company CEO. Losing his right-hand man Mike Sheard, who retired some time ago, can't have helped.
Perhaps this explains why he didn't see the danger as Icap got caught up in the Libor scandal. That said, even though he has been bloodied by this affair and his anger could be heard in his conference call don't bet against him bouncing back.
James Moore
Will buy you a Ferrari next year': The libor emails
Icap plays a crucial role in the City it's not a bank, but acts as a middleman in the trading of a variety of financial instruments. Its brokers were said to be skilled at concealing their actions, but once again the corruption of City traders has been unmasked by the publication of e-mails and text messages they neglected to delete.
Written in abbreviated English, the discussion of kickbacks and rewards, the urging of fixes, and the derision felt towards clients are easy to see among those at the centre of the Libor rate-fixing scandal that has stained the reputation of the City of London.
Starting with talk of Bollinger and bonuses in the first publication by regulators concerning Barclays, Icap's brokers also talk of champagne with curry. Plus the potential of getting a Ferrari for their "work".
24 October 2006
Read Realise it might be getting harder but need 6m [six-month Libor rate] kept as high as possible ... tomorrow I have a massive fix, today just large!! Ta mate Get your curry order ready will send [Junior Broker 1] round tomorrow.
Goodman How high ...above 552?
Read If you can get them up there and keep them there tomorrow reckon the trader from ubs Tokyo will come over and buy you a curry himself!
25 January 2007
Goodman I hear through the vine you have a good month. How's my bonus pot looking? Mlord libor
Wilkinson will push one your way today
Goodman Ok chief .... thks And im pushing 6mos as low as I can!!
18 April 2007
Cash Broker 1 Hi [Yen Desk Head] with ubs how much does he appreciate the yen libor scoop? It seems to me that he has all his glory etc and u guys get his support in other things. I get the drib and drabs. Life is tough enough over here without having to double guess the libors every morning and get zipperde-do-da. How about some form of performance bonus per quarter from your b bonus pool to me for the libor service ...
Yen desk head Lord Baliff, I would suggest a lunch over golden week. Monday or Tuesday if you are around... As for kick backs etc we can discuss that at lunch and I will speak to [Senior Yen Trader] about it next time he comes up for a chat.
29 February 2008
(via text message)
Derivatives Broker 1 Ifu can pls move 3m up more than 6m wud be much appreciated :-P
Cash Broker 1 What happens if they go down. 3m looked higher yesterday pm and 6m no change
Derivatives Broker 1 Make 6m go lower! They r going up. [Senior Yen Trader] will buy you a ferrari next yr if you move 3m up and no change 6m
Cash Broker 1 Not bad isuppose 9625 against 01625

[Magda Hassan]

Journal Ordered Not to Divulge Libor Names

U.K. Prosecutors Win Injunction Amid Investigation

By CASSELL BRYAN-LOW


Updated Oct. 17, 2013 6:33 p.m. ET
LONDONBritish prosecutors on Thursday obtained a court order prohibiting The Wall Street Journal from publishing names of individuals the government planned to implicate in a criminal-fraud case alleging a scheme to manipulate benchmark interest rates.
A British judge ordered the Journal and David Enrich, the newspaper's European banking editor, to comply with a request by the U.K.'s Serious Fraud Office prohibiting the newspaper from publishing names of individuals not yet made public in the government's ongoing investigation into alleged manipulation of the London interbank offered rate, or Libor.

• Read the Court Order
  

The order, which applies to publication in England and Wales, also demanded that the Journal remove "any existing Internet publication" divulging the details. It threatened Mr. Enrich and "any third party" with penalties including a fine, imprisonment and asset seizure.
The Journal received word of the order from the SFO by email at 7:18 p.m. London time. The news organization already had published on Dow Jones Newswires and the Journal's website, WSJ.com, an article by Mr. Enrich and reporter Jenny Strasburg that divulged names of traders and brokers that British prosecutors expect to publicly name next week. The article was taken down from the website but appears in Friday's print editions of the Journal circulated in the U.S. and in Asia.
The article said the government was preparing to name roughly two dozen traders and brokers, adding that prosecutors were still finalizing their plans and that the list could change, citing people familiar with the process. Inclusion on the list doesn't represent a formal accusation of wrongdoing and doesn't mean the individuals will be charged with crimes.
"This injunction is a serious affront to press freedom," said Dow Jones & Co., publisher of the Journal. "We have been left with no choice but to remove the previously published story from WSJ.com and to withhold publication from the print edition of The Wall Street Journal Europe. However, we will continue to vigorously fight the injunction in the coming days."
Under U.K. lawwhich seeks to balance freedom of the press with personal privacy and the integrity of the judicial processit isn't unusual for the courts to impose reporting restrictions on the media to prevent them from reporting details that prosecutors believe could jeopardize an investigation or case.
Even celebrities can obtain court orders to prevent the reporting about embarrassing revelations about their personal lives. In some instances, the orders are granted in an anonymous form so the media can't reveal the identity of the people who obtained them.
The situation in Britain marks a contrast to the U.S. In the U.S., court orders preventing media from reporting something are exceedingly rare, and typically would be considered only in exceptional circumstances involving, for example, threats to national security. Some other European countries have even stronger privacy protection laws than the U.K.
A spokeswoman for the Serious Fraud Office declined to comment on the court order.
http://online.wsj.com/news/articles/SB10...1130336946

[David Guyatt]

The news organization already had published on Dow Jones Newswires and the Journal's website, WSJ.com, an article by Mr. Enrich and reporter Jenny Strasburg that divulged names of traders and brokers that British prosecutors expect to publicly name next week.

"Expect"?

Patiently waiting...

[Magda Hassan]

From Guido Fawkes:

You can read the judge's order here. Extraordinary that we can't report the names of alleged LIBOR fraudsters, this is against the principles of open justice and freedom of the press. Even more extraordinary is that it was the Serious Farce Office that invited the defendants to apply for reporting restrictions. The prosecuting authority encouraged the defendants to seek anonymity. Bonkers…

[David Guyatt]

From Guido Fawkes:

You can read the judge's order here. Extraordinary that we can't report the names of alleged LIBOR fraudsters, this is against the principles of open justice and freedom of the press. Even more extraordinary is that it was the Serious Farce Office that invited the defendants to apply for reporting restrictions. The prosecuting authority encouraged the defendants to seek anonymity. Bonkers…

Having once tried to get the SFO to take an interest in a TV fraud, and failed, it is difficult not to conclude that their primary responsibility is protect the status quo and reputations of the rich and powerful. And, of course, the City of London is almost all powerful in the UK.

[Magda Hassan]

Whoops! Barclays accidentally deleted some of the emails related to Libor.....A piddly $3 million fine still makes them miles ahead in the game.

U.S. regulator fines Barclays over decade of records failures
Filed December 27, 2013
By Jonathan Stempel Barclays Plc has been fined $3.75 million by a U.S. regulator over its alleged decade-long failure to properly keep electronic records, emails and instant messages. The Financial Industry Regulatory Authority on Thursday said that from 2002 to April 2012, Barclays failed to preserve order data, trade confirmations, account records and other information in a format that prevented their alteration or erasure, known as "Write-Once, Read-Many" or "WORM." It also said Barclays failed to properly retain attachments to some Bloomberg emails from May 2007 to May 2010, and failed to properly retain about 3.3 million Bloomberg instant messages from October 2008 to May 2010. FINRA said that once Barclays' system encountered an attachment to an instant message that it had processed earlier on a given day, it would stop accepting instant messages for that day. "Ensuring the integrity, accuracy and accessibility of electronic books and records is essential to a firm's ability to meet its compliance obligations," FINRA enforcement chief Brad Bennett said in a statement. Barclays did not admit or deny wrongdoing but agreed to a censure and the entry of FINRA's findings. A spokeswoman for the British bank declined to comment. FINRA is an independent regulator that oversees more than 4,100 securities firms.