Tom Hayes Sues UBS in US for Handing Him to Prosecutors on a ‘Silver Platter’
(Bloomberg) — Tom Hayes, the former star UBS Group AG trader who became the face of the Libor rigging scandal, sued his former employer accusing it of handing him over on a “silver platter” to global prosecutors in order to protect the bank and its senior leadership.
Hayes filed a claim of “malicious prosecution” against the Swiss lender for at least $400 million in Connecticut state court on Monday. Lawyers for Hayes argued that it was widely accepted throughout the Swiss bank that traders should attempt to influence the London interbank offered rate to make money for their employer. But crucially, the rate setting was not criminal, they argued.
Hayes was found guilty in the UK of rigging the benchmark interest rate in 2015, a conviction that set off a raft of prosecutions against bankers and traders across the City of London. Despite multiple appeals, the verdict stayed until July this year when Hayes’ conviction was quashed by the UK Supreme Court — scuppering the most high profile financial crime prosecution in the past decade.
“Hayes became UBS’ handpicked scapegoat,” lawyers for the former trader alleged in the court filing. “Though Hayes has finally cleared his name, UBS’s egregious conduct has irreversibly ruined Hayes’s life.”
Libor had been a constant — but largely unknown — presence in markets before it became associated with the financial crisis. It was used to determine the price of everything from interest-rate swaps to mortgages and credit card rates, underpinning more than $350 trillion of loans and securities.
The global investigation led by the Department of Justice resulted in fines of almost $10 billion for a dozen banks and brokerages. In the UK, Serious Fraud Office prosecutions secured nine convictions of bankers for fraud offenses — the majority of which have been declared unsafe by the prosecutor since the stunning reversal.
UBS was not a party to the criminal proceedings between the SFO and Hayes.
A spokesperson for UBS declined to comment.
Hayes’ lawyers said in the filings that the bank should pay at least $400 million — a combination of lost earnings as well as significant emotional, physical and mental trauma including the end of his marriage.
UBS paid $1.5 billion to US, UK and Swiss regulators to settle probes over rate rigging. That number would’ve been much higher had UBS not co-operated with Department of Justice and SFO prosecutions by offering “Hayes up on a silver platter,” his lawyers said.
“UBS needed a very specific villain for its show,” they argued in the filing. “It needed a sufficiently high-profile target to satisfy the regulators, but a low level enough employee to allow UBS to credibly argue that its senior management wasn’t in on it.”
Hayes worked at UBS from 2006 to 2009, and he claims he generated about $300 million in profit for the bank on a more than $3 million salary. He left for Citigroup Inc. where he was told to stop the practice and was dismissed in 2010. He was arrested in 2012 and ultimately in 2015 was handed an 11 year sentence after appeal. Ever since he was released from prison in 2021, Hayes has tirelessly fought the notion that what he did was a criminal offense.
Hayes claims that when senior UBS executives learned of his efforts to influence Libor submissions to benefit UBS’ trading positions, they “acknowledged the value of his contributions and offered him enhanced compensation.” He claims senior managers were aware of systematic consideration of trading positions in dollar Libor submissions by Hayes and others.
“Everyone will look at this as being about money but it’s not,” Hayes said in an interview. “It’s about making sure it doesn’t happen to other people in future, it’s about providing a deterrent.”
–With assistance from Misyrlena Egkolfopoulou.
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