Tom Hayes sues UBS over Libor scandal
Tom Hayes is suing his former employer UBS, alleging it handed him on a “silver platter” to white-collar crime prosecutors to safeguard the interests of the Swiss lender and its leadership.
The former trader, who became the face of the Libor rate-rigging scandal when he was sentenced to nine years in a UK prison in the wake of the 2008 financial crisis, is pursuing the bank for “malicious prosecution” in a court the US state of Connecticut.
Lawyers for Hayes will argue on Monday that the bank encouraged its traders to influence the interbank lending rate in a way that benefited its balance sheet and that doing so was not criminal.
Hayes was found to have interfered with Libor in 2015 by UK courts, in a landmark ruling that sparked a string of similar prosecutions against traders and bankers across the Square Mile. He eventually served five years of his nine-year sentence, which was the longest white-collar criminal sentence in UK history.
After several unsuccessful appeals, the former investment banker’s conviction was quashed in the Supreme Court in July on a legal technicality, throwing several other rulings into uncertainty.
Lawyers for Hayes now claim in the filing that the banker “became UBS’s handpicked scapegoat”, adding: “Though Hayes has finally cleared his name, UBS’s egregious conduct has irreversibly ruined Hayes’s life.”
UBS declined to comment on the lawsuit.
UBS sued for $400m
The claims made by the trader’s legal representatives reflect previous comments made by Hayes in an interview with City PM, where he claimed the practice of fixing the Libor to suit your employer’s ends was standard practice across his industry.
“Libor was set up by banks, for banks, run by the British Bankers Association, the trade association for the banks,” he said in August. “Broadly, everything worked fine until people started lying about the rates because of solvency concerns in the run-up to the financial crash] that it all went wrong.”
The now-extinct Libor was used by banks to determine the interest rate for a vast array of debt, including mortgages and credit card rates. A global investigation by the US’s Department of Justice led to a dozen banks and brokers – including UBS – being fined a collective $10bn (£7.5bn). In the UK, Serious Fraud Office successfully prosecuted Hayes.
UBS paid $1.5bn to international regulators to settle investigations over its role in rate rigging. Hayes’ lawyers claim the number would have been much higher had the Swiss lender not co-operated with prosecutions, and argue he was handed “up on a silver platter”. They are now pursuing the bank for $400m in damages.
“UBS needed a very specific villain for its show,” they argue in the filing, which was first reported by Bloomberg. “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.”
UBS was not involved in the criminal proceedings between UK prosecutors and Hayes.
Jonathan Fisher KC, barrister at Red Lion Chambers, said: “This claim serves as a reminder that traders or employees in this position can sometimes push back hard.
“In order for any action against a bank or employer to succeed, there has to be evidence of wrongdoing. It’s unlikely that a bank simply cooperating with the authorities – even in a case that ultimately failed or arguably shouldn’t have been brought – would be enough to establish that. The claimant party would need to show some element of bad faith or malicious intent by the bank.”