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Ex-Barclays bankers 'driven by money', Libor court case told

Published 05/04/2016

Each of the men deny one count of conspiracy to defraud in the trial at Southwark Crown Court
Each of the men deny one count of conspiracy to defraud in the trial at Southwark Crown Court

Five former Barclays bankers were "driven by money" when they conspired to rig the Libor rate, a court heard.

Jonathan James Mathew, 35, Stylianos Contogoulas, 44, Jay Vijay Merchant, 45, Alex Pabon, 37, and Ryan Reich, 34, are accused of manipulating the US Dollar London Interbank Offered Rate between June 1 2005 and August 31 2007.

The charge alleges that they dishonestly agreed to procure or make submissions of rates by Barclays, a panel bank, into the Dollar Libor setting process which were false or misleading

Opening the case at Southwark Crown Court, prosecutor James Hines QC, said: "This is a fraud case. The defendants were employees of Barclays Bank and the prosecution case is that they conspired to defraud the people with whom they trade by dishonestly rigging the Libor rate."

He continued: "Libor is a financial benchmark. It is a pricing point or a reference point for financial dealers, and it represents the interest rate at which major banks could borrow money from each other and every day it is calculated and published for the world to see, shortly before noon.

"And every day, millions, or rather billions of deals or trades in the financial world are conducted on the basis of it.

"So this case is about employees of Barclays Bank rigging, for their own advantage, what is in fact a global benchmark interest rate.

"In doing so they were driven by money ... to make more profit on their trading."

Mr Hines told jurors that "honesty and integrity" were integral to the setting of Libor - a rate used by banks all over the world.

Speaking of the five men on trial, he added: "At the end of the day the fundamental issue you will have to determine is a simple one. It will be - is what the defendants did dishonest, and if so, did they know it?"

Describing how the men allegedly committed the offence, Mr Hines explained that in order to maximise profit from their trades, the men would rig the US Dollar their way to "advantage their trades, and to disadvantage the people with whom they were doing the deals".

He said that Merchant, Pabon and Reich, based in New York, would tell Libor submitter Mathew, and co-conspirator Peter Johnson, whether they wanted the rate to go up or down.

Mr Hines said that Mathew and Johnson would then do their best to ensure these requests were carried out.

The charge states that the traders intended to create an advantage to the trading positions of employees of Barclays, and deliberately disregarded the proper basis for the submission of those rates.

The men allegedly intended to prejudice the economic interests of others.

Mathew, from Shenfield in Essex, Contogoulas, from Greece, and Merchant, Pabon, and Reich, all of whom live in America, deny one count of conspiracy to defraud.

The Serious Fraud Office (SFO) investigation into the alleged fixing of Libor began in 2012.

British and US regulators fined Barclays £290 million over the scandal in 2012.

The rate is used to set millions of pounds-worth of financial deals, including car loans and mortgages. It is also used in complex overseas financial transactions.

Referring to the conspiracy to defraud, Mr Hines said: "It is clear that the purpose of the agreement was specifically to prejudice the economic interest of the other parties - those others who were dealing with Barclays by reference to Libor, and, in short, those parties were to lose out financially and economically."

"It really is not different from stealing," he added.

Jurors heard that in one conversation requesting a low rate submission, Contogoulas "gave an insight into his appreciation of the profitability of of rigging Libor".

Jurors heard he joked when messaging a submitter, saying: "Also, can you please tell me what next week's lottery numbers are? I would appreciate it."

Other messages exchanged between the alleged conspirators read: "We just need to f****** smash it. Have him set it low," and: "PJ has got to jam that s*** tomorrow. We are going to get this s*** low."

The prosecution claim the intention of the men to rig rates was "perfectly clear" from the phrases and language used.

Mr Hines gave the analogy of a casino croupier putting the ball where he wanted on a roulette wheel, to try to explain to jurors what the traders we doing when manipulating the rate.

He added that Libor setting was not subject to scrutiny by a regulator, and that there was no body in place to ensure that the system operated "lawfully, properly and honestly".

The trial continues at 10am on Wednesday.

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