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Jail terms for ex-bankers whose Libor rate fraud 'hit integrity of market'

Published 07/07/2016

Alex Pabon was found guilty
Alex Pabon was found guilty

Four former bankers have been jailed for rigging the Libor rate in a fraud where losses potentially ran into "millions of pounds".

Judge Anthony Leonard, sitting at London's Southwark Crown Court, said the fraud carried out by Barclays employees Jonathan James Mathew, Jay Vijay Merchant, and Alex Pabon along with Libor submitter Peter Johnson had hit the "integrity of the market."

Johnson had pleaded guilty to conspiracy to defraud in October 2014, making him the first person in the UK to admit to a crime linked to Libor manipulation.

His co-defendants were found guilty of the same charge by a jury last week.

There was no reaction from any of the defendants at they stood in the dock for sentencing.

Merchant, 45, who lives in the US and was described as bearing "the greatest responsibility" for the crime, was sentenced to six and a half years in prison.

Mathew, 35, of Shenfield, Essex, and Johnson, 61, of Tunbridge Wells, were both sentenced to four years. Pabon, 37, who lives in the US, was jailed for two years and nine months.

The charge states 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.

The Libor 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.

The judge said the men had been spurred on by the desire to boost their careers and chances of job promotion rather than immediate financial gain.

He said they had improved their positions in their own book knowing that it would cause a loss to others.

The judge told them they had been driven by "a desire to play the markets whilst influencing the results".

He said "the actual loss or risk of loss does not realistically identify the harm caused by the criminal in this case" adding that they all had for various amounts of time acted to "manipulate the rate for your own benefit and Barclays".

To maximise profit from their trades, the men rigged the US dollar Libor to put themselves at an advantage and to disadvantage the people they were dealing with.

The traders were dealing with "eye-watering" sums of money when they manipulated the rate between June 1 2005 and August 31 2007, prosecutor James Hines QC said.

Johnson was ordered to pay back £114,501 and to pay £30,000 costs.

The judge told Johnson that he had made a "courageous" decision in pleading guilty, noting that he is the only defendant in the three recent Libor trials in the UK to have done so.

City trader Tom Hayes was convicted by a jury of Libor rigging last summer following a separate investigation and sentenced to 14 years, which was reduced to 11 years on appeal.

Johnson was described as a caring family man who had volunteered for the National Trust during his 20-month wait to be sentenced but the judge said he had played a "privotal role" in the scheme.

He was responsible for involving Mathew by his influence over him as his mentor and senior.

As submitters, Johnson and Mathew had calculated the rate in a scheme which involved "sophistication and planning" over a significant period of time and had "a large number of victims".

The jury had been told that Pabon suffered a burn-out and left the financial industry. The judge noted his reasons for leaving the bank had "nothing to do" with his conduct in the conspiracy.

Confiscation proceedings against the other defendants have been adjourned to a later date.

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

An SFO spokesman noted the judge's comment that the convicted men had shown "an absence of integrity".

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

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