The length of the prison sentence handed to the first person found guilty of interest rate manipulation could encourage the City to seek more external legal advice, lawyers have said.
Tom Hayes, a former derivatives trader at UBS and Citigroup, was given a 14-year sentence yesterday after he was found guilty of eight counts of conspiracy to defraud.
Hayes was the first person to stand trial as a result of the Serious Fraud Office’s criminal investigation into the manipulation of the London interbank offered rate, and was handed a jail term which lawyers described as harsher than previous sentences for similar crimes.
‘The sentence is a show-stopper in terms of sending a message,’ Richard Burger, a corporate crime partner at City firm RPC, told the Gazette, adding that it will send a ‘shockwave’ around the City which could push many bankers to assess their own liability.
‘Bankers are waking up to the news that a trader has been jailed for 14 years for something that he wasn’t benefiting personally from,’ he said. ‘The effect will be a greater burden on risk and compliance departments, as traders or bankers seek comfort that their actions do not land themselves in an interview under caution with the SFO, the dock at Southwark Crown Court or a cell in HMP Wandsworth.
‘However, most in-house risk and compliance [departments] do not carry such experience and expertise, so will be looking for external legal advice.’
Clive Zietman, a partner at litigation firm Stewarts Law, agreed that the case will bring more work to lawyers. ‘The message to banks is you have got to clean up your act so the robustness of regulatory regimes has got to be increase.’
He added that the case could also spark civil proceedings, including over gold fixing, forex and other markets affected by manipulation. ‘It is a landmark verdict as it sends such a loud message in terms of how prosecuting authorities are dealing with this and the courts are responding in the same way,’ he said.
Others said the verdict was a much-needed win for the SFO, which had staked its reputation on the Libor cases.
Sarah Wallace, partner and head of crime at Irwin Mitchell in London, said: ‘This was the SFO’s most high-profile case to date and depending on the state of the blockbuster funding available, this conviction means that it is likely to remain dogged and focused in its approach to investigate and prosecute other alleged benchmark-rigging cases.
‘Their tails will be up and the SFO will not be fearful of taking on factually complex cases.’
But Kalvin Chapman, a banking litigation solicitor at Manchester-based Berg, said that although the result is a good start for the SFO, it still has more Libor cases to come, meaning it will be important to judge the agency’s overall performance in a year’s time.
To date 13 people have been charged as part of the investigation into Libor-rigging, with six due to face trial next month. Some lawyers have warned that the other cases might not be as easy to win.
‘The evidence against other traders or submitters awaiting trial may not be as strong,’ Andrew Smith, a partner at criminal defence firm Corker Binning, said.
‘Not many other Libor defendants will be exposed to the consecutive-sentence trap which caught Mr Hayes. It is also unlikely that any of them would need to explain to a jury the prior admissions of dishonest conduct which bedevilled Mr Hayes’s defence at trial.’