More Libor charges as case expands

British authorities filed charges against three more people in the ever-widening Libor manipulation case. Manipulating the benchmark rate has been a global scandal involving several firms since July 2012.

David Enrich and Margot Patrick wrote in the Wall Street Journal about the expanding nature of the probe:

British prosecutors filed criminal charges against three former bank traders for alleged fraud, opening a new front in a global investigation into alleged rigging of benchmark interest rates, with more charges in the pipeline.

The U.K.’s Serious Fraud Office said Monday that it charged three former Barclays PLC traders with conspiracy to defraud for their alleged roles rigging the London interbank offered rate, or Libor. The agency, which opened its criminal investigation in July 2012, also is likely to file charges against three former ICAP PLC brokers for allegedly helping bank traders manipulate rates, according to people familiar with the case

The U.K.’s latest charges represent a broadening of the Libor investigation, which got under way in 2008. They serve as a reminder of the scandal’s scope and the pervasive nature of the alleged misconduct, even as the Libor investigation begins to be overshadowed by nascent criminal and civil examinations into potential manipulation of other financial benchmarks.

Monday’s charges bring to 13 the number of people criminally charged in the U.S. or U.K. investigations into Libor, a benchmark used to set interest rates on trillions of dollars of loans and other financial contracts.

Chad Bray named the three men in the second paragraph of his story for the New York Times:

The Serious Fraud Office said that Peter C. Johnson and Jonathan J. Mathew, both former rate submitters at Barclays, and Stylianos Contogoulas, a former trader, would face charges of conspiring to manipulate the London interbank offered rate, or Libor. The three are to appear in Westminster Magistrates’ Court, possibly this month.

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Some of the world’s largest banks, including Barclays, Royal Bank of Scotland and UBS, have been caught up in the scandal and have agreed to pay billions of dollars to settle allegations with regulators in Britain, the United States and elsewhere.

Three people already faced criminal charges in Britain. Last December, Tom Hayes, a former derivatives trader at UBS and Citigroup, and Terry J. Farr and James A. Gilmour, former traders at the brokerage firm RP Martin, pleaded not guilty in London.

The trial of Mr. Hayes, the first person to be charged criminally in Britain in the scandal last year, is expected to begin next year. He also faces criminal charges in the United States.

British prosecutors have said they have identified 22 people as potential co-conspirators. On Monday, the antifraud office said its investigation was continuing and it was collaborating with Britain’s Financial Conduct Authority and the United States Department of Justice, which are conducting investigations.

The Financial Times story by Caroline Binham added some background on the U.S. side of the investigation:

The US Department of Justice has also taken an interest in at least one of the individuals. The Financial Times previously reported that Mr Mathew had signed a non-prosecution agreement with DoJ in 2012 before Barclays paid £290m to settle allegations that it attempted to manipulate Libor.

The DoJ was made aware of the SFO’s intention to charge the three Barclays defendants, according to people familiar with the situation. The DoJ’s own investigation into Barclays’ individuals and the rigging of dollar-denominated Libor is continuing, those people said.

Barclays declined to comment, as did lawyers for Mr Mathew. A lawyer for Mr Contogoulas said that his client intended to fight the charges. Lawyers for Mr Johnson could not immediately be reached.

The SFO has previously charged three men as part of its parallel probe into the rigging of yen Libor. Tom Hayes, a former UBS and Citigroup trader, denies the charges and is due to face a jury in January 2015, while two RP Martin brokers are scheduled to stand trial later in 2015.

Bloomberg’s Lindsay Fortado added this background about the fines and charges that have been levied so far:

The U.S. has charged eight people, including Hayes. Former Rabobank traders, another former UBS trader, and three former ICAP brokers have also been accused by the Justice Department. None are in U.S. custody.

Firms including Barclays and UBS have been fined a total of about $6 billion for manipulating benchmark interest rates. The U.S. and U.K. are running parallel criminal probes.

The SFO sought an extra 19 million pounds from the British government last month to pay for “blockbuster” cases including the probe into benchmark manipulation. Its 2013-2014 budget has plunged to 32 million pounds from 52 million pounds in 2008. The prosecutor previously received 3.5 million pounds in 2012 to help fund its Libor probe.

David Green, the SFO’s director, said last year the agency had doubled the number of people working on the investigation to 60 and that they were focusing on British nationals at British banks.

This story is one that has repercussions for nearly everyone involved in the global financial markets. It’s resulted in fundamental changes to the way the rate is set and also ousted Robert Diamond, former head of Barclays. As regulators begin unraveling this mess, there will be more charged. It will be interesting to see how far up it goes.