UBS Libor traders face criminal charges

‘Step Forward’

“They got a guilty plea and that’s something they haven’t been able to do, so it’s certainly a step forward,” Peter Henning, a former Justice Department attorney who is now a law professor at Wayne State University in Detroit, said in a telephone interview.

The Justice Department weighed the consequences to market confidence among the bank’s trading counter-parties before entering a non-prosecution agreement with the UBS parent company, Breuer said at the news conference.

“Our goal here is not to destroy a major financial institution,” he said. “By any fair criteria this is a very real, very robust and very forceful resolution.”

Trader A

According to transcripts released by the U.K. Financial Services Authority, an employee identified as Trader A led efforts to influence Japanese Yen Libor submissions included paying brokers as much as 15,000 pounds ($24,400) a quarter and offering a payment to another for helping him keep that day’s rate low. Trader A worked at UBS in Tokyo from 2006 to 2009 and directly contacted employees at other banks to influence their submissions at least 80 times.

“I need you to keep it as low as possible,” Trader A wrote to the broker on Sept. 18, 2008, referring to six-month yen Libor. “If you do that ... I’ll pay you, you know, $50,000, $100,000... whatever you want ... I’m a man of my word,” according to the transcripts.

Meister said UBS’s actions involved at least five interdealer brokers. “These brokers are supposed to be honest middlemen,” he said. “The brokers here were anything but honest.”

Monaco Yacht

“As one broker told a UBS derivatives trader, according to the statement of facts appended to our agreement with the bank, ‘Mate, you’re getting bloody good at this Libor game. Think of me when you’re on your yacht in Monaco, won’t you?’” Breuer said.

The financial penalties are more than triple the 290 million-pound fine Barclays Plc agreed to pay in June in the first settlement of Libor-rigging allegations. Barclays Chief Executive Officer Robert Diamond and Chairman Marcus Agius resigned in the face of political outrage over the scandal. UBS CEO Sergio Ermotti joined the bank in April 2011, after the period covered during the rate-rigging investigations.

“UBS’s misconduct is, although similar in nature, considerably more serious than Barclays’ because it was more widespread within the firm,” the FSA said. “More individuals, including managers and senior managers, participated in or knew about the manipulation.”

Libor, a benchmark for more than $300 trillion of financial products worldwide, is derived from a survey of banks conducted each day on behalf of the British Bankers’ Association in London. Lenders are asked how much it would cost them to borrow from one another for 15 different periods, from overnight to one year, in currencies including dollars, euros, yen and francs.

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