Everybody Does It: Convicted UBS Libor “Ringmaster” Tells It Like It Is On Wall Street

Forbes Erika Kelton   8/07/2015 @ 5:54PM

One of the most striking aspects of the recent criminal trial of Tom Hayes, former UBS trader, was his defense that everyone knew Libor rates were being manipulated.

At his trial for colluding with others to rig the London Interbank Offered Rate (Libor) while at UBS, Hayes testified the practice was “industrywide.”

I acted with complete transparency to my employers. My managers knew, my manager’s manager knew. In some cases the CEO was aware of it.”

. . . It was so endemic within the bank [at UBS], I just thought … this can’t be a big issue because everybody knows about it . . . . [It was] such an open secret.”

His statements reflect a mindset that is incredibly – and sadly – common in cases of significant financial and corporate fraud. In my practice as a whistleblower lawyer, I have seen “industrywide practice” used to rationalize all kinds of illegal corporate activities, from bribing foreign officials to get business to the manipulation of benchmark rates to the marketing of prescription drugs for unapproved, “off-label” uses.

Hayes was willing to break laws to make money, he suggested, because everyone was doing it. Traders and their supervisors looked the other way and comforted themselves that because the executive suite knew that traders were manipulating Libor, “it can’t be a big issue.” The “transparency” of criminal activity occurring in plain sight made it okay to rig a widely used benchmark that is used to set adjustable rate loans, credit card rates and more.

It is hard to fathom why Hayes and others in the banking industry think there should be safety in numbers when it comes to massive frauds, particularly a case where investors and consumers suffer significant financial losses. Equally puzzling is the mindset that brazen illegality by an entire industry should be a mitigating factor when it comes to penalizing those who engaged in and profited from the misconduct.

Hayes – who left UBS in 2009 to join Citigroup Inc., enticed by a $3 million signing bonus – expressed a rationale for committing fraud that shows the broader vacuum in ethics and integrity so prevalent in the financial services industry.

Everyone’s talking about honesty and dishonesty and what did you think and what was your state of mind, but you know what? At the time I didn’t think about any of it. I didn’t think about whether this was right or wrong. And people go to work every day on the train or on their bike or however they get there, and they go to work and they do a job. And they don’t sit and think, ‘Is doing my job honest or dishonest?’ They do their job.”

Hayes is right that the culture on Wall Street is not to question practices or have the judgment to even ask the questions. But he is wrong that everyone is like that. Some people do examine whether the practices they are asked to undertake are compliant or whether they are compromised or corrupt.

Many of those people quit their jobs when faced with unethical business practices. A very select number become whistleblowers because they want to stop the wrongdoing. It doesn’t matter to them whether “everyone” is committing fraud or whether their bosses are ignoring the wrongdoing.

The 12-person jury did not accept Hayes’ everybody-does-it defense arguments. He was found guilty of rigging Libor and sentenced to 14 years in prison.

In his closing argument at Hayes’ trial, lead prosecutor Mukul Chawla noted, “No one has thrown Mr. Hayes under the bus. No one forced him to rig Libor . . . . In blaming everyone else, what he does not do is take any personal responsibility for his actions.”

Wall Street and City bankers alike should take Mr. Chawla’s words to heart. “Everybody does it” is not a get-out-of-jail-free card.


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