The Fix

Chapter 8 The Sheep Will Follow

In Tokyo, Hayes was sent the April 2008 Wall Street Journal article by Sarah Ainsworth, his ex-girlfriend, but he brushed it off as irrelevant: Lowballing in dollar Libor had nothing to do with his yen derivatives book. It was just “headline grabbing journalism”. Hayes told her. The prospect of a BBA review didn't much concern him either. Hayes dismissed the body that governed the rate as a toothless, ineffectual organization run by “a bunch of old blokes sat around a table drinking port”.¹

It wasn't that Hayes thought he was invincible. But with banks routinely underreporting their borrowing costs by as much as 40 basis points, the trader saw his efforts to tweak the rate by a quarter or half a basis point as small beer and not something regulators would bother investigating.² E-mails discovered by prosecutors suggest that Read, his broker at ICAP, had begged him to make his Libor requests more subtle, pointing out in one message that “compliance is a big thing in London now”. Rather than e-mailing Goodman with Hayes's requests, Read had taken to texting his colleague from his iPhone. He'd even come up with a code word for Libor—“arbi”—to use in e-mails and messages. But Hayes seldom bothered. He thought Read was being paranoid.

Read would later say at trial that there were no compliance concerns—he was simply trying to scare Hayes into keeping the arrangement quiet in case his other clients got wind and felt the UBS trader was getting preferential ...