Banking industry’s conviction of interest rate crime canceled by the Supreme Court – Mortgage Strategy
Tom Hayes, a former banker of UBS and Citigroup, was sentenced to jail for manipulating the interest rate on identity loans, and his conviction was overturned by the Supreme Court.
A panel of five judges ruled that his conviction was unsafe, with Hayes and 18 other bankers in the center of public anger following the global financial crisis.
Bankers were convicted of working on a committee that manipulated LIBOR (the bank provides interest rate) for lenders worldwide, which costs more than $35 billion in loans and securities to benefit their own banking community.
As regulators moved to Sonia (average of the pound overnight index), the action was cancelled, set by larger banks as the benchmark, which was used to set swap prices, thereby shaping mortgage rates.
The Supreme Court dismissed Hayes’ conviction, his initial trial at Southwark Crown Court was unfair.
The court ruled: “Mr. Hayes has the right to defend the allegation he agreed to take false submissions and deny that he was dishonest about the jury’s conduct.
“He was denied this opportunity by legally inaccurate and unfair instructions.”
Hayes was initially sentenced to 14 years in prison and was sentenced to five and a half years in prison after 11 years in appeal. He was released in 2021.
Former Barclays businessman Carlo Palombo was sentenced to four years in prison for manipulating the Europeans, another benchmark rate, and his conviction was overturned. Palombo is also released in 2021.
The Office of Serious Fraud sued Hayes and Palumbo, as well as seven other UK bankers, who he said would not seek a retrial.
The Office of Serious Fraud added: “Our investigation led to the belief that nine senior bankers committed crimes, two of whom pleaded guilty and seven were pleaded guilty by a jury.
“This judgment determines that the legal instructions given to the jury at the end of the trial were incorrect at the trial of Hayes and Palumbo, and therefore, their convictions are considered unsafe today.
“We have considered this judgment and determined the entirety of what we are seeking to retrial and determined that it is not in the public interest.”
Between 2015 and 2019, British and U.S. prosecutors conducted a total of nine criminal trials in London and New York and received 19 convictions.
“It feels very surreal, kind of like my beliefs, like I haven’t really happened.
“I am very grateful to all the justices who heard the appeal.”
He added: “We have nothing to do with financial crises, such as zero.”
The lawyer said other convictions could be put on hold after the ruling.
Caroline Greenwell, speaking partner at Charles Russell, said: “This is a landmark ruling and the Supreme Court made it clear that considering business interests when filing Libor rates is not automatically dishonest or criminal.
“The judgment brings the UK in line with the U.S. court, which overturned the trader’s conviction in 2022, as allowing banks to be given a trading advantage when filing a Libor submission and confirms that Mr Hayes and Mr Palombo’s jury unfairly directed the commercial interests among judges considering commercial interests.
Greenwell added: “This result not only clears the names of Mr Hayes and Mr Palumbo, but also can lead to the belief secured in nine other criminal trials prosecuted by the Office of Serious Fraud, who naturally opposed Hayes and resorted to the Supreme Court’s appeal – under scrutiny.”
