Why is the SFO No Longer Addressing the Libor Scandal?

Following the release of the SFO’s annual report a few weeks back, Dominic Carman, noted legal commentator, discusses with Lawyer Monthly the lack of any mentions of Libor within the 76-page document. Given that David Green QC has previously stated that the SFO should be judged on their success in the Libor case, this is a startling omission.

A decade ago, the term LIBOR was rarely heard outside the City of London. But since the crisis of 2007/8, the London Interbank Offered Rate, which is used as a global benchmark to price more than $350tn of financial products, has become one of the most widely-used acronyms in British media.

On 19th July, Andrew Bailey, chief executive of the Financial Conduct Authority, made a surprise announcement: he signalled the imminent death of LIBOR, confirming that the rate will be replaced by the end of 2021. The current situation is “not only unsustainable but also undesirable,” he said, after conceding that banks no longer wanted to participate in setting the rate.

By coincidence, Bailey’s announcement overshadowed news on the same day that a New York appeal court had overturned the convictions of two former Rabobank traders. In the first US criminal appeal related to US investigations into LIBOR manipulation, the duo – Anthony Allen and Anthony Conti, both from Britain – had been convicted in November 2015.

LIBOR’s demise may come as a welcome relief to David Green QC, director of the Serious Fraud Office, for whom the term has almost become omerta: he has developed a total silence on the subject. As evidence, one has to look no further than the SFO’s latest annual report and accounts for 2016-17, published less than a week before Bailey’s speech. Although the document stretches to more than 20,000 words over 76 pages, it mentions LIBOR only once – referring to the annual rate of interest in a fine to be paid by Rolls-Royce. Green’s lengthy overview makes no reference to LIBOR at all.

This is rather strange, given the synonymous relationship that had developed between the SFO and LIBOR over the last five years. Back in November 2012, shortly after he had taken over the SFO hot seat, Green was very keen to talk about LIBOR. Under questioning by MPs on the Justice Select Committee, he spoke confidently in asserting that the SFO should be judged on the outcome of its investigations into LIBOR. He informed them that the SFO had started its LIBOR investigations in July 2012, reversing a decision by his predecessor, and that a team of 40 investigators had been tasked to look into the activities of multiple traders at several banks.

Green’s bravado LIBOR rhetoric continued in a slew of subsequent media interviews. What then followed was a series of London LIBOR trials involving bank traders like the Rabobank duo. In the first of these, Tom Hayes was found guilty in August 2015 and received a 14-year sentence, later reduced to 11 years on appeal. Green expressed a “certain professional satisfaction” over the Hayes conviction, adding: “Plainly, it was a very important one. It was the biggest investigation we have ever done.”

However, in January 2016, five City dealers were cleared in a separate trial of helping Hayes to manipulate LIBOR. More followed. In July 2016, four former Barclays traderswere convicted of LIBOR rigging, receiving sentences of between two years and nine months and six and half years.

Green showed less schadenfreude at this result: “The key issue in this case was dishonesty. By their verdicts the jury demonstrated they were sure that the conduct of three of the defendants, Jonathan Mathew, Jay Merchant and Alex Pabon was dishonest. Senior LIBOR submitter Peter Johnson accepted he had been dishonest when he pleaded guilty to the offence in October 2014. The trial in this country of American nationals also demonstrates the extent to which the response to LIBOR manipulation has been international and the subject of extensive cooperation between US and UK authorities.”

However, in April 2017, following a six-week retrial, Stylianos Contogoulas and Ryan Reich, both former Barclays traders, were acquitted of LIBOR manipulation. The pair had originally been tried alongside the other four Barclays traders convicted in 2016.

Of the 19 traders charged in respect of Libor and Euribor manipulation, there has been one guilty plea, four convictions and eight acquittals. The remaining six defendants will be tried in April 2018. But of the four convictions, at least two are subject to appeal following fresh evidence at the Contouglas/Reich re-trial. Under cross-examination, the lead SFO expert witness acknowledged that his expertise was deficient when it was revealed that he had to text questions on technical points from the courtroom. The symbolic pressure of the two successful appeals in New York further undermines the SFO’s Libor investigations in London.

And so we come back to the strange absence of LIBOR in the SFO annual review. In a year filled with extensive news of LIBOR trials, it is as if they never happened. When questioned over LIBOR by another Parliamentary Select Committee last October, Green told MPs: “We don’t go after the people. We go after the evidence and we go after the people the evidence points to.”

But according to its latest report, the evidence that the SFO has spent tens of thousands of hours and many millions of pounds investigating and prosecuting LIBOR traders has simply vanished. One important question remains unanswered: why?

Photo: Heathcliff O’Malley

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