Former UBS and Citi Bank trader Tom Hayes, the only person to be found guilty in the UK of trying to manipulate Yen LIBOR rate, has had his sentence reduced at the Court of Appeal from 14 to 11 years.
Mr. Justice Cooke has now made a confiscation order at £878,806, far less than the £3.8m sought by the Serious Fraud Office and £1,757,919 deemed available by the Court.
The legal world will be watching with interest to see if the Serious Fraud Office will seek to appeal Mr. Justice Cooke’s confiscation ruling.
On 23 March 2016 the Serious Fraud Office argued that Mr. Hayes’ “criminal conduct” represented the total of his remuneration at UBS and Citi Bank between 8 August 2006 and 9 September 2010, as well as payments received by him which are unidentifiable, rental property and the RPI adjustment to remuneration.
In accordance with section 10 (2)-(5) POCA, the Serious Fraud Office was required to prove the benefit obtained by the balance of probabilities.
From the outset of the trading for UBS in 2006 until the end of his trading period with Citi in 2010, the defendant was involved in the attempted distortion of the Yen LIBOR rate, the Serious Fraud Office argued.
The Court accepted that this was borne out by the evidence at the trial. The prosecution argued that Hayes continued the practice because he perceived it would enhance his reputation and seniority in the trading world, resulting in a significant basic salary and large bonus incentives both at UBS and CITI. This, argued the prosecution, meant that his salary and bonuses were the result of criminal conduct and bore no relation to tangible or actual gain.
The Court conceded that it was almost impossible to arrive at an exact mathematical calculation at how much Hayes had gained from the attempted rigging of LIBOR. Mr. Justice Cooke accepted it was not possible to assess the difference that the attempted manipulation of LIBOR made to the banks on a daily basis. However, the judge added, it was necessary for the Court to “grapple with the issues in order to evaluate, on the balance of probabilities the degree of trading by the defendant which was impacted by his attempt to manipulate LIBOR, the impact this would have had on profit/loss position of his employers and the effect this had on his remuneration”.
Mr. Justice Cooke then sought to draw a distinction between Mr. Hayes’ unlawful activities relating to LIBOR and other lawful trading.
The Court accepted that the only evidence that Tom Hayes attempted to manipulate LIBOR on his earnings was his own assessment in his SOCPA interviews and his s.17 statement. Mr. Justice Cooke rejected the Serious Fraud Office’s assertion that they should be entitled to confiscate all of Hayes’ salary, bonuses and other financial benefits based on an analysis of his income between 2006 and 2009. This, said the Serious Fraud Office, represented his LIBOR manipulation uplift on top of what he would have legitimately received had he been at all times an honest trader.
The Court departed from Grainger  EWCA Crim 2506 where it was held that “it is essential, first, for the prosecution and then for the judge to look to see what real benefit the offender has obtained and to examine the evidence relating to it in order to arrive at a fair valuation”. The Court noted Boyle  EWCA Crim 19 where the “the rationale of the confiscation regime is that the defendant is deprived of what he has gained or its equivalent. He cannot, and should not, be deprived of what he has never obtained or its equivalent, because that is a fine.”
So, will Mr. Justice Cooke’s unwillingness to adopt the Serious Fraud Office’s proposed draconian approach result in an appeal?
In order to have any prospect of success the Serious Fraud Office would need to attempt what they originally asserted as an impossible mathematical equation, which would take even an experienced Counsel or forensic accountant many hours to undertake, and even then it is unlikely an agreement would be reached about calculated figures.
For now, the approach taken by Mr. Justice Cooke is one that will be welcomed by many defence practitioners and traders still awaiting trial.