US to charge banks in UBS case, source says


Sun, Dec 16, 2012 - Page 13

US prosecutors are planning to file charges next week against multiple bankers associated with UBS AG’s rigging of Tokyo interbank lending rates, according to a person with knowledge of the case.

The charges would be the first brought by the US Justice Department against individuals alleged to have manipulated the London Interbank Offered Rate, or LIBOR, a rate used in bank borrowing, and comparable lending rates in Europe and Japan.

The prosecution is slated to begin in tandem with an announcement that UBS Securities Japan Ltd, the Japanese subsidiary of the Zurich-based bank, would plead guilty to manipulating Japanese interest rates starting in 2007, said the person, who asked not to be named because the matter is private.

UBS is set to pay more than US$1 billion to settle charges of interest rate manipulation with the US Justice Department, the US Commodity Futures Trading Commission, the UK Financial Services Authority and the Swiss Financial Market Supervisory Authority, said two people familiar with the matter, including the person with knowledge of the plans to charge individuals.

That US$1 billion-plus sum is more than twice the £290 million (US$469 million) that Barclays PLC agreed to pay last June to settle allegations that its employees conspired to manipulate LIBOR.

Unlike the pending settlement with UBS, the Justice Department did not require Barclays to enter a guilty plea to a specific charge.

In deciding against a charge last June, prosecutors praised Barclays’ “timely, voluntary and complete disclosure of facts.”

UBS has been “granted conditional leniency or conditional immunity” by the Justice Department’s antitrust division, in connection with potential antitrust violations related to submissions for interbank lending rates in Tokyo, according to the Swiss bank’s most recent annual report,

According to Justice Department guidelines, a corporation can secure favorable treatment from prosecutors if it is the first to pledge full cooperation in an antitrust investigation.

However, in order to win that leniency, the corporation has to include an admission that it was part of an antitrust conspiracy, and help identify other participants in the scheme.

One year ago, Japanese regulators sanctioned UBS’ Japanese operations, curtailing the bank’s ability to participate in the Tokyo interbank derivative market for a week, and ordering the bank to improve its regime of compliance and internal controls.

Earlier this week, a former Citigroup Inc trader was among three people detained in the first UK arrests as part of the global LIBOR probes, according to two people familiar with the matter.

Thomas Hayes, a former trader at UBS and Citigroup, was arrested by the Serious Fraud Office and City of London Police, said the people, who asked not to be identified citing the continuing investigation.

The other two men arrested worked at brokerage firm RP Martin Holdings Ltd, according to one of the people and a third person familiar with the investigation, who also requested anonymity.

The employees are Terry Farr and Jim Gilmour, people with knowledge of the investigation said.

They were later released on bail.