David Corker’s comments published in Thomson Reuters Regulatory Intelligence

Hayes jail sentence means new push for compliance protection in banks, say lawyers

Alex Davidson, senior editor, retail and insurance in London for Thomson Reuters Regulatory Intelligence

The 14-year jail sentence given to Libor trader Tom Hayes yesterday is so severe that the push by traders and others for compliance protection in banks will be immediate, according to lawyers. The concerns arise not least because the case had a fighting chance if Hayes had not given testimony in court. One clear legal view is that compliance protection is crucial for such activity as participation in a traders’ chat room, and that bank compliance departments must develop their expertise in criminal law.

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Unprecedented

“This is a sentence at the top end and is unprecedented of its kind in white-collar fraud. But if Hayes appeals, I am convinced that the Court of Appeal will uphold this sentence, or reduce it by a year at the most,” said David Corker, partner at Corker Binning.

“This was a case with a fighting chance, but for Hayes to defend his actions in the witness box was ultimately a disastrous decision,” Corker said.

“His only prospect of success was for him to say that he was not the only one manipulating Libor, and that it was unfair to single him out. His lawyers did in fact put the case, but Hayes ruined it by his testimony,” he said.

According to Corker, the major mistake was not that Hayes had, in the months following his arrest, given the Serious Fraud Office 82 hours of taped interviews where he admitted to seeking to influence banks’ submissions to benefit his trading book.

Hayes’ testimony in court was that he had cooperated with the SFO only because he feared extradition to the US and wanted to be tried under the UK’s more lenient regime, Corker noted.

“The mistake was that Hayes turned round in court and said he had lied to the Serious Fraud Office in saying he had believed he had been dishonest, and that in reality he never believed he had been dishonest,” Corker said.

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According to Corker, compliance officers at banks can take away from this case the lesson that surveillance of traders’ activity is more crucial than ever. “To spot evidence is a subtle thing, but they had better get the right software to handle it,” he said.

“Compliance departments performing surveillance of countless emails are faced with a daunting task. The Financial Conduct Authority has an easier job investigating insider trading after the event because it has specifics that it can review,” he said.

The full article was originally published on Thompson Reuters Regulatory Intelligence on 4 August 2015.