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04 Aug 2015

The Tom Hayes LIBOR sentence: how did Mr Justice Cooke arrive at 14 years?

The first criminal prosecution concerning LIBOR manipulation culminated yesterday in Southwark Crown Court when Tom Hayes was handed a 14 year prison sentence. At first blush, this sentence may seem unusually long. Sentences of this length are usually reserved for offenders convicted of serious organised general crimes such as robbery, or those convicted of massive VAT frauds in which HMRC have been systematically cheated out of multi-million pound sums. A sentence of 14 years is almost unprecedented for white collar fraud. How, then, did Mr Justice Cooke arrive at this sentence?

The Judge’s sentencing remarks suggest that there were three decisive factors: (a) the reliance upon the Sentencing Council’s recent Fraud, Bribery and Money Laundering Definitive Guideline; (b) the application of consecutive rather than concurrent sentences; and (c) Mr Hayes’s manipulation of his assisting offender agreement in 2013.

The Sentencing Council’s Definitive Guideline

In sentencing Mr Hayes, the Judge had regard to the Sentencing Council’s Fraud, Bribery and Money Laundering Definitive Guideline. This Definitive Guideline is relatively new and applies to those sentenced on or after 1 October 2014. Until the Definitive Guideline was introduced, the Sentencing Council (and its predecessors) had published no guidance concerning conspiracy to defraud, the common law offence of which Mr Hayes was found guilty and which is being investigated in all of the SFO’s LIBOR cases. Consequently, when sentencing offenders for conspiracy to defraud, the Courts historically derived guidance from a patchwork of case law, some of which was inconsistent and outdated. The Definitive Guideline brought conspiracy to defraud into the fold of the Sentencing Council, aligned it with more recent statutory fraud offences, and beefed up the Courts’ sentencing powers to punish defendants convicted of conspiracy to defraud – a matter which Mr Hayes may not have foreseen when he made his fateful decision in October 2013 to renege on his cooperation with the SFO and contest the allegations.

The Definitive Guideline now creates starting points for sentencing in all fraud cases based on concepts of “culpability” (i.e. the offender’s role and the extent to which the offending was planned and sophisticated) and “harm” (i.e. the actual or intended losses resulting from the offence). In terms of culpability, the Judge identified a plethora of aggravating factors – including Mr Hayes’s wash trades with brokers and the extent of his attempts to manipulate LIBOR externally between banks on the submitting panel – which pushed Mr Hayes’s offending into the most serious category. In terms of harm, the Judge regarded as irrelevant the fact that there were no identifiable victims and instead accepted that multi-million pound losses had been incurred by unidentifiable counterparties prejudiced by the manipulation, which again pushed Mr Hayes’s offending into the most serious category. Combining these two factors produced a sentencing “starting point” of seven years, which could be increased to a maximum of 10 years on a single count of conspiracy to defraud.

Consecutive not concurrent sentences

The eight count indictment against Mr Hayes was split between conspiracies during his time at UBS (counts one to four, all of which spanned August 2006 to December 2009) and conspiracies during his time at Citibank (counts five to eight, all of which spanned December 2009 to September 2010). Having identified the starting point in the Definitive Guideline of seven years, the Judge had to decide whether the sentence for the UBS conspiracies should run concurrently with or consecutively to the sentence for the Citibank conspiracies. If concurrent, the Judge would be limited to imposing a total sentence of 10 years, but if consecutive, the Judge would not be so restricted.

According to the Sentencing Council’s guidance on the so-called ‘totality’ of sentencing, concurrent sentences should generally be imposed in respect of offences arising out of the same incident, or a series of offences of a same or similar kind. In contrast, consecutive sentences should generally be imposed in respect of offences arising out of unrelated incidents, or where the offences are of the same or similar kind but where the overall criminality will not sufficiently be reflected by concurrent sentences. Whilst the Judge’s reasoning is not explicit, it seems that this last point – that Mr Hayes’s overall criminality would not adequately be reflected by a sentence of 10 years – persuaded him to treat the UBS conspiracies as distinct from the Citibank conspiracies, and for the two groups of conspiracies to run consecutively. This approach to totality permitted the Judge to elongate the overall sentence to 14 years.

The assisting offender agreement

The Judge was clearly unimpressed by Mr Hayes’s engagement with an assisting offender agreement negotiated with the SFO under the Serious Organised Crime and Police Act 2005 (SOCPA). This agreement was a means by which Mr Hayes could have received a reduced sentence in return for making admissions of his own criminality and for cooperating with the SFO by providing them with information about the matters under investigation and those involved. Having initially engaged with the SOCPA process in January 2013, Mr Hayes withdrew from it ten months later, having made numerous admissions to the SFO which at trial he described as lies designed to stymie the threat of extradition to the US by precipitating a criminal charge in the UK.

The Judge took a dim view of Mr Hayes’s manipulation of the assisting offender agreement as a strategic tool to play off prosecutors on both sides of the Atlantic, to abandon it once it had seemingly served this purpose, and then to treat it with contempt by suggesting that he used it to lie repeatedly to the SFO. The Judge was careful to say that the sentence had not been increased for these reasons, but it deprived Mr Hayes of any effective opportunity to mitigate his sentence downwards from 14 years.


The sentence handed to Mr Hayes should not be seen as determinative of the sentences likely to be handed down in any future LIBOR prosecution if further convictions are obtained. Each case will of course turn on its own facts. The evidence against other traders or submitters awaiting trial may not be as strong. Not many other LIBOR defendants will be exposed to the consecutive sentence trap which caught Mr Hayes. It is also unlikely that any of them would need to explain to a jury the prior admissions of dishonest conduct which bedevilled Mr Hayes’s defence at trial.

The sentence is a lesson in the dangers inherent in trying to manipulate a criminal fraud investigation. Mr Hayes’s strategy of leveraging the assisting offender agreement to precipitate a trial in the jurisdiction that appeared to offer the more lenient sentencing regime backfired. It deprived him of the opportunity to mitigate his sentence and means he will now serve the kind of lengthy custodial sentence he feared receiving in the US.

Finally, the sentence is a graphic illustration that the most egregious white collar fraudsters will now be punished by sentences comparable to those handed to offenders who commit the most serious general crimes. As the current Lord Chief Justice memorably remarked in the context of a foreign bribery case: “those who commit such serious crimes as corruption of foreign officials must not be viewed or treated in any different way from other criminals.” Mr Justice Cooke has ensured that the same sentiment will now echo throughout the financial services industry, noting that: “the seriousness of this offence is hard to overstate […] a message has been sent to the world of banking”.

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