In early December 2012, the UK seemed like a modern-day version of a Dickensian Christmas.
A cold snap had left buildings and fields covered in frost, enveloping a country already frozen by a financial slump. The UK’s economic growth was in retreat and its credit rating threatened. just as many in the City accused of causing the gloom appeared insulated.
But at 7.10am on 11 December, the ghosts of Christmas bonuses past were to return to haunt one home in the Surrey commuter town of Caterham, as part of what was then the latest investigation into allegations of City boys behaving badly.
City of London police, along with representatives of the Serious Fraud Office (SFO), raided a property and led away a 33-year-old multimillionaire former derivatives trader – whose cerebral, yet socially awkward, demeanour had prompted colleagues to nickname him after Dustin Hoffman’s 1988 autistic film character, Rain Man. The trader’s name was Tom Alexander William Hayes.
Hayes – who on Monday became the first person to be convicted on charges of rigging the financial world’s key interest rate benchmark. the London Interbank Offered Rate, better known as Libor – had his computers seized and was taken on a one-and-a-half hour drive from Surrey to Bishopsgate police station in the heart of the City of London. There, sat in a grey interview room familiar to any viewer of a gritty police drama, the trader blanked questions from SFO officers during a series of interviews spanning about three hours.
Yet despite Hayes’ reluctance to talk, his former life was closing in on him. A day later, 3,500 miles away in New York, the US Department of Justice filed a separate complaint, alleging three counts of Libor-related fraud. Michael J McGillicuddy, a special agent with the FBI, claimed: “Hayes, together with others known and unknown, orchestrated a scheme to manipulate yen Libor to maximise profits for his trading positions.”
According to Hayes, the FBI’s interest – and specifically the possibility of extradition to the US and a theoretical 90-year prison sentence – shaped what happened next. His lawyers wrote to the SFO in January 2013 saying Hayes had decided to cooperate, and during a subsequent 82 hours of interviews he appeared to acknowledge his crimes. When asked if he admitted acting dishonestly in the manipulation of Libor, he replied: “Yes, I admit that I was dishonest and was dishonest within an environment that was prevalent among all the banks, yeah.”
Hayes added: “There is no way that I’m the only Libor manipulator in the world. It’s just not possible. I might be the most open about it and I’ve left reams of evidence.”
The SFO’s case was that Hayes had become the “ringmaster” of Libor rigging to increase his own trading profits and that he rewarded brokers influencing the rate on his behalf with so-called “wash trades” – trades that were financially neutral for Hayes on which he paid brokerage fees. “I don’t care, right, just get me any fucking trade which pays you basically today, mate,” he messaged one alleged co-conspirator. “If you keep [Libor] unchanged today, yeah, I will fucking do one humungous deal with you.”
But if SFO officers believed their suspect was about to plead guilty, they were to receive an awakening as abrupt as the one they had delivered to Hayes that winter morning. Roll forward to the summer of 2015 and the trader, now 35 years old, pleaded not
guilty at Southwark crown court to eight counts of conspiracy to defraud. Furthermore, his “Rain Man” nickname took on a considerably more uncomfortable feel, as the court was told how he had been diagnosed with mild Asperger syndrome, a form of autism. “No one ever mentioned the Asperger’s,” says one former City associate, “but it does make sense.”
Certainly, the former trader had a distinctive style, and not just in the way he presented himself during his trial, where he sported tatty V-neck pullovers, scuffed shoes and well-worn dark slacks. He has been described by City acquaintances as shy and gifted but not socially adept. “He would buy a lot of drinks to impress people, but only in the cheapest pubs,” one acquaintance recalls. “He has terrible taste in everything, clothes especially.”
This awkwardness manifested itself in court, during an at times tearful cross-examination. He would shake his head vigorously at evidence given by expert witnesses, pick apart phrases used by his own defence counsel and, at times, appear agitated when having to explain the intricacies of Libor to the laypeople of the jury.
But slightly more polished was the presentation of his defence: he claimed he exaggerated statements to the SFO in order to avoid a long prison sentence in the US. Hayes told the jury that he had originally confessed to misconduct in 2013 after being “frozen with fear” that he would be extradited to America and separated from his wife and child, so had attempted to ensure a UK trial by getting charged by British prosecutors. He denied the key legal test that he had acted dishonestly. The jury at Southwark crown court did not believe him.
Born in west London, Hayes suffered an early family breakup, although his mother remarried. The enlarged family – in which Hayes now has one brother, plus two step and two half siblings – relocated to Winchester in the mid 1990s.
The family made an impression there, and a trip to the Hampshire cathedral city would unearth glowing testimonies. “The family is really, really nice,” says one resident. “They are hugely into their community and doing good for society. Despite having six children of their own, they’re also big into fostering. Loads of kids come through their door. They have a big, big house, right near the middle of city and the kitchen is always full of people. Foster kids, friends of children’s friends.”
Hayes was soon identified as a bright student. After excelling at school and gaining a maths degree from the University of Nottingham, which also boasts convicted UBS rogue trader Kweku Adoboli among its graduates – he spent time as an intern at UBS before embarking on his City career at the Royal Bank of Scotland and then Royal Bank of Canada. Even then, Hayes admits to being teased for using the same superhero duvet cover he had possessed since he was eight.
But the crucial professional move came when he joined UBS in 2006, where he generated $260m (£170m) of profits for the bank in three years. A disgruntled Hayes, who says the bank reneged on a promised $2.5m bonus, defected to Citigroup in 2010, but found cultures could differ between rival investment banks.
A colleague quickly alerted Citigroup management to Hayes’ methods, and he was sacked after just 10 months’ service, albeit while being allowed to keep a £2.2m bonus. Then, on 11 December 2012, came the door knock.