Former Tory treasurer Michael Spencer runs into political row as firm he founded given stiff penalty and ex-employees charged
The City dealer run by former Conservative party treasurer Michael Spencer has been fined £55m by regulators and three of its former employees charged with criminal offences in the United States as part of the global investigation into Libor rigging.
Spencer said he regretted the actions of the three – one of whom was known to colleagues as "Lord Libor". Regulators hit the Icap money broking firm he runs with huge fines and released pages of embarrassing email exchanges showing offers of a curry night out, a Ferrari and "bubbly on its way" in return for moving the yen Libor rate.
One of the City's highest profile figures, Spencer was drawn into a political row as the Labour MP John Mann called for his donations to the Conservative party to be handed to the armed forces charities where Libor fines are sent.
Labour's vice-chairman Michael Dugher also called for the money to be returned. "David Cameron fought tooth and nail to avoid launching a proper inquiry into the scandal of rigging interest rates, the very scandal which has now engulfed one of his big donors – a man who has given him nearly £5m," Dugher said. "It just goes to show what we already knew. In the end it's a privileged few whose voices he hears, and whose interests he acts in."
Each of the one-time employees – Darrell Read, who lives in New Zealand, Daniel Wilkinson and "Lord Libor", Colin Goodman – face 30 years in jail for each of the three charges levelled against them by the US department of justice (DoJ). They have been charged with conspiracy to commit wire fraud and two counts of wire fraud. In the US a criminal complaint is not evidence and a defendant is presumed innocent until convicted.
Spencer's tenure as treasurer of the Conservative party overlapped with the period of the fines – between July 2006 and December 2010 – but he claimed that this was not relevant. Even if he had not been holding the senior political role Spencer said: "I can't believe I'd have been able to pick it up."
A Tory official said the demands to repay Spencer's donations were "nonsense".
Spencer has attended a series of dinners in Downing Street and close links with the party since leaving his post as co-treasurer. Last year he was described as a personal friend of the prime minister by cabinet minister Francis Maude.
Spencer described the 10 former and current employees as "rotten apples" but acknowledged the desk on which they worked had never been audited during the relevant four-year period.
Announcing the latest development in the Libor scandal, which erupted in June 2012 when Barclays was fined £290m, Scott Hammond, deputy assistant attorney general for the antitrust division's criminal enforcement programme, said: "In exchange for bigger bonus checks, the three defendants undermined financial markets around the world by compromising the integrity of globally used interest rate benchmarks."
Icap, in which Spencer and his family own a 16% stake worth £400m, will pay £14m to the Financial Conduct Authority. It is the FCA's fourth fine for Libor rigging and first against a non-bank. The remainder of the £55m will go the US authorities.
According to the FCA one of the brokers received £5,000 every quarter in "corrupt bonus payments".
The regulators link the activities to those of UBS, the Swiss bank which has so far faced the largest Libor fine of £940m. The DoJ's complaint names former UBS trader Tom Hayes as a "co-conspirator" in its charges against former Icap employees along with "others known and unknown".
According to the FCA, which does not name individuals, there were 300 written requests to change Libor rates to brokers at Icap, and more orally which were harder to chart.
Libor – the London interbank offered – is a benchmark rate based on submissions by major banks about the price they think rivals would charge them to borrow money over different periods of time. It in turn is used a benchmark against which £300tn of financial contracts around the world are set.
According to the DoJ, Goodman distributed a daily email to individuals outside of Icap, including derivatives traders at several large banks as well as those responsible for providing Libor submissions to the British Bankers' Association. The BBA is now being stripped of its involvement in the rate.
Goodman's email contained what were termed his "SUGGESTED LIBORS", purported predictions of where yen Libor ultimately would fix each day across eight specified borrowing periods. Read and Wilkinson, along with Goodman himself, often referred to Goodman as "Lord Libor"," the DoJ said.
Spencer did not rule out taking a bonus for this year but said top executive payouts would be affected. "None of the three individuals at the centre of the activity remains with the firm. Others are either no longer with the company or are being disciplined," he added. "We deeply regret and strongly condemn the inexcusable actions of the brokers who sought to assist certain bank traders in their efforts to manipulate yen Libor. Their conduct contravenes all that Icap stands for."
'Will buy you a Ferrari if you move 3 month up'
Desk head: "Lord Baliff, I would suggest a lunch over golden week. Monday or Tuesday, if you are around ... As for kickbacks etc, we can discuss that at lunch and I will speak to [senior yen trader] about it next time he comes up for a chat."
Trader: "OK with an annual champagne shipment, a few p*** ups … and a small bonus every now and then."
Broker: "How about some form of performance bonus per quarter from your b bonus [sic] pool to me for the Libor service …"
Derivatives broker: "Morning Lad, on the scrounge again, if possible keep 3 [months] the same and get 6 [months] as high as you can. My guy … will want it has high possible. Waiting for my credit card to get returned to me from a drunken night out bowling but will be supplying you with copious amounts of curry on it's imminent return.
Derivatives broker: "Make 6m go lower! They r going up. [Trader] will buy you a Ferrari next year you move 3 [month] up and no change 6 [month]"
Derivatives broker: "brooliant!! they are making fortunes with these high fixings!!! :-)
Trader told broker that he "need[ed] high at the start of Oct". Broker replied: "Gotcha … just give me a 'wish list' at the start of each day."
Article Source : http://www.guardian.co.uk
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