Financial Crime Update
FINANCIAL CRIME UPDATE
23 Essex Street is a set of barristers’ chambers specialising in criminal litigation and noted in the financial field for its
work in white-collar crime cases, including money laundering, confiscation and asset recovery, revenue and customs,
business and market-related and intellectual property crime. In addition, it is noted for its expertise in the associated
fields of professional regulatory and disciplinary proceedings.
Tom Godfrey and David Dainty of 23 Essex Street review the latest financial crime developments
14 YEARS FOR AN ELIBOR ATE FRAUD? TOM HAYES AND
THE LIBOR SCANDAL
On 3 August 2015 Tom Hayes, the former UBS and CitiGroup
trader, was sentenced to 14 years’ imprisonment for his part in the
well-publicised LIBOR fraud. With the media spotlight fixed firmly on
the case this Financial Crime Update examines whether 14 years for a
man of previous good character, who had recently been diagnosed with
Asperger’s, was justified.
THE SENTENCE
Hayes was convicted after trial of eight counts of conspiracy to
defraud. The sentencing judge, Mr Justice Cooke remarked that
Hayes was the “central hub” of the LIBOR fraud. Each of the eight
conspiracies involved a high degree of sophistication and planning and
the sums involved ran into millions of dollars. The number of attempts
made by Hayes to influence the LIBOR rates was huge. As Mr Justice
Cooke stated, “the seriousness of this offence in the context of the
LIBOR benchmark and banking is hard to overstate.”
Having set out the factual basis on which he was sentencing
Hayes, the judge turned to the Fraud Sentencing Guidelines. Mr
Justice Cooke rightly categorised this case as being at the top end in
terms of culpability and harm. For cases falling into the top category
of the guidelines (Category 1A) the starting point is seven years’
imprisonment. The starting point is based on a single conspiracy worth
£1,000,000. As such, the judge was right to treat this case as falling
outside the ordinary guidelines. However, does this also mean that he
was right to pass a sentence twice as long as the starting point referred
to above?
DISCUSSION
Instinctively, 14 years for an offence where there is no readily
identifiable “victim” may seem oppressive. This is particularly so
given that criminal practitioners regularly see single figure sentences
passed for violent and serious sexual offences. Nevertheless, the
consequences of financial mismanagement and fraud have a major
impact on homeowners, savers and families. There is also a real and
genuine public interest in ensuring that the financial services market is
working properly and fairly. In particular, the whole financial services
industry must have confidence and trust in the LIBOR rate. In order to
safeguard that public interest the courts must pass deterrent sentences
where bankers and traders abuse a position of trust for private gain.
It appears that this was the approach taken by Mr Justice Cooke,
who remarked that “the conduct involved here must be marked out
Butterworths Journal of International Banking and Financial Law
as dishonest and wrong and a message sent to the world of banking
accordingly.”
14 years also appears to be consistent with previous Court of
Appeal authority. In Attorney-General’s References (Nos 7 and 8 of
2013) (R v Kallakis & Williams) [2014] 1 Cr.App.R (S) 26, Kallakis
played a leading role in two separate conspiracies to defraud. In the first
conspiracy he fraudulently obtained loans totalling £743m to fund the
purchase of high-value, luxury London properties. £77m of the loans
was dispersed amongst the conspirators. On the second conspiracy
Kallakis fraudulently obtained a loan from Bank of Scotland to convert
a ferry liner into a luxury yacht resulting in a loss to the bank of around
£5m. Kallakis was sentenced on the basis that he was the lead player
and received a total sentence of seven years’ imprisonment.
The Attorney-General referred the case to the Court of Appeal on
the basis that the sentence was unduly lenient. The Court of Appeal
agreed. It held that Kallakis “set out and persisted over a significant
period with planning, determination and audacious dishonesty to
commit a commercial fraud with international proportions”. The
Court quashed the sentence of seven years and replaced it with one of
11 years (seven and four years consecutively).
Kallakis was an example of a high-value, serious fraud, which was
properly planned and perpetrated over a number of years. However,
the LIBOR fraud was even larger still and went to the very heart of
the banking system in this country. It undermined public confidence
in the system used by banks to lend money to each other. Given those
circumstances, a three-year increase on the sentence in Kallakis is more
than justified.
Comparisons will certainly be drawn with the seven-year sentenced
meted out to Kweku Aboboli for his orchestration of the £1.5bn
UBS fraud. Adoboli, though, whilst convicted of two counts of fraud,
was acquitted of a number of counts of fraudulent trading and was
described as a relatively junior trader. Both the jury and the judge in
his case, it seems, had some sympathy for Adoboli. No such sympathy
existed for Hayes.
CONCLUSION
„
In short, 14 years for Hayes was justified.
Biog box
Tom Godfrey is a barrister and David Dainty is a pupil barrister
practising from 23 Essex Street Chambers, London.
Email: [email protected]
October 2015
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