LONDON — A former Citigroup trader is one of three people held in the first British arrests as part of global probes into tampering with the London interbank offered rate, according to two people familiar with the matter.
Thomas Hayes, a former trader at UBS AG and Citigroup, was arrested by the Serious Fraud Office and City of London Police on Tuesday, said the people, who asked not to be identified citing the continuing investigation. The other two men arrested worked at brokerage firm RP Martin Holdings, according to one of the people and a third person familiar with the investigation, who also requested anonymity.
The three men who were arrested, ranging in age from 33 to 47, are all British nationals living in Britain and were taken to a London police station for questioning, the Serious Fraud Office said in an e-mailed statement.
Global authorities are investigating claims that more than a dozen banks altered submissions used to set benchmarks such as the London interbank offered rate, or Libor, to profit from bets on interest-rate derivatives or make the lenders’ finances appear healthier. Swiss lender UBS is expected to face a fine as early as this week that may surpass the record $466.6 million paid in June by Barclays PLC, Britain’s second-biggest bank, to settle claims it attempted to manipulate Libor.
The agency and police also searched three homes in Surrey and Essex, according to the fraud office statement. Arrests in Britain are made early in investigations, allowing people, who may not be charged, to be questioned under caution.
Libor, a benchmark for more than $300 trillion of fi- nancial products worldwide, is derived from a survey of banks conducted each day on behalf of the British Bankers’ Association in London. The rates help determine borrowing costs for everything from mortgages to student loans.
Hayes, a Tokyo-based trader for Citigroup, was previously dismissed for suspected involvement in the rate manipulation, a person familiar with the situation said earlier this year.
Jeff French, a spokesman for Citigroup in London, declined to comment or provide contact information for Hayes. A number for Hayes couldn’t immediately be located.
Japan’s Financial Services Agency said last year that Citigroup’s local securities unit would be banned from trading tied to the London and Tokyo interbank offered rates for two weeks starting on Jan. 10. Citigroup was forced to write off $50 million as it exited trades made by Tokyo-based employees, a person familiar with the matter said earlier this year.
Hayes joined Citigroup in December 2009 and was dismissed after he was reported for inappropriate conduct by a rate setter there in June. He had previously worked for UBS, and for Royal Bank of Scotland Group PLC between 2001 and 2003, according to a United Kingdom Financial Services Authority database.
David Jones, a fraud office spokesman, declined to comment beyond the statement. The City of London Police referred all calls to the fraud office. An RP Martin spokesman said the company doesn’t comment on employee matters.
Last month, fraud office Director David Green said in an interview last month that the agency was considering conspiracy-to-defraud charges against individuals. Green said the agency is focusing on the most egregious attempts to manipulate Libor and other related rates. Investigations into firms, managers, traders and rate setters involved in minor offenses will come later.
The fraud office opened the Libor probe in July at the request of British politicians after the Barclays fine. Regulators in the United States and Britain are looking into how derivatives traders and bankers who submitted interest-rate data colluded to rig benchmarks to benefit their own trades, and whether lenders low-balled submissions in 2008 to hide their true cost of borrowing.
Criminal probes by the fraud office and the U.S. Department of Justice are running in parallel with civil investigations being conducted by the Justice Department’s fraud division, the U.S. Commodity Futures Trading Commission and the U.K. Financial Services Authority.
Information for this report was contributed by Gavin Finch and Ben Moshinsky of Bloomberg News.z
Business, Pages 25 on 12/12/2012