by David Enrich
Back in Tokyo, he called Farr. The broker had previously volunteered to pay for a chunk of the vacation. Hayes felt a bit guilty about it, but not so guilty that he didn’t accept the offer. “I’ll just give you my bill for my hotel room, if that’s alright,” he said. “The thing is, mate, it’s in Thai baht.” No problem, Farr assured him. RP Martin would just convert the figure into pounds and deposit the money into Hayes’s personal bank account. “I appreciate that,” Hayes said sheepishly. “The thing is, it’s about 5,000 bucks, mate.” Farr was unruffled. He had already checked with his boss Cliff King about covering part of Hayes’s trip. The money was transferred.
Hayes, of course, didn’t need help with the hotel bill, but he nonetheless was grateful for the friendly gesture. He suggested to Farr that he reciprocate via a big switch trade—yielding far more in commissions than RP Martin had paid to cover the hotel. It was mission accomplished for Farr.
In late June, Hayes asked Wiley to get his J.P. Morgan colleagues to bump six-month Libor higher. “It would probably suit me as well, but our guys seem to be very by-the-book,” Wiley said. “If I ask them, they’d almost [move it in the opposite direction] out of spite.” Still, Wiley got on the phone with his Libor-submitting colleague, who, sure enough, refused to help. Wiley told Hayes.
“They sound like pricks,” Hayes declared in an instant message from his Bloomberg terminal.
Hayes’s obnoxiousness was nothing new, but the “pricks” remark nonetheless irritated Wiley, and so he called Wilkinson—with whom Wiley had previously plotted to move Libor in helpful directions. Now Wiley relayed a badly distorted version of what had just happened. “Tommy Hayes” wanted Libor moved, Wiley said, “which I had no intention of doing. But of course I don’t want to piss him off, so I sort of went for a bit of pretense.” He said he had told Hayes he would check with his guys, but never actually did anything.
“Oh mate, that’s so illegal, it’s ridiculous,” Wilkinson sympathized, laughing.
Continued Wiley: “So I came back with a Bloomberg saying I spoke to my guys . . . and he sends an e-mail back saying, ‘your guys are pricks.’”
“Fucking hell,” Wilkinson responded. “He’s out of control, isn’t he? Now you know what we’re dealing with.”
“He’s got to be careful phoning up banks,” Wiley said.
“You just don’t do that.”
“He’ll get in all sorts of trouble.”
Now it was Wilkinson’s turn to bend the truth. “Well, he sort of tries it around here,” he said, “but we said, ‘mate, look, if you’ve got any views on Libor, we’ll listen to them, but that’s as far as it goes.’” Wilkinson, laughing louder now, mimicked Hayes’s requests to ICAP. “Aye aye, shepherd’s pie,” he giggled, recycling the old yarn about the out-of-control Hayes. “Get in the bath!”
“I don’t want to piss him off by saying that I’m not going to do anything at all, but I’m just pretending to,” Wiley lied again.
“Mate, absolutely, yeah, I think you’ve made the right call,” Wilkinson agreed. “Just fucking leave it be. Put the onus on someone else.”
* * *
Noel Cryan was in South Africa, having followed Britain’s national rugby team, the Lions, there for a tournament. The trip wasn’t going quite as planned. For starters, his traveling companion’s hotel room was robbed. And Hayes was driving Cryan crazy. This was nothing new; Cryan was accustomed to Hayes’s antics. Most of the time, he managed to turn the other cheek. (There were exceptions. After one tirade, Cryan had threatened to come to Tokyo and kill Hayes. The broker smashed the phone down, kicked his chair onto its side, and stomped out of the building.) In this case, Cryan had warned Hayes he was going on vacation beforehand, but the message didn’t seem to have registered. Hayes called Tullett looking for the broker. When told that Cryan was in South Africa, Hayes exploded: “He’s a fucking lazy crit. He’s never in work, that boy. He’s had more holidays this year than I’ve had in the last three years.” Hayes called Cryan on his cell phone, too, warning that he might sever his relationship with Tullett. The rant lasted almost ten minutes.
“Mate, I’m in fucking South Africa,” Cryan responded. “What the fuck do you want me to do?”
Once Cryan was back in London, Hayes teased him about the hotel room getting burgled. Cryan, trying to make conversation, said that things had been quiet lately, depriving him of brokerage revenue. He wasn’t asking for charity, but just like that Hayes volunteered a switch trade to help him out. After assailing Cryan a few days earlier, now Hayes acted as though they were friends. Cryan happily accepted the offer, and Hayes, true to his word, arranged a lucrative switch trade. Danziger—who recently had run up such a huge tab on a night out with Cryan that Tullett’s normally laissez-faire bean counters had taken notice—took the other side of the transaction as a way to say thanks.
These quid pro quos had become an established pattern for Danziger. In June, after an afternoon and evening of drinking, Danziger and Lee Aaron decided to go to a club, Mahiki, along with several other brokers and traders. The tropical-themed nightspot—frequented by celebrities and located amid the hedge funds and Ferrari showrooms of London’s Mayfair neighborhood—had a pair of wooden, Pacific island statuettes guarding its main entrance, along with a few black-shirted bouncers. Aaron was outrageously drunk when he arrived, and Danziger “was fucking out of his head,” Aaron reported the next day. The bouncers wouldn’t let the inebriated group in unless they forked over a fee to access a VIP area. They paid. Inside, Danziger and Aaron started guzzling £250 bottles of vodka. By the end of the night, they had run up a £2,200 tab. Aaron knew that was too much to charge on RP Martin’s account, at least without prior approval, so he pleaded to Danziger for help. But the RBS trader didn’t want to split the bill. He had a better idea. “Just put a switch through,” he drunkenly proposed. Aaron agreed.
The next day at 6:30 a.m., after a few hours of sleep, Aaron was at work. He was still a bit drunk, his voice hoarse. He phoned RBS. “Danziger owes me a little switchy today,” he told the guy who answered the phone. “Is he in?”
“Don’t actually see him” was the response.
“There’s number one rule, if you go drinking, make sure you get in,” Aaron slurred. “That is the only rule. . . . It doesn’t matter if you go out drinking till four o’clock in the morning. Make it home, make it into work, and then people will send you home if you look like shit. But at least make the effort to make it in. That’s the only rule.”
“Yeah, I know,” the RBS guy said.
Eventually Danziger showed up and a 100 billion yen switch trade got done. It netted RP Martin nearly £20,000 (about $33,000) in commissions—almost ten times the size of the Mahiki bill.*
The combination of a fierce hangover and the £20,000 windfall had Aaron in a loopy mood, and he spent most of the rest of the day telling jokes. “Did I tell you that fucking one-liner?” he asked a colleague. “‘She’s about as useful as Anne Frank’s drum kit.’ That fucking line is great.” Aaron’s colleague didn’t get it, possibly because it was out of context—Aaron wasn’t using it to refer to anyone in particular. “Well, she had to be quiet, didn’t she?” he explained. “So a fucking drum kit is fucking useless. She was hiding in the wall, wasn’t she?”
A few days later, Danziger pinged Aaron with a nonalcoholic request: “Low Libors again please.”
“Gotcha,” Aaron replied.
* * *
One day in June, Hayes got an e-mail from Neil Archer, an imposing bald Australian who worked as a recruiter for a number of big banks. He was reaching out on behalf of Citigroup. The New York bank had just hired a refugee from Lehman Brothers, a star trader named Chris Cecere. Citigroup sent him to Tokyo to build up the bank’s interest-rates trading business. Cecere had consulted with Archer, and the pair drew up a short list of Tokyo’s best rates traders. Hayes was at the top. Archer asked Hayes if he’d be interested in a meeting. Sure, he said.
Hayes and
Cecere met at the Maduro Bar in the Grand Hyatt hotel in Roppongi. It was afternoon, and the dark, wood-paneled jazz bar, which featured live music in the evenings, was mostly empty. Hayes ordered a very expensive glass of orange juice. Cecere drank a beer. Unlike when he was feted by Goldman, Hayes felt comfortable around Cecere. They both dressed haphazardly, showing up at the swank bar in jeans and sneakers. The curly-haired Cecere sported a bushy, unkempt beard, making his thin face look fuller than it really was. Five years older than Hayes, Cecere was brainy without being saddled with social awkwardness. He spoke in rapid-fire bursts and exuded nervous energy. They each could tell that the other was a savvy trader, and Hayes later reported to Tighe that Cecere was probably “the smartest guy I’ve ever met.” The day after their hotel meeting, Hayes sent a follow-up note to thank Cecere for his time and to signal that he was open to further discussions.
At the next meeting, the CEO of Citigroup’s Japanese investment banking business, Brian Mccappin, came along. So did Tighe. They met in the top-floor bar of another hotel, with sweeping views of Tokyo’s skyline. Mccappin, an easygoing, karaoke-loving Brit, quickly determined that Tighe was the key decision maker—and that she liked to drink. Downing glass after glass of expensive wine on Citigroup’s tab, Tighe did most of the talking at the meeting. Hayes didn’t say much and then after a while abruptly ended the meeting, declaring that he had made other plans.
Hayes and Tighe were both enthusiastic about him joining Citigroup, especially after Cecere introduced his wife, Megan, a pretty American with brown hair and hazel eyes. The two couples got along well. Hayes and Tighe liked the idea of him working for a U.S. bank; that would make it easier for them to one day move to New York. Plus, Hayes had come to distrust UBS after it failed to live up to its compensation promises. It didn’t hurt that Citigroup was offering a $3 million cash signing bonus, on top of a generous salary and the expectation of an additional year-end bonus.
It was a ton of money, but Hayes, partly because of his UBS experience, fretted. Citigroup had become the poster boy for an out-of-control banking industry. Through a flurry of aggressive acquisitions, its voracious architect, Sandy Weill, had built the company from a small commercial lender in Baltimore into one of the world’s biggest financial supermarkets, offering everything from checking accounts to derivatives, with the primary goal of pushing the bank’s share price ever higher. (Weill was famous for interrupting meetings to check Citigroup’s stock.) Even as the financial crisis got under way, Citigroup had kept gorging on risky investments until, on the cusp of collapse, it had to be rescued, twice, by the U.S. government, which pumped $45 billion into the bank. An outside monitor had been appointed to reform Citigroup’s pay practices; unsurprisingly, the government wasn’t wild about the idea of its dependent continuing to lavish employees with huge paychecks. But the bank assured Hayes that the promised paycheck wouldn’t present a problem—the government restrictions only applied to the bank’s top executives, not rank-and-file employees. (The loophole was opened in response to pressure from Citigroup brass, who warned their government overseers that clamping down on big pay packages lower down the food chain would put the bank in an untenable competitive position. That wouldn’t be in anyone’s interest, right?)
When UBS learned that Hayes was again talking with a rival, the bank scrambled to retain him. By then Hayes was up nearly $150 million—and the year was only half over. Pieri wrote a detailed, five-point e-mail to his higher-ups in Zurich and London listing all of Hayes’s attributes. One of them was his “strong connections” with Libor setters, which Pieri described as “invaluable.” Plus, he was an “excellent risk manager. . . . It’s not just the money he can make, it’s the money he will save UBS (and has done) in times of crisis,” Pieri gushed. “During Lehman, we excelled, whilst other banks lost.”
Kengeter got back on the phone to plead with Hayes. Another top executive, a silver-haired Brit named Alex Wilmot-Sitwell, called Hayes from London to sing the trader’s praises. Hayes’s squawk box was bleating with trading opportunities, and he told Wilmot-Sitwell that he had to run. “You go make your money, that’s far more important,” Wilmot-Sitwell said.
* * *
Tighe pushed her fiancé to accept Citigroup’s offer. Hayes, however, still felt the tug of loyalty to UBS—not to mention the fear of leaving the comfort of a familiar institution. He turned to Read for counsel. His main advice: If he was seriously considering staying at UBS, make sure he got any commitment for more money etched in stone. “It needs to be in writing and checked by a decent lawyer,” Read said. Hayes’s problem was that, in some situations, he just wasn’t good at saying no—an odd characteristic for someone with a well-deserved reputation for being blunt to the point of rudeness. “If I say no to the CEO of the investment bank [Kengeter], that I don’t trust his word, then I am looking like a disloyal employee,” Hayes reasoned.
“You have two years of broken promises,” Read said. “You are not going to risk getting mugged again. The buck stops somewhere at UBS and that person needs to put numbers down in writing.”
“I wish you could be my agent and just do the negotiating for me,” Hayes mused. Read joked that he’d be happy to do it—for a fee.
While Hayes was a rainmaker, he had made enemies with Darin and others at the bank who resented his pit-bull style and, Hayes suspected, envied his success. Some executives thought it would be best for UBS if Hayes just left. When Darin’s boss, Yvan Ducrot, saw the e-mail with Pieri’s glowing endorsement, he forwarded it to Darin and Holger Seger. “Could you please give me some balancing points against this bullshit,” Ducrot asked.
Darin was happy to help. He responded that colleagues perceived Hayes as an “immature, explosive person regularly losing his temper.” He said other banks and brokers were aware of—and often joked about—Hayes’s behavior. What’s more, his efforts to get his pals in London to goose Libor were well known. “I find it embarrassing when he calls up his mates to ask for favours on high/low fixings,” wrote Darin, who of course had been using his power as UBS’s yen Libor submitter to benefit his own trading positions. “It makes UBS appear to manipulate others to suit our position; what’s the legal risk of UBS asking others to move their fixing?”
Seger was the manager who, years earlier, had pushed Andrew Smith and his rate-submitting crew in Zurich to collaborate more with the bank’s swaps traders. “If you want to know the reputation he has in London, let me know,” Seger wrote Ducrot. “But trust me, you won’t like the sound of it.”
The anti-Hayes forces, though, were severely outgunned. With Kengeter and Wilmot-Sitwell on board, UBS agreed to fork over a $500,000 retention payment to Hayes. Kengeter promised him he was looking at a year-end bonus in excess of $3 million. “We agreed he would turn off Citi,” Kengeter triumphantly reported to Pieri and others. “I told him . . . that he should get on with making money so I can pay him more.”
And, enticing Hayes even further, Darin received a promotion that felt more like a sidelining: He was sent back to Zurich and stripped of his responsibilities as a Libor and Tibor submitter. Those duties would now fall to Hayes’s team.
Darin, about to lose his last scrap of leverage over Hayes, figured he might as well make the most of his final days. He knew that Hayes needed Tibor higher, so he decided to lower UBS’s submission. The next day, Darin’s last in the Tokyo office, Pieri walked over to his desk and asked him to stop playing games. Tibor needed to go up, or at least not go down again. Darin smirked. It was clear to Pieri that Darin had been acting “spitefully” and that he was planning to do it again. Indeed, Darin lowered UBS’s Tibor submission. Hayes and Read were chatting when they noticed. “Roger’s parting gift,” Hayes grumbled. “He tried to screw my position. Next week we have control.”
* * *
That summer in London, UBS’s Koutsogiannis, aka Pete the Greek, was finally getting nervous about all the Libor machinations. One day in late June, he messaged a colleague: “JUST BE CAREFU
L DUDE.” It wasn’t clear exactly what Pete was referring to, and perhaps that was deliberate. But it became obvious when his colleague responded: “I agree we shouldn’t have been talking about putting fixings for our positions on public chat. Just wanted to get some transparency though.” Their consternation was a sign that word of the CFTC investigation was slowly trickling down through the ranks at UBS and other banks. Like a radar detector on a seemingly deserted stretch of highway, banks’ compliance departments were starting to sound the alarm about cops lurking up ahead.
Nobody told Hayes. He had a huge set of trades dependent on Libor rising in mid-July and then falling afterward, and he acted accordingly. The day after Pete the Greek’s warning, Guillaume Adolph sent Hayes a message asking for his cell phone number. Hayes provided it, and the Deutsche Bank trader promptly called. Adolph noted their mutual desire to keep six-month Libor as high as possible. He suggested they act together to lift their submissions over the next two weeks, and then lower them later, to suit both of their interests. Hayes, pacing in a small conference room just off UBS’s trading floor, agreed. Then his phone died. When he returned to his desk, he realized he wasn’t entirely sure what he had just agreed to, thanks to the scratchy cell phone connection and Adolph’s heavy accent. He figured he’d just double-check with Adolph that he had understood correctly. So he typed the plan into an instant message.
“Basically I will help you in two weeks time,” he wrote to Adolph. “But for the next two weeks, I really, really need you to put six-month higher.” After July 14, “I need six-month to crash off, like you.”
“Perfect,” Adolph confirmed. “That is no problem for me.”
Still, Hayes wanted to triple-check that nothing had been lost in translation. He had a ton riding on Libor going higher. “But please move six-month up on Monday,” he emphasized.