by David Enrich
That week, Kii Ko, one of the Citigroup employees responsible for Tibor submissions, happened to have a brief conversation with Mccappin. Ko said that Hayes and Cecere in the past had told the cash desk not to lower Tibor, even though the submitters thought that’s what should happen based on Citigroup’s borrowing costs. Now the same thing was happening again. Tan, who was Ko’s boss, had a similar chat with Mccappin. The problem, Tan had told Mccappin, was that Hayes’s team kept flip-flopping on what they wanted—a reflection of Hayes’s trading positions changing from day to day. It made Citigroup look stupid to keep reversing the direction of its submissions. Mccappin was “very clear” about the problem, Tan told Ko afterward. So Mccappin now found himself in the middle of an awkward tug-of-war between different factions of Citigroup Japan.
With his colleagues less inclined to help, Hayes tried Gollum. The Deutsche Bank trader was having a middling year and had relinquished responsibility for the bank’s yen Libor submissions. (Hayes was under the false impression that he still retained some influence over the rate.) Adolph, however, had gotten wind of the government investigations. So when Hayes started pestering him for help getting Libor moved—the same type of request he’d lodged many times before—Adolph shot him down.
“Enough,” he said, cutting him off.
Hayes kept going, detailing what he was looking for.
“I have no influence or control nor [do] I want to be involved,” Adolph said.
Hayes was confused. “Sure thing,” he said, trying to defuse the awkward situation. “Well how are you doing anyway.” Later, as he deconstructed the conversation, he figured maybe Adolph had been brusque because of the tough year he was having. Or maybe it was that he was no longer in charge of yen Libor? Then an unsettling thought crossed his mind: It was almost as if Adolph was worried that someone might read through their chats in the future.
* * *
When Hayes left UBS, Pieri had taken it as a personal betrayal. He had stuck his neck out, over and over again, for his star, extracting rare concessions from top UBS brass—and Hayes still quit. It made Pieri look bad. The anger festered. By summer, Pieri was out for blood.
Hayes “is so stubborn and thinks he is bigger than the market,” Pieri gossiped to a Credit Suisse trader named Paul Ellis, as the two marveled about the size of Hayes’s trading portfolio. “I had to rein him in all the time when he was here”—that was a lie; in fact, UBS had encouraged him to pile on riskier trades. “I knew that when I hired him and prevented it, and told him he was at risk of blowing up when he left.” Pieri hinted to Ellis that Hayes was circumventing Citigroup’s risk management systems. “It would be interesting if someone were to drop an anonymous line to their market risk guys,” he said.
Ellis then cited a market rumor about one of Hayes’s specific trading positions. “I can confirm he had that position,” Pieri responded. If his losses kept piling up, he continued, “Tom will end up the fall guy . . . as Chris [Cecere] is Andrew [Morton]’s mate. These are reckless Lehmans guys managing the place. . . . Chris is way over his head and his boss Andrew has no idea how to run a business. They bought the racehorse but don’t have a good jockey.” Over lunch later that month, Pieri explained to Ellis how Hayes used brokers at ICAP and elsewhere to move Libor in favorable directions.
Hayes and Cecere had picked up inklings that Pieri was among the leaders of an anti-Hayes bandwagon. Cecere, for example, had noticed Pieri trading in a bizarre fashion that made it seem like he was simply trying to damage Hayes’s positions, not make money for himself, but he hadn’t really believed that was happening. It would be an irrational way for an executive at a major bank to act—his compensation was tied to his trading desk’s profits, not a rival bank’s performance. Hayes, meanwhile, had finally come to the conclusion that he probably shouldn’t be placing his trust in Alykulov, given his connection to Pieri. But neither Hayes nor Cecere realized the severity of the situation until June 28, when Cecere went out for drinks at a crowded Tokyo bar. In a city with more than 13 million inhabitants, he ended up seated at a wooden table right next to Pieri and another UBS trader. The two UBS men were sipping white wine and talking shop. They didn’t seem to recognize Cecere. So he sat there, nursing his drink and eavesdropping. At one point, he pulled out his phone and surreptitiously snapped a grainy photo of the two men.
“The ONLY thing he [Pieri] spoke about was screwing Tom and Citibank,” Cecere wrote later that night in an incredulous e-mail to Morton and Mccappin. He attached the photo as proof. “His end game is to inflict pain and not make money. He sounded like a raving zealot who’d lost the plot. . . . Given his trades in the last day and a half, he’s now spending money to have a go at Tom/us. Not that it really matters, but this is what we are dealing with.”
* * *
Three days earlier, Hayes had set in motion a chain of events that would inflict far more damage than anything Pieri could do. It was the last Friday in June, sunny, warm, and clear in both Tokyo and London. Hayes was still losing money. Growing desperate, he had convinced himself that, if his next batch of trades didn’t pay off, it would cost him his job. That afternoon, talking to Hoshino on his cell phone, he asked him to lean on Celtik to increase Citigroup’s submissions by 0.01 percentage points on Monday and Tuesday.
Hoshino tentatively walked over to Celtik’s desk. “Here’s a message from Tom,” he said quietly. “It would be good for us if Libor went up by one basis point.” Celtik told him to stop—they couldn’t be talking about this kind of stuff. Trying to drive his point home, he claimed that some Barclays traders recently had been arrested for just this sort of behavior.*
Hoshino shuffled away, rattled. He called Hayes and told him what had happened. “Oh, okay,” Hayes replied, unperturbed. When Hoshino relayed what Celtik had said about the Barclays traders, Hayes brushed it off. The two of them hadn’t actually been asking Celtik to move Libor, he explained—they had simply been stating aloud what would please them. Hoshino didn’t buy the tortured distinction.
Celtik told Porter about the conversation with Hoshino. Porter told him to tell Thursfield. Thursfield told his boss, Compton, as well as Matt Jerman, a senior executive. Jerman told Morton, who said he would inform the bank’s compliance department.
By the following Monday, nobody from compliance had called, so Thursfield took it upon himself to phone one of the bank’s compliance officers and tell him everything. Knowing what it knew about the U.S. government’s escalating investigations, the bank didn’t really have a choice: Within days, Citigroup launched an internal review into the matter.
* * *
Unaware that the compliance department had been alerted, Hayes kept pushing traders and brokers to nudge Libor up or down. But it was getting harder. Farr sent an apologetic e-mail to let him know that Luke Madden at HSBC had texted him—not for the first time—“asking me not to mention Libors again.” Then Hayes asked Hoshino to call him. Hoshino had been sufficiently frightened by the prior week’s incident that he rang Hayes on his work line, not his cell phone, figuring Hayes wouldn’t talk about Libor on the recorded line. He was wrong; without hesitation, Hayes asked Hoshino to go back to Celtik. Hoshino hung up and called Hayes back on his cell phone. “I don’t want to do it,” he said. Why was Hayes having such trouble getting the message?
In the middle of the day on July 6, Hoshino was summoned into a meeting room. A phalanx of compliance officials was waiting for him. Terrified, he stammered through the interview, repeatedly failing to remember recent events surrounding his and Hayes’s Libor requests. The Citigroup investigators perceived him as uncooperative. Hoshino didn’t tell his Tokyo colleagues about the meeting.
About a week later, though, Cecere detected that something was amiss—maybe Hoshino had been scolded, and that’s why he was no longer cooperating. Cecere called Morton to figure out what was going on. Morton said the London Libor submitters had complained to compliance.
“Those fucking cunts!” Cecere exploded. �
��What is wrong with them? Pardon my language, but that drives me fucking mental. Pick up a phone and have a word with me.”
Morton tried to calm him down, to no avail. “What the fuck kind of bank is this?” Cecere sputtered. “Turn your own people in instead of just picking up a phone and saying, ‘Look, this is really not comfortable. Please stop it.’ Like that’s all you have to say, and it’s done.” But of course it hadn’t been done, until now.
* * *
One morning that month, Citigroup traders in London arrived to find neatly printed documents placed on their desks overnight. The message spelled out, in detail, the acceptable procedures surrounding the Libor submission process. In Tokyo that day, all of Citigroup’s traders were called into a meeting room to hear a similar message. A bunch of executives, including Mccappin, were piped into the meeting via speakerphone. From this point forward, no traders were allowed to speak to the cash desks. Any exceptions had to be authorized by the compliance department. The rules were now crystal clear, even to Hayes.
* * *
On a Sunday evening in July, Cecere called Hayes on his cell phone. “I need to speak to you,” he said. They decided to meet at the Windsor. The two sat in the deserted pub, as they had a dozen times in the past, a beer per banker, although Hayes hardly touched his. Then Cecere got to the point: “Tomorrow these lawyers are coming in to do this investigation into Libor.”
“Why?” Hayes asked. Cecere said someone in London had gotten uncomfortable. Hayes asked whether he needed to worry. No, Cecere said. He told Hayes to distance himself from whatever it was that Hoshino had done to kick up this whole storm. As for the broader question about whether he had been asking the London crew to move Libor, Hayes should just explain that this is the way things worked in the market. They hadn’t done anything wrong—or, if they had, just about everyone was guilty.
Lawyers from a high-priced law firm, Cleary Gottlieb, flew from New York to interview Hayes. They invited him into one of the bank’s finely furnished conference rooms, a few floors below where Hayes worked, that Citigroup generally used to impress clients. The lawyers were armed with reams of internal documents. Hayes tried to follow Cecere’s advice. The lawyers presented him with e-mails and chat transcripts showing his dialogue with Hoshino; Hayes’s spin was that he was only asking him to provide general market commentary to the London team. He told the investigators that he had no idea what Hoshino had actually said that so inflamed Celtik and Thursfield. But every time he opened his mouth, Hayes could tell the lawyers thought he was lying—which, of course, he was. They kept asking questions that led him to contradict his previous answers. They seemed especially exercised about a phone call where Hayes told Hoshino to grab a reluctant Celtik on his way to the toilet to press him for Libor help. They also made a big deal about how Hayes, in his first days on the job, had encouraged Hoshino to butter up the submitters.
That night, Hayes went home and told Tighe what had happened. “These lawyers came to interview me today,” he said. Tighe instantly knew this wasn’t good. Did they interview anyone else? she asked. No, just me, Hayes replied. By the end, Hayes told her, it had seemed more like an interrogation than an interview. “They had me saying left was right, and right was left,” he recounted. “I didn’t really know what I was saying.”
A few days later, Hayes turned to Mccappin for advice. The CEO assured him he had nothing to worry about. After all, the fact that Hayes remained in his job and continued to trade was evidence that this wasn’t a big deal. If they really thought he’d done something wrong, surely they would have suspended him. Mccappin repeated Cecere’s advice to point the finger at Hoshino.
Tighe, a lawyer herself, wasn’t so sanguine. The fact that the attorneys, including high-ranking partners, had flown from New York did not suggest that Citigroup viewed this as a minor problem. She asked Cecere out for a drink. They met at the Windsor. “Give it to me straight,” she said. “What’s going on?”
“Nothing,” Cecere replied. “There might be a slap on the wrist.” He smacked his expensive wristwatch for emphasis. Tighe didn’t think Cecere was lying, but she wasn’t sure he knew what he was talking about, either. At home, she sat down with her fiancé for a serious conversation. It was time, she told him, to hire a lawyer. He needed someone to sit in the room with him during these meetings, someone equipped to square off against Cleary Gottlieb’s attorneys. Hayes insisted that wasn’t necessary. He told her that he could trust Cecere and Mccappin, and if they said everything would be all right, everything would be all right. There was, he proclaimed, no need to waste money on a lawyer. Tighe shouted at him that he was being unbelievably naïve—but Hayes had the final word.
In August, Hayes departed for his bachelor party—a stag do, in British parlance—in southwestern Ireland. The rolling bright green countryside was a refreshing break from Tokyo. Hayes and a dozen-strong group, led by his childhood friend Charlie and his brother and stepbrothers, stayed in a local university’s dorms; Hayes thought the stark, bare rooms looked like jail cells. Rounding out the entourage were a few of Hayes’s brokers: Noel Cryan, Nigel Delmar, and Danny Brand. The dynamic was strange. Cryan and Delmar had never gotten along, and Cryan thought it was weird that he was there at all. Cryan knew that if Hayes were ever to leave the industry, they’d never speak again. He wasn’t so sure Hayes viewed their relationship similarly; it was sad that he viewed Cryan as one of his closest pals. But it certainly wasn’t in Cryan’s interest to correct that misperception.
The group planned to go sea fishing. But the night before, after hitting up a bar, the guys stayed out late at a local casino, and Charlie blew all the money to charter the boat on losing hands of poker. Hayes had to pay for the outing himself; he caught a large cod. The next morning, the jet-lagged groom-to-be found himself awake while his friends remained passed out after another late night at a club. Hayes called Mccappin to ask about the latest status of Citigroup’s internal investigation. Mccappin waved off the query. “Why aren’t you drunk?” he asked, recommending pints of Guinness as a good antidote to Hayes’s early-morning sobriety. Hayes returned to Tokyo without a hard sense—or any sense at all—of what was happening with Cleary Gottlieb’s own fishing expedition.
By the end of the month, Hayes had spent what seemed like an eternity—at least eight hours, by his count—over the course of three or four meetings with the lawyers. Wanting to show that he was being helpful and had nothing to hide, he had agreed to hand over his personal cell phone records—a surprisingly complicated task that entailed him and Tighe going to a cell phone store and explaining in broken Japanese that they needed a printout listing all his calls and texts. He told Farr to stop communicating with him about Libor in writing. Tighe once again ordered him to get a lawyer. Hayes once again refused. And once again, they fought. This time, though, Tighe issued an ultimatum: He could either hire a lawyer or write a formal letter to Citigroup documenting his concerns about the investigation. At least that would create a contemporaneous record of his grievances. If Hayes wouldn’t do one of those two things, Tighe said, she would stop talking to him.
The threat worked, although Tighe had to do the work herself. She had quit her job and was preparing to head back to London in early September; she expected to return to Japan after the wedding and honeymoon and spend the following year as a full-time student mastering Japanese. Taking a break from wedding planning, she drafted two lawyerly e-mails for Hayes to send to Cecere asserting that he hadn’t broken any rules. Tighe labored over the correspondence, printing out and revising drafts. She authorized Hayes to make minor tweaks but insisted that he let her review them before they were sent. On the back of one copy, she scribbled notes detailing the choreography of the first dance at their wedding, as planned by their dance instructor: foxtrot, promenade, waltz, swing, marching for four counts.
The first missive, sent August 20, protested that Hayes was being treated like a suspect. “I have felt as though perhaps I am being accused of doing
something wrong, although frankly I am not sure whether that is the case or not and, if it is the case, I am not sure exactly what I am being accused of,” he wrote. Cecere promised to forward the note up the chain of command. The second e-mail, sent nine days later, protested that Hayes hadn’t received a response to his first letter. And he complained that a Citigroup employee had come to collect information from him under false pretenses, claiming it was needed for auditors, not the lawyers. “I am now considering making a formal complaint since it appears that my previous e-mail has fallen on deaf ears,” Hayes wrote.
Though he didn’t mention it in his notes, Hayes had noticed that he was no longer able to access certain websites at work and couldn’t e-mail attachments to people outside Citigroup. He told himself it probably was just a glitch in the system.
* * *
Around 11 a.m. on September 6, Hayes was at his desk trading. It was a hot day, with temperatures in the low 90s, and a stiff wind didn’t do much to cool the broiling city. Hayes was sitting at his desk in an ill-fitting Tullett Prebon polo shirt when Mccappin’s assistant, Kevin Green, tapped him on his shoulder. “Can I have a word with you?” he asked, beckoning. Hayes grumbled that he didn’t want to leave his desk, but reluctantly got up. He figured it was yet another interview with the lawyers, and he started walking to the elevators so he could go down to the same conference room they’d been using. Green instead directed him into an austere, windowless meeting room on the eighth floor. Hayes still thought it was a normal interview—after all, only minutes earlier, he’d been placing bets with Citigroup’s money.
As soon as he entered the meeting room, though, he realized this was something different. Mccappin was there. So was Morton, who had flown in from London. A couple of lawyers and human resources officials were crowded in, too. Hayes’s adrenaline pumped.
Mccappin got things started. This was a formal meeting, not a debating forum, he declared. Citigroup had completed its internal investigation and concluded that Hayes had attempted to manipulate Libor and Tibor. He might have violated multiple Japanese laws in the process. All of this was grounds for Citigroup to fire Hayes, Mccappin said—and that was what the bank intended to do. An HR official handed Hayes a typed letter, signed by Mccappin. “Such conduct is in clear violation of provisions of the Citi Code of Conduct, resulting in the potential for serious regulatory or reputational harm to . . . the entire Citigroup organization,” Mccappin read aloud, without looking up. “Moreover, we regret that you did not cooperate fully with Citigroup’s internal investigation into your conduct. The foregoing constitutes clear grounds for punitive termination.”