by David Enrich
When you got down to it, everyone who had been part of the effort to manipulate Libor—Hayes, Pieri, Farr, Read, Alykulov, Goodman, Cecere, and on and on, even UBS itself—was a trader, no matter their particular place in the market. Hayes had been odd and abusive, but it had been worth tolerating because everyone was getting paid well. Morals were never part of the equation. Feeling sorry for the loser on the other side of your winning trade was career poison. And so now, too, it was time to trade, to come out ahead, to find the weak one—the muppet—and grind him into dust. There was no need for a group meeting, a halftime huddle: Those who had worked with Hayes knew that just as he’d been the key to the vault, he was now the key to a very different door. If someone was going down, UBS had to make sure it was Tom Hayes. And if Tom Hayes was going down, everyone who had worked with him had to do whatever he could to make sure Hayes fell alone. The good thing was that there was at least a little truth in the lie: Hayes had, in fact, been central to much of the Libor-skewing effort. But no orchestra is made up of a single musician.
Hayes, Alykulov told the Justice investigators, had orchestrated the whole thing. What about current UBS employees and executives? Alykulov downplayed their involvement. Hayes, he made clear, was the mastermind.
* * *
Back in London, Tighe was a couple of months pregnant; the baby was due in October. Between severe morning sickness and doctors’ appointments and her decision that they needed to move—the Sugar House flat wasn’t child-friendly, nor was the surrounding urban grit—their lives were hectic but on track. They started shopping for a house in London’s exurbs.
One day in March, Hayes received a Facebook message from Alykulov: “We need to talk.” He said the Justice Department wanted to speak with him and that he wanted to get Hayes’s advice on what to do. Hayes still hadn’t spoken to any regulators, and he was eager for any scraps of information he could pick up about the course of the U.S. investigations. He sent Alykulov his cell phone number. A couple of days later, on a mild, damp afternoon, Hayes and Tighe were in the prenatal wing of London’s University College Hospital, a sleek, modern building with green-tinted windows. They were there for Tighe’s twelve-week scan, a crucial exam that would show if the fetus had any serious abnormalities or health problems. As a midwife moved an ultrasound wand over Tighe’s growing midsection, Hayes’s cell phone rang with a call from a number he didn’t recognize and that didn’t appear to be from England or Japan. While Tighe lay there, anxious, Hayes stood up, walked out of the room, and answered the phone.
It was Alykulov, who said he was calling from Kazakhstan—hence the long, strange phone number on Hayes’s screen. As Muyskens had promised, Alykulov had been granted a nonprosecution agreement that stated that Justice wouldn’t go after him as long as he cooperated fully. The FBI agents initially had tried to convince Alykulov that they hadn’t been able to track down Hayes’s phone number. He’d be doing everyone a big favor by reaching out to his former boss over Facebook to establish contact, the investigators said; the sooner they got in touch with Hayes, the better it would be for him. One thing led to another, and on this day, Alykulov was sitting in his lawyer’s office in Washington. FBI agents had devised an elaborate system to make it look like the call was coming from Alykulov’s native country. Audio of the call was being recorded and piped live into a room at the Bond Building, where prosecutors and FBI agents sat around a conference table listening. They had prepared a list of questions for Alykulov to ask Hayes, hoping to get his former mentor to acknowledge that what he’d been doing was wrong or to make some other sort of incriminating statement—perhaps encouraging Alykulov to lie or destroy evidence.
Alykulov—trying to fight back a debilitating sense of anxiety and betrayal—started the call by repeating what he’d said in the Facebook message: Justice wanted to schedule an interview. “Should I talk to them? What should I tell them?”
“The U.S. Department of Justice, mate, you know, they’re like . . . the dudes who, you know . . . put people in jail,” Hayes answered. “Why the hell would you want to talk to them?”
Her ultrasound finished, Tighe walked into the prenatal wing’s waiting room, its walls covered with posters featuring cherubic babies and signs barring phone calls. Hayes was pacing and talking on his cell. Tighe could tell from his expression—his whole face was screwed up in a confused, agitated look—that something strange was going on.
Alykulov had just mentioned that he had printed out e-mails in which Hayes had asked his subordinate to help move Libor. “What should I do with them?” he asked.
“Why are you printing e-mails?” Hayes asked, furrowing his brow.
Tighe started listening carefully to his end of the conversation. They were clearly talking about Libor and the Justice Department. She motioned for him to get off the phone; when that failed, she whispered, urgently, for him to tell Alykulov not to destroy evidence or to lie. If this was a trap, she didn’t want her naïve husband stumbling right into it. Hayes complied, then asked Alykulov whether the Justice Department wanted to talk to him. Alykulov, his adrenaline surging, said he didn’t know. Hayes, growing apprehensive about Alykulov’s carefully worded queries and nervous tone, asked whether he was recording the call.
“I did this, too,” Alykulov said. “Why would I record it?”
With Hayes still on the phone, Tighe took an elevator downstairs to collect the test results that would show whether the fetus was at risk of Down syndrome. She couldn’t believe she was going through this alone. The results showed virtually no risk of the syndrome. Angry despite the good news, she rode the elevator back up and found Hayes still on the phone. He was in the process of telling Alykulov to just blame his managers. “That’s what I’m going to do,” Hayes said.
At the Bond Building, FBI agents thought that Hayes’s suggestion that Alykulov shouldn’t talk to the investigators might be enough for an obstruction-of-justice charge. A couple of days later, though, they decided to take another shot, hoping for cleaner evidence. Hayes was finishing up lunch at the Cuckfield pub in East London with his stepbrother Ben O’Leary, who worked at a nearby hospital, when his phone rang. The Cuckfield, housed in a nineteenth-century stone inn, had a beer garden in the back, and Hayes stood there in the early-afternoon sunshine. Alykulov asked what struck him as a series of leading questions. “Should I tell them about your friend at RBS?” Alykulov wondered.
“Brent? What’s he got to do with it?” Hayes asked.
“Should I tell them about your friend at Deutsche?”
“Well, I wouldn’t mention it,” Hayes said, “but if they ask, you should tell them.” In any case, he added, everything was done in writing, so it wasn’t much of a secret.
* * *
In 1986, in response to what became known as the Roskill Report, the British Parliament created the Serious Fraud Office, consolidating what had been a national patchwork of antifraud forces into one central government body. The report, named for the senior judge who helmed a special committee, had found that “[t]he public no longer believes that the legal system in England and Wales is capable of bringing the perpetrators of serious frauds expeditiously and effectively to book” and that “the overwhelming weight of the evidence laid before us suggests that the public is right. In relation to such crimes, and to the skillful and determined criminals who commit them, the present legal system is archaic, cumbersome and unreliable.” The newly launched SFO’s mandate was to investigate and prosecute complex, large-scale fraud and corruption cases—attacking the stock swindlers, bribery schemes, and manipulative practices that were rife in the City at the same time that Margaret Thatcher’s government was encouraging middle-class people to invest their savings in the market. Housed in a run-down office building on an out of-the-way street north of the City, the SFO got off to a fast start; its probe into the 1991 collapse of the Bank of Credit and Commerce International resulted in the convictions of several bank executives. But by the 2000s, the agency’s statistic
s were looking soft: Each year, it prosecuted perhaps two dozen individuals, most of them relatively small-time offenders, notwithstanding the agency’s goal of going after only the highest-level criminals. The agency was dogged by internal scandals, doling out lucrative severance packages to ousted employees and spending a small fortune for its chief executive to travel back and forth between London and her home in England’s Lake District.
Perhaps worst of all, high-profile investigations faltered in sometimes spectacular fashion. In 2006, for example, facing intense diplomatic and political pressure not to offend an important British ally, the agency abandoned its investigation into whether British arms manufacturer BAE Systems had bribed Saudi Arabian officials for lucrative military contracts. (The continued investigation “would have been devastating for our relationship with an important country,” Prime Minister Tony Blair explained.) And at dawn one morning in March 2011, the SFO and police forces raided a series of residences and arrested two well-known property tycoons, the brothers Robert and Vincent Tchenguiz. The arrests, part of an investigation into the collapsed Icelandic bank Kaupthing, were probably the SFO’s highest-profile actions ever—and they quickly became its biggest embarrassment. The SFO eventually dropped the case, admitting it had misinterpreted evidence involving the Tchenguiz brothers. For its troubles, the agency became known in some quarters as the Seriously Flawed Office, and the government drew up plans to strip it of much of its funding.
Despite its woeful reputation, if you worked for an entity that was pursuing fraud investigations involving British culprits or victims, the SFO was a crucial way station: Protocol dictated that you at least check in with the agency. So in May 2011, two months after the Tchenguiz arrests, an official at the United Kingdom’s antitrust enforcer, the Office of Fair Trading, contacted the SFO. The antitrust agency had been looking into Libor manipulation since the prior December, when UBS had showed up, out of the blue, to turn itself in. Over the next several months, UBS employees had provided testimony and evidence to help the OFT build a case—similar to the processes going on in other world capitals. Now, the OFT wondered, would the SFO be interested in joining forces to bring the investigation across the finish line? Following a preliminary phone call, the OFT mailed over a dossier of evidence, forming what it thought was the backbone of a promising fraud case—exactly the type of investigation the SFO was designed to tackle and one in which much of the investigative legwork already had been completed. The SFO took the matter to its executive board. The response eventually came back: “At this time the SFO cannot commit to using their resources on this case.” Its tail between its legs, the underfunded agency was trying to reorient itself toward simpler cases.
Robertson Park at the Justice Department had a similar conversation with the SFO that spring. He informed his London counterpart that Washington had in its sights a British citizen who looked increasingly like the ringleader of the Libor scandal. Would the SFO care to get involved? No thanks, came the immediate response. Park hung up, puzzled by the agency’s indifference. Shouldn’t they be clamoring for a piece of the action?
* * *
On May 9, Terry Farr was invited into a meeting room at RP Martin. Only a few weeks earlier, he had called Hayes to check in, and the pair made plans to catch up over beers. But when the appointed date came, Hayes backed out; he had a doctor’s appointment. They rescheduled. The next time, Farr had to cancel when a client asked to get drinks. They never managed to meet up. It was too bad, because Farr had been eager to hear more about how Hayes had handled Citigroup’s internal investigation. As word of Hayes’s downfall and the intensifying government investigations had spread, RP Martin had opened its own review into the matter. Mustard’s hated compliance squad dubbed it Project Green and, with the help of outside lawyers, collected volumes of chat transcripts, e-mails, and recordings of phone calls. When Farr arrived at the meeting that May morning, he was asked to describe his twelve-year employment history at RP Martin. He told the lawyers about how he’d first met Hayes, who was looking for a junior broker to mold. Farr downplayed the importance of the relationship. They only met every eighteen months or so in Tokyo, he said. He didn’t mention that they’d spoken every day for years. Then the meeting was over—there was nothing more to it. Jim Gilmour was brought into a similar meeting the same day, with the same result: nothing.
Two months later, in mid-July, Farr was called in for another meeting. This time he was briefed on the broadening scope of the brokerage’s internal investigation, which was examining possible violations of antitrust and other laws. Farr was informed that RP Martin had been contacted by the CFTC, the European Commission, and Canadian regulators. The firm’s internal searches had turned up an overwhelming amount of material that was of interest to the regulators and that Farr hadn’t bothered to mention in his previous meeting. RP Martin’s lawyers laid out two options: He could switch into another job—something far away from the yen desk—or he could be suspended but still collect paychecks. Neither option sounded disastrous. Farr decided to go on paid leave. Then, for the next six months, nothing seemed to happen.
* * *
A few other dominoes began to fall. At RBS, Paul White and Neil Danziger were suspended after the company turned up troves of embarrassing—and potentially incriminating—communications in an internal investigation that it named Project Zen.
An investigation got under way at ICAP, too. In September, Wilkinson was on vacation when Frits Vogels, the manager in London, called. He told Wilkinson to cut his vacation short and get back to meet with the firm’s lawyers.
Around that time, violent riots were engulfing large swaths of London. Protesters vented their rage about police abuses by torching and looting businesses. “I can’t believe it,” Read e-mailed Wilkinson. “I’m here in Wellington looking at London burning.”
“The end is nigh,” Wilkinson responded. The men wouldn’t speak again for years.
* * *
Kweku Adoboli, who attended the University of Nottingham at the same time as Hayes and then joined UBS as a summer intern, had climbed through the bank’s ranks. Despite starting in the unglamorous “back office,” where he earned a paltry £33,000 salary (roughly $60,000), the cheerful and charismatic Ghana native had managed to scratch his way up to an actual trading job in London. By 2010, the thirty-year-old had been promoted to the rank of director, his salary had jumped to £110,000, and he was on track to pocket a handsome £250,000 bonus. But the next summer, his career started to unravel. Every trade he executed, every market prediction he made, turned out dead wrong. His weren’t the only positions that were curdling; his entire team was losing money. Rather than wave a white flag, Adoboli concocted an elaborate cheating scheme. He took advantage of UBS’s rickety compliance and risk management systems and entered fake offsetting trades into the bank’s computer systems to conceal the fact that his risk levels were soaring to out-of-control heights. At first, the ploy worked: It bought him and his colleagues some time, and they managed to make up most of the money they’d been hemorrhaging. But then the bleeding resumed, and this time there was nothing Adoboli could do to stanch it. By August they were staring at a $3 billion loss. “We need a miracle,” he posted on Facebook.
The miracle never came. On a Monday afternoon, he gathered his team at a bar across the street from UBS’s offices and told them he was prepared to take the fall. He went home and e-mailed his bosses, confessing what he’d done. Then he returned to the office and explained the mechanics of his scheme. Late that night, UBS called the police, who came to arrest him and hauled him off to prison. UBS announced a few days later that Adoboli’s trading had cost the bank $2.3 billion. The next week, as questions swirled about how UBS management possibly could have failed to notice such massive and problematic trading, the bank’s CEO, Oswald Grübel, handed in his resignation. For a second time, UBS got to work arming investigators with evidence against an employee, casting him as a lone, rogue operator inside an otherwise law-abi
ding company.
At his trial, Adoboli pleaded not guilty to the criminal charges of fraud. In a drab brick courthouse on the south bank of the River Thames, the prosecution painted him as a greedy, reckless fraudster whose selfish actions had cost UBS shareholders billions of dollars. Adoboli’s defense was that he was a scapegoat for the bank’s out-of-control, risk-crazed culture. He had learned everything he knew from UBS—including the ways to navigate around the bank’s haphazard internal checks and balances—and everyone knew exactly what he was doing. Indeed, other UBS employees had referred openly in e-mails and electronic chats to his fraudulent strategy. Some colleagues had participated. The jury didn’t buy it. He was convicted and sentenced to seven years in prison.
* * *
With Tighe’s due date only a few weeks out, Hayes continued his tradition of attending every Queens Park Rangers game, home and away. She had been frustrated with Hayes’s conduct throughout her pregnancy. He hadn’t been very sympathetic when she was largely bedridden in the first trimester, and now he wasn’t showing any indications of adapting to their soon-to-change life. Was he oblivious or did he not care?
Baby Joshua arrived shortly after 11 p.m. on October 7, 2011. The lovestruck parents nicknamed their cuddly newborn “Mr. Marsupial,” which was eventually shortened to “Mr. Sups” and, finally, “Supy.” Hayes dressed Joshua in soccer gear. “QPR fan, just like Daddy,” Tighe captioned a photo on Facebook when the baby was two weeks old. That was sweet, but the exhausted Tighe was less pleased when, two weeks later, Hayes announced that he was going on a road trip to watch QPR play. “You just don’t get it!” she shouted.