The Spider Network

by David Enrich

  The initial relief of being admitted into the SFO’s cooperation program, and the enjoyment he derived from blabbing to the amicable Ball and his SFO teammates, soon gave way to depression and anger. Hayes got heartburn every time he thought about testifying against men like Farr and Read. He couldn’t bear the thought of one day having to tell Joshua that he had admitted to being a criminal. He and Tighe both felt he had been railroaded into cooperating, the victim of America’s overzealous law enforcement system. And the more he explained his tactics to the SFO, the more he convinced himself that he was innocent—or, at least, no guiltier than anyone else. After all, whose fault was it if he did what he’d been told was okay? How could he be blamed if everyone was doing more or less the same thing? This was just the way the system worked.

  He started smoking cigarettes. At home, he spent hours brooding in a cold bath or outside staring at a tree, sometimes in the wee hours of the morning. His sex drive vanished. He stormed around the kitchen, opening and slamming shut cupboard doors. Sometimes Tighe would wake up in the middle of the night and find her husband staring at her. Other times, he questioned whether his life was worthwhile. “I’ll kill myself if you want me to,” he offered. “Would it be better for you?” Once he mentioned the possibility of suicide in front of Joshua. Tighe told friends she took the threats seriously, that he needed to be watched all the time. She pushed Hayes to see a therapist or a psychiatrist who could prescribe antidepressants. He refused.

  Joshua grew increasingly clingy as the family’s stress levels rose. Sometimes he asked why Daddy was so angry or why he had forgotten to feed him or take him to the potty even when he asked again and again. It was becoming clear that Joshua couldn’t be left alone with his father—a problem for many reasons, but especially now as Tighe was returning to work. In April, she made the painful decision to take Joshua and move into her parents’ house. The marriage seemed to be unraveling.

  Tighe checked on Hayes on weekends, and during the week, she dispatched her sister to stop by the Old Rectory. Every day around noon, Emma would stick her head in the door and say hi to her brother-in-law, before getting back in her car and driving away. Nobody said it aloud, but she knew that one of her responsibilities was to make sure Hayes hadn’t hurt himself. She had heard him threaten once to throw himself in front of an oncoming subway train, though she grimly figured he was more likely to commit suicide at home. Without telling her sister, Emma researched online how to rescue, or at least detach, someone who had hung himself. When she walked in the door each day, she worried whether she would have to put her new knowledge to use.

  All the while, Hayes kept trekking into London to talk to the SFO. On May 21, sitting in one of the closetlike interview rooms, he learned that his so-called friend Read had long been misleading him. An investigator read aloud an e-mail in which Read told Goodman to “never let him know that you send a physical run-through out. I lie about the levels all the time and it makes our life easier.” Then the agent handed Hayes a printout of the e-mail to see for himself. “Bloody hell,” Hayes stammered. “That’s the first time I’ve seen that.” He grasped for possible explanations for the deception. He couldn’t believe his own naïveté. “Which shows you actually you think that you know everything that’s going on, but quite often you don’t,” he told the SFO.

  The next day, Hayes’s interrogators turned to page 146 of a bundle of documents, a numbered to-do list that had been stored on a shared computer drive at UBS, which a number of managers had access to. Hayes had never seen the document before, but as he examined it, he realized that it was essentially an instruction manual for the bank’s Libor submitters. It showed that the UBS traders who specialized in interest-rate derivatives linked to euros and dollars were in charge of submitting their own Libor data. They didn’t have to go through an intermediary in another department, as Hayes had to do with Darin, in order to tinker with the bank’s Libor submissions. But the real revelation was the explicit instruction to the traders about exactly how to take their derivatives positions into account when setting Libor. It was just so flagrant. “It’s hilarious,” Hayes said. But the humor quickly faded. “You see, this is what winds me up here. Like I’m just like getting hung, drawn and slaughtered by this bank, and then there’s this official document for publishing the Libor rates where they’re just blatant.” Again, everyone was doing it, so why was he being singled out?*

  That evening, Hayes showed up at Tighe’s parents’ house, so worked up he could barely speak. If UBS was officially trying to manipulate Libor, how could his actions be construed as criminal? he sputtered. Hayes e-mailed his lawyers. He said the new evidence made him wonder if he really should be pleading guilty. In the course of the SFO interviews, “I have seen very little to harm me but a large amount to support what I have told you from the beginning that this was just part of doing my job.” After a couple of days with no response, the lawyers proposed meeting to discuss his concerns. Hayes by then had grown discouraged: “I am aware that basically I have little to no option in relation to this.”

  By June, as the interview process entered its final stage, Hayes’s admissions of guilt were growing more equivocal. Asked repeatedly whether he was aware at the time that he was acting dishonestly, he responded: “I was aware of that I was being dishonest, but on a micro scale, on a scale that was not perceptible to people, that was not really influencing the rates, outside of what I would term my permissible range.” This was an important concept, at least to Hayes and some of his former colleagues. Their argument was that because each bank’s data was supposed to be based on what it thought it would cost to borrow money from another bank on any given day, there was no absolute precise rate, but rather a narrow band of numbers, drawn from a variety of information sources, and somewhere within that band probably lay the truth. But picking a specific figure, down to multiple decimal places, was arbitrary. As long as the Libor submitter chose a data point from within that band, it was hard to argue his numbers were technically wrong—not that this represented much ethical justification for what Hayes and his confederates had been doing.

  * * *

  Several days later, Hayes and Jonson returned to the Bishopsgate Police Station, this time for him to be formally charged. To their relief, no reporters or photographers were waiting outside. At 8:25 a.m., a police sergeant read aloud the charges against him: eight counts of conspiracy to defraud, involving his time at UBS and Citigroup. (Because Libor manipulation hadn’t itself been a crime when Hayes was a trader, the SFO turned to the conspiracy-to-defraud statute, which outlawed entering into agreements with the intent of ripping off another party.)

  Hayes and Jonson exited through a back door and decamped to a nearby Starbucks. Hayes blew up, months of frustration boiling over. He berated Jonson about the jail sentence he was likely facing and for allowing him to fall victim to what struck him as a politicized process. (The charges had been filed the day before the parliamentary banking standards commission—convened in the wake of the Barclays settlement a year earlier—was due to release its final report. Among other things, the report recommended stiffened criminal penalties for misconduct. Hayes suspected the timing of his charges was not coincidental.) And to Hayes’s disappointment, unlike the SFO’s earlier draft document, the actual charges didn’t name any of his alleged co-conspirators—only him. Yet the bigger picture was that this was exactly what he had set out to accomplish; now that he had been charged in Britain, the chances of being extradited to the United States receded. He later apologized to Jonson for losing his temper.

  Two days later, Hayes was summoned to an arraignment hearing. It was his first public appearance. Not many people knew what he looked like, so the swarm of photographers outside the London courthouse—eager for a shot of the notorious criminal mastermind—snapped photos of all similarly aged men who entered the building. Hayes showed up wearing khakis and a dark blue button-down shirt, untucked. Standing in the glass-enclosed defendants’ dock, a staple
of British courtrooms, Hayes confirmed his name and address, a new court date was set, and then it was over. It wasn’t yet time for him to enter a plea. He and Jonson walked out together. A horde of photographers and camera crews chased them across a busy street.

  * * *

  One morning that summer, Tighe woke up and couldn’t move her left arm. It was completely frozen. The medical explanation was that calcium deposits in her shoulder joint, built up over many years, had finally reached a tipping point and immobilized her arm. Emma, acting as nurse, thought the real trigger was stress. In any case, how could Tighe juggle a toddler and a job with one arm? She couldn’t. She felt she had no choice but to move back in with her husband.

  Hayes was overjoyed to have her and Joshua back. But things remained bad. One night, Emma slept over. In the middle of the night, she was awoken by the sound of her sister screaming. She raced to the master bedroom, queasily expecting that Hayes had hurt himself. Tighe told her to go back to bed; she had just had a nightmare. Emma suspected that wasn’t the full story. On another summer evening, pacing back and forth in the Old Rectory’s open-plan kitchen, Hayes mentioned the idea of driving the car off a cliff—a common refrain for months now. “I’m going to do it,” he declared.

  Tighe was reaching the end of her tether. “Go on, then,” she snapped.

  Hayes was starting to entertain a radical idea: pleading not guilty and fighting the British charges. He increasingly wanted his day in court. He wanted to be able to tell his son that, even if he ended up in jail, he had never admitted that he was a criminal. And Tighe had given an ultimatum: Either accept his plight or do something about it. If he remained angry, she would divorce him.

  One July night, Hayes couldn’t sleep. He eventually quit trying and, starting around 3 a.m., sent a barrage of stream-of-consciousness text messages to an acquaintance:

  I feel like I am sleepwalking the path of least resistance. I don’t know the odds but I know the truth and I know that I didn’t believe what I was doing was dishonest. In some senses I don’t care if I get a worse punishment at least I went down fighting. I have never denied doing what I did but how can any sane person really think my actions dishonest in my mind given how open and transparent I was in absolutely every regard? I never sought to hide anything ever, was never told I should not be doing it, was never trained, was directly instructed. So many people got paid from the money I made and I am going to jail, it seems so unjust. I did not do anything for personal enrichment. . . . Yes indirectly I would benefit but this was so minor [in] the greater scheme of how much money I made the bank. In short I am not a rogue operator or bad person, I was a 26 year old in a high pressured job looking to do the best I could and now I have society trying to retrospectively apply some sort of moral code, well why don’t they go back to the mid 90’s when this start[ed] whilst I was still at school? . . . The public misconception driven by ignorant press and incompetent regulators seeking to deflect from their own shortcomings is staggering.

  Eight hours later, Jonson met with the SFO investigators again. They were pushing for an ironclad commitment that Hayes would plead guilty. Hayes had told Jonson that he was contemplating fighting the charges. She thought it was an awful idea—he had given eighty-two hours of taped interviews, including countless confessions! “The SFO will crush you,” she cautioned. But in the SFO’s offices, Jonson deflected the investigators’ questions about her client’s intentions. “There is a concern about documents we have not seen so far,” she warned them. She cited e-mails in which Hayes had been instructed to push Libor up or down—e-mails that her client insisted existed but that apparently hadn’t been disclosed to the SFO.

  The agency, in its haste to throw together an open-and-shut case, hadn’t even asked UBS to hand over all documents. “We didn’t want everything in the way the Americans did,” one investigator rationalized. “I’m not reading too much into the fact that UBS have withheld material.”

  * * *

  In July, the SFO filed criminal charges against Farr and Gilmour. The agency assumed Hayes would plead guilty and testify against all of his co-conspirators—with a witness of his caliber, who in their right mind would fight the charges? And that was good, because aside from its endless interviews with Hayes, the SFO hadn’t done a whole lot of investigating over the past year. Not wanting to waste time or money interviewing second-tier witnesses, the agency had even declined offers from lawyers for some of Hayes’s former colleagues who were offering to help—part of an effort to ensure that it was the British authorities, not the Americans, who charged their clients.

  One of the exceptions was Brent Davies. His life had changed dramatically in the two years since ICAP cut him loose. One day he had been walking down the street in London’s suburbs when a film producer for a miniseries about the Vikings spotted him. The hulking, wild-haired Davies looked the part; would he like to be an extra? Why not, Davies figured—it’s not like he had a job. So they suited him up in chain mail and a sword; he fit right in. Now Davies was fishing for more acting work. But the formerly gregarious, charismatic man was stressed and miserable. Nonetheless, in July, he managed to tell his story to the SFO, including how he hadn’t thought anyone would take his Libor-moving requests seriously. At the half-day interview, the SFO hinted that Hayes was pleading guilty and had agreed to testify against his former brokers.

  In August, the SFO started digging into Hayes’s assets, not least the Old Rectory, to see if they should be confiscated as the fruits of his crimes. This shouldn’t have surprised Hayes, but it tipped him into a wild rage. “They are trying to destroy me, but I’ll go down fighting,” he fumed to his lawyers.

  “If you plead not-guilty, prospects of acquittal are reduced,” David Williams cautioned—a bizarre warning, since the chances of acquittal were zero if he pleaded guilty.

  “But I get to say my side of the story,” Hayes shot back.

  “Remember that you are at risk of doubling or tripling your prison sentence,” Jonson said.

  Hayes countered that, if convicted, he didn’t think it was likely he’d end up getting sentenced to more than five years, since “I didn’t take any personal benefit from the situation.”

  For someone who felt such comfort in numbers, he was wildly off—not to mention exercising faulty logic (and incorrectly claiming that he hadn’t benefited). Each of the eight counts he was charged with carried a possible sentence of up to ten years in prison. And it hadn’t fully dawned on Hayes that he was being cast not only as the Libor ringleader but also as a symbol of the darkest tendencies of the entire banking industry. “You’re the scapegoat and so there is a deterrent aspect,” Jonson pointed out. Still, Hayes decided, there could be no guilty plea until the SFO took off the table the threat of seizing his family’s assets. But the SFO was unlikely to take that off the table until he pleaded guilty. It was a stalemate.

  “The trader in me wants to plead guilty,” Hayes told an acquaintance in mid-August. “My gut says fight.” He went with his gut.

  Chapter 17

  The Unit Cost of Steak

  It was a late-August evening, and the setting summer sun cast long shadows across the winding, tree-lined streets in the small English town of Fleet. Barely a month earlier, Hayes had moved there with his family. They had given up on trying to sell the Old Rectory—buyers were scarce, at least at the price Hayes and Tighe were seeking—and so they had settled for renting it out instead. With that desperately needed income, they moved into a four-bedroom rental house with a small backyard. The house was a short drive from Tighe’s parents, so they had easy access to child care when Sarah was at work and Hayes had to meet with his lawyers or appear in court. Hayes also informed their befuddled real estate agent that a key consideration was the house’s proximity to a KFC outlet.

  Driving home, fried chicken and a Fanta resting on the passenger seat of his remaining Mercedes, Hayes approached a four-way intersection and tapped the brakes. His orange soda teetered, and as he lea
ned over to prevent it from tumbling to the floor, he took his eyes off the road. The car rolled through a red light. There was a squeal of brakes, then the smash of metal and glass as Hayes’s vehicle collided with another car. Hayes was shaken up but not seriously injured; nor was the other driver. (The Mercedes didn’t fare so well. Its repair bill would amount to about £15,000.)

  Hayes had been struggling lately to remain focused on the task at hand, as unpleasant as it might be, to not let his mind wander to subjects he preferred, like financial markets or QPR’s next match or his rapidly cooling dinner. Sometimes, though, when his stress levels rose, the world seemed either to descend into slow motion or to accelerate as if life was being fast-forwarded. It was hard to concentrate at times like that. Now a brief lapse in attention had nearly ended in disaster.

  He phoned Tighe from the site of the accident. “I crashed the car,” he reported. She was relieved to hear nobody was hurt. But she couldn’t shake an unsettling thought: Was it really an accident?

  * * *

  On September 25, 2013, the Justice Department filed felony charges against Goodman, Wilkinson, and Read. Aside from Hayes and Darin, the three former brokers were the first people the U.S. government had charged in its five-year investigation, and a posse of powerful American prosecutors once again took to a podium to denounce their actions. Attorney General Holder accused the men of having “undermined the integrity of the global markets. They were supposed to be honest brokers, but instead, they put their own financial interests ahead of that larger responsibility. And as a result, transactions and financial products around the world were compromised, because they were tied to a rate that was distorted due to the brokers’ dishonesty.” The charges were filed in a New York court on the same day that ICAP agreed to pay $87 million to settle the U.S. and British Libor investigations. The deal spared ICAP’s top executives of criticism, notwithstanding David Casterton’s role hammering out the fixed-fee arrangement that authorities now described as corrupt. “I deeply regret and strongly condemn the inexcusable actions of the brokers,” Michael Spencer told reporters, emphasizing that the misbehavior had been confined to a few rogue—and former—employees. (In the United Kingdom, Labour lawmakers called for David Cameron’s Conservative Party to return the nearly £5 million that Spencer had donated. The party kept the money.)