The Spider Network

by David Enrich

  But when presented with e-mail after e-mail that seemed to show Thursfield himself taking Libor-moving instructions from traders—in the period before Hayes had arrived at Citigroup—he rattled off excuses. “I have chosen my words poorly here,” he said to explain one statement. “This e-mail reflects a poor choice of words on my part,” he conceded in relation to another note. “This was a flippant remark of mine,” he said about yet another e-mail where he suggested getting Barclays to lower its rates. When shown other e-mails where Citigroup colleagues explained their plans to manipulate Libor, Thursfield insisted he didn’t know what they were talking about.

  * * *

  The judge assigned to Hayes’s case was a former semiprofessional rugby player named Jeremy Cooke. He was a longtime trial lawyer, bespectacled and with bushy eyebrows and brown hair punctuated by white sideburns. He had joined the bench in 2001, the same year he was knighted. A member of a socially conservative Christian lawyers’ group, he had ruffled feathers in the past by sentencing a woman to eight years in prison for performing her own late-term abortion.

  After months of reviewing evidence and mediating lawyers’ pretrial jousting, Cooke was pretty sure Hayes was guilty. Most of the defense’s maneuvers to get the case dismissed or delayed or redefined struck him as a waste of time. The trial already had been pushed back to spring 2015, and Cooke was determined to get it wrapped up before the court shut down for that year’s August recess.

  Carter-Stephenson tried to get the case tossed on an important technicality: Only in the wake of the Barclays settlement had Parliament passed a law officially outlawing the manipulation of benchmarks like Libor, and that didn’t apply retroactively. Plus, the conspiracy-to-defraud charges against Hayes hinged on the notion that he had intended to defraud third parties. Well, who exactly were those third parties, and how were they actually defrauded? The SFO hadn’t presented evidence that identified victims.

  Hayes’s lawyers also decided to seek Cooke’s recusal, citing comments he’d made in court about the case being “open-and-shut” and his repeated references to Hayes as a “gambler.” But in one motion after another, the judge ruled for the Crown (as the prosecution is known in British courts). Cooke, presumably not thrilled by the efforts to oust him, stayed on the case.

  * * *

  On an unseasonably warm September afternoon, Farr arrived at Canary Wharf to meet one more time with the regulator that, until recently, had been called the FSA. While the agency occupied the same skyscraper, with the same ferocious owl sculpture guarding the lobby, it had been rechristened the Financial Conduct Authority—part of a government effort to wipe away, once and for all, the old agency’s stained reputation. Farr’s former employer had undergone changes, too. The Libor investigation had put RP Martin’s future in peril; it was sold to its larger rival, BGC. Caplin was removed from power. The FCA fined the former CEO £225,000 and banned him from ever again holding a senior financial job in the United Kingdom, accusing him of presiding over a corrupt, lawless culture. Farr, meanwhile, had sold all but one of his motorcycles, including his two beloved Ducatis. He got a temporary job chopping down trees and selling them at a local market. His life was in turmoil, but at least he had managed to maintain a sense of humor. He joked that his new open-air job was a good use of his “market” skills. To handle some of his legal communications, he registered an e-mail address with the username “terrysinapickle.”

  Two years earlier, when the FSA last interviewed Farr, he had said he rarely spent time or money entertaining Hayes. But in their subsequent digging, the investigators had found heaps of receipts Farr had submitted for wining and dining his prized client. Why hadn’t Farr mentioned these years ago? Well, technically, it was true that he didn’t go out much with Hayes. Instead, the trader would send Farr receipts from his nights out in Tokyo or London, and the broker would submit those through RP Martin’s expense accounting system and then reimburse Hayes, transferring money directly into his bank account. “We’d give him money back like that,” Farr explained.

  “And that was common practice for you to do that?” Patrick Meaney asked, stunned by the firm’s lackadaisical attitude to what looked like borderline bribery.

  “Yes,” Farr said. Meaney showed him two receipts from a Four Seasons resort, from Hayes and Tighe’s trip to Thailand in May 2009. Then Meaney played a recording of a phone call in which Hayes agreed to take the other side of one of Danziger’s switch trades.

  “Was this a quid pro quo?” Meaney asked.

  “What do you mean, ‘pro quo’?”

  “That he was giving you something in return. So in return for you paying for his hotel accommodation in Thailand, he’s agreeing to do a switch trade for you to give you brokerage?”

  “I can’t remember actually him saying that, but, I mean, it writes like that there,” Farr answered.

  * * *

  Through it all, Hayes foraged for different ways to scratch his trader’s itch. A friend who worked at an online gambling company had alerted him to a loophole in the fine print of a rival, CaesarsBingo.com. Caesars, like other gambling websites, offered customers an automatic bonus when they deposited money in their accounts. If you deposited $200, you got a $400 bonus—a total of $600 would be in your account. For every dollar you gambled, the odds were that you’d get about 60 cents back. Normally, those would seem like losing odds. But if you gambled the entire $600 at once, you could expect to recoup at least $360—a quick $160 profit above the $200 you’d deposited. If that sounded too good to be true, it usually was: Most gambling sites required that customers place a minimum number of bets, at least a few rounds, with their bonus cash. Through sheer probability, that requirement would ensure that the bonus cash and much of the principal got whittled down. But Caesars had forgotten to require customers to place a minimum number of bets.

  So Hayes opened accounts, put money in, received the bonus cash, gambled the whole pot, then withdrew whatever was left—always more than his initial deposit. He scouted the terms of other gambling sites and found a few with similar errors and got to work exploiting those, too. (He gleefully spread the word among friends and family.)

  Joshua, meanwhile, had become obsessed with the Disney Pixar film Cars. Searching online, Hayes discovered a vigorous market to buy and sell the toy cars associated with the movie. Hayes calculated that he could buy a bunch of the cars in bulk for a price that worked out to less than $1 per car. That bundle would generally include one or two especially sought-after toys that could sometimes fetch more than $20 apiece from avid collectors. He could resell the pricey cars and make all his money back, while keeping all the leftovers. But he overcame his impulse to try to exploit the inefficient market, reminding himself that he had more important, if less enjoyable, things to worry about.

  Tighe had concluded that Carter-Stephenson was botching courtroom arguments and feared that he wanted to go to trial mainly to burnish his own reputation; she ultimately convinced her husband to ditch the famous lawyer. His replacement was a slight, mild-mannered barrister named Neil Hawes, who had a background in fraud and finance cases. He lacked Carter-Stephenson’s bombast but possessed a quiet, reassuring confidence.

  Under Tighe’s tutelage, Hayes had made progress at acting more normal. It was hard work; whenever Hayes interacted with other people, including his wife, he had to adhere to rules that he and Tighe had formulated beforehand. (Among them: He needed to ask her each evening how her day had been.) Hayes generally had managed to comply, but it never became automatic. Now, under pressure, he was relapsing. He started pelting acquaintances and strangers alike with information about Libor and why the case against him was a waste of taxpayer money. At dinner parties, he grew agitated as he talked about the injustice of his plight; Tighe’s efforts to redirect conversations rarely worked. They eventually stopped going out. Some friends no longer returned their phone calls.

  Tighe found it torturous to think about her husband’s predicament without a drink in he
r hand. The recycling bin in their driveway overflowed with wine and beer bottles. (Inside, the kitchen counter was jammed with full wine bottles—a reflection not only of Tighe’s prodigious drinking but also of Hayes’s penchant for buying in bulk.)

  She tried to stage-manage her husband’s approaching moment in the spotlight. In the car one morning, the couple discussed how to deal with the fact that, despite all their tribulations, they remained wealthy, especially compared to the jurors, drawn from London’s mostly working-class Southwark area, who would be hearing Hayes’s case. He kept insisting that he had sacrificed greater riches out of loyalty to UBS; Tighe explained over and over that a jury would not care. He had still earned millions. Nothing was easy: She instructed him to buy a court-appropriate wardrobe; he bought secondhand Armani and Hugo Boss trousers and dress shirts and sweaters on eBay. She persuaded him to get a professional haircut, rather than leaving the task to his mother, in exchange for doing a week of his chores around the house.

  Tighe prepped him on how to act during the trial, counseling against his tendency to roll his eyes, and sent him to a personal coach to train him to control his temper, speak slowly, and make eye contact. At a pretrial hearing in April, Cooke ruled that the defense team wouldn’t get access to certain additional documents it was seeking. Hayes jumped out of his chair and angrily pointed his finger at the judge. His lawyers struggled to calm him down. Afterward, he went out for fried chicken and a drink with his high school friend David Brown—the same guy who had watched Hayes studying pub slot machines decades earlier. The bar they went to had a two-for-one deal on cocktails. Unable to resist a bargain, Hayes angrily downed one after another. By the time he got home late that night, he was drunkenly ranting about Cooke. He couldn’t sleep, so he popped a sleeping pill. It didn’t work. He lay awake, slowly sobering up, miserable.

  * * *

  Brent Davies had converted his success in the Vikings series to other acting work. His latest job was playing a fighter in the seventh Star Wars movie, The Force Awakens. It was being filmed at Pinewood Studios, which occupied a sprawling lot in the middle of a huge park west of London. Between scenes, Davies wandered around in his elaborate costume. Sometimes he called his lawyers and had to be reminded to remove his helmet so they could hear what he was saying. Davies was earning more as an actor than he had as a broker; he was also having more fun. (His lawyers took to joking about whether he’d be allowed to wear chain mail into court.)

  After being fired in the summer of 2013, Danny Wilkinson also had found an entertaining diversion, rekindling his career as a DJ. Under the stage name Emperor Constantine, he was part of an electronic group called Hellsinki-V. They scored gigs at trendy clubs and a summer music festival, got a weekly late-night slot on a community radio station, and started producing amateur music videos. Costumed in white lab coats, flimsy 3-D glasses, and bulky headphones, Wilkinson and his bandmates bounced around the stage, waving their arms and dancing, while the audience throbbed along with the music. For some, times were good. Not for Hayes.

  * * *

  One afternoon, a respected London psychologist, Alison Beck, interviewed Hayes at his lawyers’ offices. Part of the defense strategy was to argue that Hayes’s odd personality helped explain his professional behavior. In the interview, Hayes was his normal, manic self, plowing through minutiae about his old job and the legal case before Beck even had a chance to introduce herself. Listening to Hayes jabbering, Beck quickly concluded that he viewed the world in a very particular and peculiar manner. Human interactions were reduced to digits, with no room for nuance or subtlety. If Hayes trusted someone, for example, he gave that person unconditional, unquestioning loyalty, even if there were obvious reasons to be wary. At one point, Beck asked why he didn’t want to testify against his former colleagues. They’re my friends, Hayes responded. “Which of them have come out to support you?” she asked. Deep down, Hayes knew she was right. And yet . . .

  Beck’s diagnosis confirmed what many had informally surmised over the years: Hayes had “a relatively mild form” of Asperger’s syndrome. She wrote:

  Mr Hayes does not perceive the world as people without Asperger’s Syndrome do. . . . It is consistent with a diagnosis of AS that if manipulation of Libor existed both before and after Mr Hayes’ employment in the market, then he is likely to have simply regarded it as acceptable practice. . . . People without AS might recognise the moral grey area of this line of work and might appreciate that excelling in this area would make them vulnerable. . . . [I]n order to function he appears to have needed to believe that his bosses are right because they set the rules. This is a feature of AS. It is also likely to have made him vulnerable to exploitation.

  When Hayes heard the diagnosis, he worried that a jury would dismiss it as contrived to help his case—not an unreasonable concern. But a psychiatrist hired by the defense and a psychologist hired by the prosecution arrived at similar diagnoses.*

  Tighe burst into tears when told about the diagnosis. She had a psychology degree and felt awful that she hadn’t identified the condition earlier. The signs had been there all along. It wasn’t just his “Rain Man” and “Kid Asperger” nicknames. Before showing up at a party, she always had to remind Hayes not to ask people inappropriate things, like how much they earned, or to comment on their weight. His obsession with routine was another: his lucky trousers, socks, pandas, turnstile. These were more than superstitions—they were absolute convictions.

  Emotionally spent, Hayes, Tighe, and Joshua spent the long Easter weekend at a nearby Four Seasons, the same hotel where they’d been married. At dinner on Sunday night in the hotel’s ballroom, they were escorted to a table near the stage. Tighe pointed out that they were sitting only a few feet away from where they had exchanged their wedding vows more than four years ago. How their lives had changed since then, for better and for worse! It was a romantic moment.

  Hayes looked up from the menu. He announced that he had made a discovery: The unit cost of steak, as measured by grams of meat, was slightly cheaper if they ordered individual portions instead of a two-person serving. Tighe gaped at him in disbelief.

  * * *

  Tighe felt that the whole world had turned against her and her family. One Saturday night in April they attended a friend’s wedding in London. Hayes stood around the outskirts of the party, wondering which of the guests realized that he was an accused criminal. Toward the end, Tighe bumped into an ex-boyfriend who mentioned Hayes and his apparent guilt. Tighe leapt to her husband’s defense. The disagreement quickly escalated into a loud, drunken fight. Tighe was in a fury. The pair had to be separated forcibly.

  As pretrial rulings consistently went against the defense, the trained lawyer in Tighe was coming to terms with the increasing odds that her husband would be convicted. Maybe, she thought to herself, Hayes shouldn’t have gone to such lengths to avoid extradition to the United States in the first place. (Fulcrum’s advice to cooperate fully, and admit guilt, wasn’t looking quite so wise.) She started considering what she would do if her husband was locked up. Feeling betrayed by her country, she scoped out living arrangements and a nursery in Tokyo, where she still had friends. She toyed with a job prospect in Abu Dhabi. She worried that she would skid into a dark, angry depression if she remained in England. Then she reconsidered; she couldn’t abandon Hayes.

  Increasingly, she was paranoid. One day, she was standing outside her office having a cigarette—a bad habit she had recently resumed in order to deal with the stress. A silver Mercedes stopped at a traffic light. A man in the backseat seemed to be pointing his long-lensed camera right at her. Tighe couldn’t quite put her finger on why someone would be photographing her, but she was convinced it was part of a conspiracy. Maybe the SFO was trying to intimidate her?

  Hayes chain-smoked. His hair grayed. He had vivid, bizarre dreams. In one, he was running a KFC franchise and showed up to cook himself some fried chicken. At first, he couldn’t get the fryers to work. Then customers notice
d the restaurant was open and they streamed in. Hayes realized there wasn’t any chicken, anywhere. There was only beef stroganoff. He awoke in a panic. In a different nightmare, he flunked professional tests that his rivals passed. Another time, he dreamed that he returned to work and that everything was back to normal. Nobody cared about Libor. This time, he woke to the crushing realization that it was only a dream.

  The couple strategized about what they would tell Joshua if Hayes was convicted. They decided on a white lie: Daddy was away at work for the next few years, like a soldier on an overseas assignment. Tighe envisioned a large photo of Hayes hanging in their home. Each night, she and Joshua would wish the portrait good night.

  * * *

  UBS had fired Pete the Greek before he could land a job at a competitor, and things had gone downhill for him from there. As the FCA trawled through internal chats and e-mails from UBS and other banks, the agency encountered the plentiful instances in which he schemed with his colleagues to get Libor adjusted for the benefit of his trading positions. The regulator banned him from performing any influential role in the British financial industry because he “was dishonest and lacked integrity.”

  Pete the Greek’s lawyers appealed the ruling. The FCA had an odd system for handling appeals of this nature: An internal panel called the Regulatory Decisions Committee was empowered to overturn verdicts of the agency’s enforcement division if it found that there was compelling evidence that hadn’t been properly taken into account. In early April, the committee vacated the FCA’s punishment. The crux of the ruling—which was secret due to the confidential nature of the disciplinary process—was that “Mr Koutsogiannis did not behave dishonestly or without integrity in making requests for submissions within what he understood to be an acceptable range.”

  The FCA recognized the potential import of the ruling on Hayes’s defense. A week before the trial was to begin, the agency convened a meeting to decide whether to disclose the ruling to his lawyers. “The sensitivity here is the criminal proceedings and the potential bleed across to other cases,” an FCA official told attendees. They decided to withhold judgment for now on whether the Hayes team needed to know.