The Spider Network

by David Enrich

  Hawes started the interrogation with a simple question: “Do you accept that you have acted dishonestly?”

  “No, I do not accept that,” Hayes answered. Things soon got more complicated. His nervousness was obvious. Each time Hawes started to ask a question, Hayes cocked his head slightly to the right and pursed his lips. Sometimes he swiveled to the left, in the direction of Tighe, as if trying to pick up cues from her. He went on tangents. A straightforward question prompted him to rattle off a sequence of data about Japanese interest rates in 2010 and how they tended only to move within a narrow range. “Pause for a moment,” Hawes interrupted. “Just slow down.” Asked if his requests to other traders and brokers were effective, Hayes said there was no evidence they had been—there might have been correlations, but that’s not the same as causation. Then he dived into a scientific explanation about the empirical basis for determining cause and effect with control groups. A question that touched on the Bank of England’s efforts to squelch the financial crisis triggered a passionate soliloquy about the central bank’s futility. When Hawes mispronounced the name of French bank BNP Paribas, Hayes corrected him. Tighe cringed and shook her head as her husband’s focus lapsed.

  Then a new problem surfaced. It wasn’t just the pressure of trying to keep his facts straight, to not sound too afflicted, to make eye contact with jurors, to not obsess about the fact that his future was hanging in the balance. Hayes’s toes had started to tingle. By the time the court broke for lunch, his feet were partly numb. A decade earlier, doctors had wondered about whether similar numbness might be an early sign of multiple sclerosis, but when the feeling faded, the episode had been dismissed as a false alarm. But now, at the worst possible moment, here it was again. Maybe the doctors had been mistaken. Tighe told him it was probably stress related or the result of sitting for a long period in an uncomfortable chair. She didn’t entirely believe what she was saying.

  That afternoon, Hayes nonetheless hit the crucial points. He introduced the concept of the permissible range and argued that since he was asking for numbers from within that band, he wasn’t violating the BBA’s definition of Libor. In that case, how could his behavior be construed as dishonest? He also emphasized that Libor was only one part of his overall trading strategy and that, in the middle of the financial crisis, with markets gyrating wildly and banks not lending to each other, the notion that anyone could rig Libor—or that there was even such a thing as an accurate rate—was preposterous.

  That night, Hayes couldn’t sleep. The case racing through his head, he took a sleeping pill. It didn’t work. He swallowed another. Then he started worrying that he was overdosing. The following morning, he was a wired mess. His face was flushed, and his voice had taken on a scratchy tone, as if there was something caught in his throat. Tighe had noticed that sound before, at other times when Hayes was on the brink of unraveling. Now, though, there was nothing she could do. She couldn’t even talk to him about the case.

  With Hayes on the stand, Hawes walked him through dozens of instances of other UBS employees taking into account their trading positions when they set Libor. Many of the examples predated Hayes’s arrival at UBS, and he wasn’t a participant in any of the chats and phone calls. Hayes answered calmly and articulately and came off as credible. Previously skeptical journalists in the audience began to wonder whether the case was slipping away from the SFO.

  The next day—after a strike by London’s Tube workers’ union caused the trial to not start until noon and left Hayes fatigued by travel-related stress—Hawes began grilling his client with questions about his communications with the ICAP brokers. Hayes announced that he couldn’t believe they were having this conversation without any discussion of whether Goodman actually had adjusted his run-throughs in helpful ways. His own analysis suggested that about half the time the run-throughs weren’t beneficial at all. “This lack of analysis, this lack of critical thinking . . . is absolutely typical of how this whole investigation has been carried out, with no reference to numbers,” he erupted. Then Hayes took a breath and pulled himself together. His rant was over. “I’m sorry,” he said, “what was the question?”

  * * *

  In the audience that day were two San Francisco–based lawyers, Joseph Cotchett and Nanci Nishimura. They happened to be in London and figured they would drop by to see the Libor mastermind in person—this was the guy, after all, whose actions were the basis for a series of class-action lawsuits they had filed in 2013 on behalf of several cities, counties, and other public institutions. The litigation was working its way through the federal court system, but it wasn’t going as well as Cotchett and Nishimura had hoped. A judge had sided with the defendants—many of the world’s biggest banks—and found that the plaintiffs lacked standing to bring the antitrust suit. The lawyers were appealing the ruling, but the situation had left them in grouchy moods, convinced that the judicial system was biased in the banks’ favor.

  In court that day, Cotchett was wearing a seersucker jacket, a red, white, and blue shirt, and beige cargo pants. He watched as Hawes presented Hayes with what seemed like one leading question after another. “He’s sitting up there all arrogant,” Cotchett bellowed in the crowded courtroom during a break. “What a disgrace!” He couldn’t believe that Chawla hadn’t loudly objected to more of Hawes’s softball questions.

  When Hayes walked past, Cotchett glared at him, contempt burning in his eyes. Tighe, standing nearby, noticed the large, brash American giving her husband a filthy look. The anger, the disgust, on Cotchett’s face seemed more severe than anything she’d ever seen from even a prosecutor. Tighe did her best to return the death stare. Cotchett and Nishimura were taken aback by the fearsome look. They didn’t know who this tall, blond woman was, but they marveled at the intensity of her stare.

  * * *

  The next day, a Friday, Hayes was back on the stand, and Hawes pushed him increasingly hard. This was the final day of the direct examination, and the lawyer wanted to do as much as possible to blunt the lines of attack that he expected Chawla to deploy in what was sure to be a brutal cross-examination. But Hayes was irritated by his lawyer’s approach, and his answers took on a snarky, sneering tone. By the afternoon, Hayes was becoming emotional, his voice cracking. At one point he tried to explain that since he was the guy responsible for overseeing all of his team’s Libor-dependent trades, he was therefore making requests to benefit everyone’s positions, not just his own. “And now I’m wound up sat here. I wasn’t operating in a vacuum, though.”

  “Are you someone who loses your temper?” Hawes asked.

  “Yeah, I get frustrated, particularly when I care about things,” he said. “I get angry when I feel people aren’t doing their jobs properly. I flip out. I have meltdowns. I get insanely angry. I guess I’m trying to communicate and sometimes I find it hard.” Hawes asked why Hayes had admitted wrongdoing to the SFO. Hayes recalled his near mental breakdown, how he’d been living day to day, how he’d watched his life falling apart, how he’d panicked and felt like he didn’t have a choice. His eyes welled up. The intermediary, sitting next to him on the stand, called for a break. Tighe wiped tears off her face.

  When court resumed a few minutes later, Hawes didn’t let up. Why didn’t Hayes just tell the SFO he didn’t do anything wrong? “I knew what I thought and what I wanted to say, but I knew I couldn’t say it,” he said. He needed to get charged, and to get charged, he needed to admit wrongdoing. “What I wanted to say is, ‘I’ve not done anything, it was just my job, and I’m not dishonest.’” He begged the jury to think about how most people don’t show up to work and consider whether what they’re doing is honest or dishonest. They just do their jobs.

  Hayes bowed his head, his face flushed, his cheeks wet. He dabbed his eyes with a tissue. He kept sobbing on the train ride home. Joshua was sick that weekend. Hayes spent the next two days in bed with his son. Curled up with the boy, he was finally able to sleep.

  * * *

  On Mo
nday morning, Hayes walked into court alone through a drizzle. In the witness box, he propped up the creased photo of Joshua. He was determined to stare at the picture instead of making eye contact with Chawla; that represented his best hope of maintaining his composure.

  “Mr. Hayes, do you regard yourself as an honest man?” the prosecutor began.

  “Yes.”

  “Do you think you as a banker”—Hayes interrupted Chawla to clarify that he was a former banker—“as a former banker have a different understanding of honesty than other people?” Hayes said he didn’t know what other people’s understandings of honesty were.

  The cat-and-mouse game continued. “Do you think it is right to steal?” Chawla asked, his large left hand supporting his chin and the side of his face. Hayes’s mind was in overdrive. He sensed a trap and tried to anticipate what the prosecutor was aiming for, what next question he had in his quiver.

  “‘Steal’ is quite a broad word,” he finally answered. “I might steal a cookie from the table when my wife’s told me that I’m not meant to take one.”

  The grilling continued, as did the defendant’s evasive maneuvers. “Do you accept that it would be wrong to make money by telling lies?” Chawla asked. “Do you need a rule or a regulation to know when something is honest or dishonest?” Hayes, the prosecutor asserted, was cavalier about the truth. He didn’t care about honesty as long as he was getting what he wanted—whether that was making money or being charged by the United Kingdom so that he wouldn’t be extradited. Chawla cycled through each of Hayes’s admissions to the SFO, followed by a simple question: Was that a lie or was that the truth? Hayes struggled to answer.

  “I was not at that time a particularly rational individual,” he spat. “I was looking at a world of bad options. . . . My main concern was whether I was going to be put on a plane to the USA in the next seven days.”

  When Hayes had answered “yes” to the SFO’s question about whether he acted dishonestly, Chawla asked, was that dishonest?

  “That was false,” Hayes conceded.

  “Can you not bring yourself to say ‘lie’?”

  “Well, it was a lie,” Hayes finally said. “It’s disgusting that I was forced into this situation by the United States government.”

  Chawla pounced: “Nobody forced you to rig those rates, did they?” Hayes questioned the use of the word rig. “Nobody forced you to get brokers to rig rates, did they?” the prosecutor repeated. “Nobody forced you to get other bank traders to rig rates, did they?”

  Some of Hayes’s answers strained credibility. His prior admission to the SFO that his agreement with Guillaume Adolph was dishonest wasn’t what it seemed, he now insisted. He was only trying to tell the SFO that the pact was more dishonest than his previous arrangements with others, not that it was actually dishonest. Cooke smirked.

  “Was this all a dishonest charade involving you and your lawyer?” Chawla asked.

  “This was a means to an end,” Hayes answered. “It was me answering questions in a way to optimize my chances of getting charged without regard to my real opinion.” Anyway, Hayes ventured, what did Chawla mean by charade? “My idea of charades is of a game played at Christmas involving books and films,” he deadpanned. Nobody smiled.

  * * *

  For such a long, hard-fought trial, there were surprisingly few facts in contention. Everyone agreed that Hayes had peppered dozens of people with hundreds if not thousands of requests to move Libor in advantageous ways. Nobody disputed that Hayes used switch trades to thank the brokers. There was even agreement that Hayes’s bosses knew about and condoned what he was doing and that countless other traders were doing more or less the same thing.

  The key question was whether Hayes had acted honestly. And his success at establishing that all-important credibility was at best mixed.

  “I don’t know what the outcome is going to be here,” Hayes said in his last words on the stand. “But I know in my heart I did the right thing and I won’t have that same life sentence” as if he had pleaded guilty. The judge thanked him. He returned to his seat. Sandy smiled as he walked past.

  That night, a Friday, Hayes took a bath, drank a glass of orange juice, and passed out. The trial was nearing an end. He and Tighe knew it might be one of their last weekends as a family for a long time. They spent Saturday at a small music festival near their home. Joshua’s preschool friends came for a picnic. Long into the evening, they sat on the village green, the kids playing with dinosaurs and the grown-ups chatting. Hayes seemed content. He managed not to talk much about his ordeal. By the end of the weekend, the last of the numbness in his feet had faded away.

  * * *

  The barristers’ closing statements followed predictable routes. “This all comes down to honesty,” Chawla intoned. “His actions were nothing more and nothing less than dishonest.” The prosecutor noted that the disgraced cyclist Lance Armstrong had defended himself by saying his competitors were also doping. “Just because other people are acting dishonestly doesn’t give you or other people carte blanche to act in a similar way,” Chawla said.

  Hawes’s main goal was to drape everything the prosecution had said with a curtain of doubt. Get the jury to go through all the evidence, he figured, and anything could happen. “We are awash in evidence,” Hawes contended. “Is he so blind, so dishonest, that he simply ignored all these flags that were shown to him? We suggest not.” But his delivery—speaking softly, pausing between clauses—was like a lullaby to the jurors who, one by one, seemed to be tuning out. A woman in a black dress decorated with red flowers started to nod off. A juror in the back row leaned his head against the wall and blinked slowly. A third bowed his head and closed his eyes. In the front row, another juror yawned, stretched, and removed his glasses.

  * * *

  That evening, Hayes was feeling giddy. For all intents and purposes, the trial was over. Cooke was going to spend the next few days giving the jury detailed instructions about the legal framework for interpreting each piece of evidence. His typed script ran more than two hundred pages. Sitting outside at a pub, smoking cigarettes and drinking beer, Hayes considered the jurors. He was pretty sure he had at least three on his side: Juror 1 (a short man who Hayes decided harbored an antiauthority streak) and Jurors 11 and 12 (who sat next to each other and, Hayes thought, regularly smiled at him). That was enough to guarantee he would either be acquitted or the jury would be hung. Hayes’s lawyers also were providing encouragement, perhaps unintentionally. During Chawla’s closing statement, Hayes had been grumbling and gesticulating. His lawyers told him to shut up. At one point, they passed him a handwritten note: “You can still lose this.” Hayes interpreted that as meaning that he currently was in a position to win.

  He and Tighe started envisioning a victory party.

  * * *

  The jurors were instructed to use a two-part test to determine whether the agreements Hayes had entered into were fraudulent. The first question was whether a normal, reasonable human would have considered Hayes’s actions to be dishonest. If no, then the jury should acquit. If yes, they had to answer a second question: Did Hayes, at the time of his actions, realize that what he was doing was dishonest according to reasonable human standards? If yes, he was guilty. In other words, the jurors needed to put themselves inside Hayes’s head back when he was a trader in Tokyo. “You can’t open up a person’s mind to see what’s inside,” Cooke observed. The jurors should use common sense, taking into account all the evidence, including Hayes’s statements to the SFO and his testimony during the trial. Don’t consider sympathy or emotions, the judge said, only the evidence. The jurors left the courtroom hauling armloads of documents and color-coded binders filled with evidence.

  Shortly after, Hayes’s lawyers met with Cooke in his chambers. He made it clear that, if their client was convicted, he intended to make an example out of him. Hawes broke the news to Hayes and Tighe a few minutes later: He was facing a possible twelve-year prison sentence, worse than t
he couple had expected. Hayes sat motionless, on the verge of tears. At home that evening, he became manic, talking nonstop, tapping his foot, yanking out his hair. It reminded Tighe of his erratic behavior in the first half of 2013. He will need to be put on suicide watch if he’s convicted, Tighe thought to herself.

  Day after day, the deliberations dragged on. Time crept by. Chawla’s daughter baked chocolate-frosted cupcakes, decorated with tiny silver candies, and the prosecutor brought a Tupperware container of them to court to treat staff and journalists. Ever since his cross-examination, Hayes had been wearing the same outfit every day—his trusty black slacks, a light blue shirt, and a thin blue sweater. (He washed the shirt every evening.) He spent hours pacing in a hallway. At one point, a college friend stopped by to distract him with reminiscences. Another day, a professor whom Hayes had consulted as a possible expert witness hung out on the courthouse’s fifth floor with him. Whenever the court’s scratchy loudspeakers summoned people back to a courtroom, Tighe’s adrenaline surged; she came to dread the sound of static when the system was switched on. Too stressed to eat, they spent their lunch breaks smoking cigarettes by the river, taking in the view of the glistening skyscrapers and the World War II–era gunship the HMS Belfast permanently moored on the riverbank. On the way back into court, a swarm of photographers and camera crews filmed them. “Every single time, they do this,” Hayes grumbled to Tighe after one smoke break, as a photographer stuck the snout of his camera into his face.

  Finally, at 2:35 on the afternoon of August 3, the courthouse speakers squawked with Hayes’s name. After a week of deliberations, the jury had reached a verdict.

  Part IV