by David Enrich
I am thankful for the support I’ve received from the Journal throughout this process. I benefited from world-class editing, not just by Bruce but also by one of the Journal’s awesome Page One editors, Mitch Pacelle. His fingerprints are all over the book’s latter chapters. A cast of at least a dozen—including programming whiz Elliot Bentley and Alex Martin, who came up with the serialization idea—helped “Unraveling” succeed, laying the groundwork for this book. Crucially, the Journal was generous with my time. For more than a year, I had the privilege of devoting myself to not a whole lot other than Tom Hayes and Libor. As my manager drily noted in a recent performance review, “the year was something of an indulgence on the part of the Journal.” Especially at a time when struggling media companies are demanding that journalists churn out more and more, faster and faster, I appreciate that indulgence.
This is my first book, and I didn’t know what to expect or how to proceed. My agent, Dan Mandel of Greenburger Associates, was a valuable guide. (Thanks to my Journal colleague and friend Liz Rappaport for introducing us.) Dan not only managed to drum up interest in a first-time author’s complicated project, but he also pulled off the miraculous feat of keeping me (relatively) calm during the search for a publisher.
I was lucky to end up with Geoff Shandler at Custom House as my editor and publisher. I’d heard horror stories from other fledgling authors about editors who didn’t actually edit; one acquaintance had to shell out a five-figure sum to pay an outside editor to improve her manuscript. I was desperate to avoid a situation like that—I knew enough to know that I would desperately need a proactive, engaged editor—and Geoff proved true to his reputation as vigorously hands-on. He marked up each page, often each line, of the manuscript with his trusty red pencil. Then he did it again. (And in some cases, a third or fourth time as well.) It turned out that, despite having written hundreds of thousands of words as a newspaper journalist, I didn’t really know how to write a book. Geoff taught me. He also pushed me, hard, to reconsider some of the assumptions I’d made during the reporting process and to not shy away from delving into complex topics. This book is immeasurably better as a result of his tireless, meticulous work.
The entire team at Custom House and William Morrow was a pleasure to work with. Kelly Rudolph in publicity was there from the start with regular suggestions and encouragement. Kyran Cassidy helped bulletproof the book from a legal standpoint. Ploy Siripant designed the delightful cover. Bill Ruoto designed the book’s interior. Madeline Jaffe was always available to help—and did so frequently.
At Ebury, which is publishing The Spider Network in the United Kingdom and Commonwealth countries, Jamie Joseph was a great partner. He helped me slim down the manuscript and to explain things more clearly. His enthusiasm was valuable during what occasionally felt like a slog. Lucy Oates made things easier. Ebury’s marketing guru, Joanna Bennett, helped devise ways to get would-be readers interested. And Martin Soames patiently and thoroughly reviewed the book so that it complied with England’s draconian publishing laws.
A number of other people volunteered to provide feedback. Charles Forelle and Justin Scheck, two of the best journalists I’ve ever worked with, devoted to this book many hours of their personal time that they instead could have spent with their families. They spotted things that didn’t make sense and points where my prose turned a shade too purple (as well as a number of mistakes that nobody else had caught), and they suggested ways to simplify the book and eliminate extraneous characters. I am grateful for their support and friendship.
My parents, Peggy and Peter, instilled a love of reading and writing in me at an early age. They also read drafts of this book. My father provided insightful feedback about how to amplify some of the big themes. My mother, who purports to be terrified of numbers and finance, read and re-read the sections on market mechanics and Libor, advising me on ways to make them more comprehensible. My siblings, Nicholas and Liza, and sister-in-law Jordanna served as valuable sounding boards and provided welcome encouragement throughout.
And then there was Kirsten. My lovely wife was an indispensable partner. From the start—a cold, wet Saturday morning in early 2013 when I dragged her, in the first trimester of pregnancy, to visit London’s just-opened Shard skyscraper and then spent the entire time exchanging text messages with Hayes—Kirsten not only tolerated my obsession but also encouraged it. Even though she never met Hayes, I felt like she knew him because of how much we discussed him. When I started viewing this as a book, Kirsten was instantly on board. A voracious, sophisticated reader, she plowed through numerous versions of the initial book proposal. She talked sense into me—and gave sage advice—in the project’s difficult early stages. She read drafts of the book multiple times, offering innumerable smart suggestions. And on more than one occasion when I felt like I was buckling under pressure, Kirsten stabilized me. She did all of this while handling first one baby boy, then another. I don’t know what I would have done without her.
Finally, a special thanks to Henry and Jasper. They didn’t directly help on the book—unless you count Henry shuffling pages and scribbling all over the drafts of a few chapters—but their presence in my life is a constant source of inspiration and joy.
Notes
Prologue
The description of the ski getaway comes from my interviews with Hayes and another attendee. The description of Mccappin’s personal background and musical history comes from interviews with former colleagues as well as a member of Ocean Colour Scene and the band’s manager.
Chapter 1: Watching the Coronation
The descriptions of Hayes’s family, childhood, and schooling come from my interviews with him and members of his immediate and extended family; his academic records; and reports written by the doctors who examined him and interviewed his mother and wife, leading up to the trial.
The section on Hayes’s early professional years is based on my interviews with him and his former colleagues; his UBS personnel files; and descriptions provided by Hayes and others in interviews with the SFO or financial regulators. The descriptions of the old City of London, as well as its modern transformation, are based in part on the excellent City Lives: The Changing Voices of British Finance by Cathy Courtney and Paul Thompson (Methuen Publishing, 1996) and on Other People’s Money: Masters of the Universe or Servants of the People? by John Kay (Profile Books, 2015). Joris Luyendijk’s Swimming with Sharks: My Journey into the World of the Bankers (Guardian Faber Publishing, 2015) provides other valuable context and anecdotes.
Chapter 2: The Hall of Mirrors
The account of Shah Pahlavi’s coronation is based on archival New York Times stories. Minos Zombanakis’s story, and his involvement with the creation of what would become known as Libor, comes in large part from The Story of Minos Zombanakis: Banking Without Borders by David Lascelles (Kerkyra Publications, 2011).
Ken Griffin’s comment about bets paying off just 52 percent of the time comes from “Citadel’s Ken Griffin Leaves 2008 Tumble Far Behind,” Wall Street Journal, August 3, 2015, by Rob Copeland. The descriptions of Hayes’s time at RBS and his interactions with colleagues there come from my interviews with Hayes; my interviews with other former traders and their lawyers; personnel records; e-mail and chat transcripts; and interviews that a variety of people, including Hayes, gave to regulators.
The history of derivatives, including the section on the IBM swap, is derived largely from Peter L. Bernstein’s Against the Gods: The Remarkable Story of Risk (John Wiley & Sons, 1998), as well as from When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein (Random House, 2000).
Chapter 3: Classy People
The details about Michael Spencer’s childhood and early career are based in large part on this comprehensive profile of him: “MT Interview—Michael Spencer,” Management Today, January 27, 2005, by Chris Blackhurst, as well as “20 Questions: Michael Spencer,” Financial Times, April 7, 2011, by Emma Jacobs. The history of Ethiop
ia comes from New York Times archival stories.
The descriptions of what a broker does, the industry’s culture, and the personal histories of Hayes’s brokers are based on testimony of the six brokers in their 2015 trial, as well as their interviews with regulators; the brokerage’s internal disciplinary records; my interviews with the brokers, their lawyers, and former colleagues; reports by law-enforcement and regulatory agencies that punished the brokerage firms; e-mail and chat transcripts; and a series of Wall Street Journal stories on the brokerage industry in 2013 and 2014.
The section on Hayes’s time at the royal banks of Scotland and then Canada are based on my interviews with Hayes and his former colleagues; various former traders’ interviews with regulators and law enforcement; personnel files at both banks as well as at UBS (especially as it relates to the circumstances surrounding Hayes’s departure from RBC); and internal chat and e-mail transcripts.
Chapter 4: Peak Performance
John Ewan’s personal and professional history comes from my interviews with his former colleagues; extensive interviews he gave to regulators and law enforcement; his testimony in the trials of Hayes and the brokers; and personnel records and internal BBA e-mails and phone transcripts. The history of Libor comes from internal BBA materials gathered by regulators as well as interviews and trial testimony by Ewan and Andrew Thursfield. Douglas Keenan described his early run-in with Libor manipulation in his article “My Thwarted Attempt to Tell of Libor Shenanigans,” Financial Times, July 26, 2012. The account of how Libor ended up in the Chicago Mercantile Exchange’s derivatives, and the failed efforts to warn against that, are from this excellent story: “How Gaming Libor Became Business as Usual,” Reuters, November 20, 2012, by Carrick Mollenkamp, Jennifer Ablan, and Matthew Goldstein.
The Andrew Smith section is based on former traders’ interviews with me and with regulators and internal chat transcripts.
Chapter 5: The Lucky Turnstile
As in prior and future chapters, the accounts of Hayes’s personal and professional lives are based on my interviews with him, his friends, colleagues (and their lawyers), and family members; e-mails, electronic chat, and phone recordings; bank personnel records; interviews that Hayes and his former colleagues gave to regulators and law enforcement; information presented in court; and bank and brokerage settlement agreements with regulators and law enforcement. The detail about Hayes bringing a textbook to dinner comes from “Former Deutsche Bank Rate Trader Describes Difficulties in Tokyo’s Rates Market,” New York Times, February 19, 2013, by Hiroku Tabuchi.
Chapter 6: The Sycophants
The descriptions of Laydon and the pension funds that potentially lost money due to yen Libor manipulation are based partly on lawsuits filed in U.S. federal court by those parties as well as the lawyers who filed the suits and other publicly available information (such as Laydon’s LinkedIn page).
As in prior and future chapters, the personal details about the brokers—such as Farr’s sexual advice to his son, Gilmour’s financial woes, and the Read clan’s difficulty adjusting to New Zealand—largely were captured via discussions the brokers had on work e-mail, chats, or phone calls. Other details were disclosed in their trial, in their personnel records obtained by regulators, or in interviews with me.
The background on Alexis Stenfors comes largely from my interviews with him and his wife, as well as lectures he has delivered to students and academic papers he published that discuss his personal background. Broader context, including how other traders and bankers felt around 9/11, comes from Luyendijk’s Swimming with Sharks.
The scene at the Mayweather-Hatton boxing match is derived from widespread media coverage of the event as well as a video recording of it available on YouTube.
Chapter 7: Your Name in Print
The detailed retelling of when Hayes and Tighe met is based on extensive interviews with both parties as well as e-mails they sent at the time they met and Tighe’s Facebook page, which I had access to. I also reviewed their personal photos for additional details. Further details come from a psychiatric report produced by Dr. Dene Robertson before Hayes’s trial.
I relied on contemporaneous news coverage in the Swiss and American media for the account of the UBS shareholders meeting. The Walsh-Koutsogiannis exchange was conducted over instant messages that were later collected by regulators.
The descriptions of the Hayes family interactions and his introduction to the Tighe clan come from my interviews with members of both families.
Chapter 8: A Yacht in Monaco
The descriptions of the Bali vacation come from interviews with Hayes and Tighe and pictures they took of Hayes’s vicious sunburns.
Chapter 9: What’s a Cabal?
The descriptions of the states of mind and actions of various BBA officials are based on their e-mail and phone records, contemporaneous BBA documents, interviews they gave to regulators and law enforcement, trial testimony, and my interviews with past and present BBA officials. The account of the FXMMC meetings comes largely from minutes of those meetings as well as interviews with some participants.
The Scott Peng sections come in large part from interviews with him and former colleagues as well as the reports that he wrote while at Citigroup. Andrew Thursfield’s subsequent testimony to the Serious Fraud Office also provided helpful context about the industry reaction to Peng’s research.
The account of what went on in the Wall Street Journal’s London bureau in 2008—two years before I started working there—comes from interviews with several people who worked there at the time.
The back and forth between Tim Geithner, Mervyn King, and others comes from materials the BBA disclosed to a British parliamentary committee as well as documents published by either the Bank of England or the Federal Reserve. The descriptions of the Bank for International Settlements gathering partly come from Neil Irwin’s The Alchemists: Three Central Bankers and a World on Fire (Penguin, 2013).
In this and future chapters, the descriptions of the CFTC and Justice Department investigation are based on my interviews with past and present CFTC staff and commissioners, past and present Justice Department officials, and their counterparts at other agencies, such as the FSA.
Chapter 10: Entre Nous
The description of Carsten Kengeter—yoga lover and extreme skier—comes from this profile: “Ex-banker Carsten Kengeter Moves Fast to Reshape Deutche Börse,” Financial Times, February 24, 2016, by Patrick Jenkins.
Chapter 11: Gods of the Sea
Some of the physical descriptions in this chapter—of Cecere’s wife, for example—are based on photos taken of the individuals and that appeared on other people’s public Facebook pages.
Chapter 12: In the Flag Room
The descriptions of Thursfield (and his CFTC presentation) are based largely on his trial testimony and his interviews with the Serious Fraud Office.
The Gary Gensler section is derived partly from my interviews with a wide range of his former colleagues, as well as from other media coverage. Among the most helpful articles was “The Democrats’ Stealth Fighter,” Baltimore Sun, November 3, 2002, by Julie Hirschfield Davis. The description of his ideological about-face came from “Beating the Street,” New Republic, May 5, 2010, by Noam Scheiber. Several other elements came from “CFTC Chief Gary Gensler Is out to Police Financial Wild West,” USA Today, November 23, 2009, by Paul Wiseman; “An Ex-Goldman Man Goes After Derivatives,” Time, April 22, 2010, by Michael Scherer; and “Was Tom Hayes Running the Biggest Financial Conspiracy in History?” Bloomberg Businessweek, September 14, 2015, by Liam Vaughan and Gavin Finch.
The section on Thomas Youle and Connan Snider is based on my interviews with them as well as their article, which remained unpublished as of mid-2016. Similarly, the Joseph Cotchett and Nanci Nishimura section is largely based on my interviews with and observations of them as well as “Sealed with a Dis,” San Francisco Weekly, May 23, 2007, by Will Harper and Mary Spicuzza.
The se
ction on the Justice Department’s evolving attitude toward prosecuting big companies is drawn in significant part from Too Big to Jail: How Prosecutors Compromise with Corporations by Brandon Garrett (Harvard University Press, 2014).
The descriptions of the subpoenas sent and visits made by regulators are based on public accounts, my interviews with regulators and others present at the visits, and trial testimony.
Chapter 13: A Slap on the Wrist
The description of the warning Mccappin received about Hayes comes from a person who was on the call between the UBS and Citigroup officials.