Tom Hayes: LIBOR Fraudster’s Sentence Reduced, But Conviction Upheld

29 12 2015

750x-1Regina (Respondent) v Tom Alexander William Hayes (Appellant) [2015] EWCA Crim 1944 (21 December 2015)

In this redacted judgment, the Court of Appeal (Criminal Division) upheld Tom Hayes’s conviction but reduced his brutal sentence from 14 years to 11 years. The clawback of three years will come as a blow to the resurgent fortunes of the Serious Fraud Office (SFO). Lord Thomas of Cwmgiedd CJ, Sir Brian Leveson PQBD and Gloster LJ reduced the sentence because Hayes was not in a managerial position and also suffered from autism (see here). Expressing mixed emotions about the outcome of his appeal against conviction and sentencing Hayes said that he “was immensely disappointed” by the overall result but was nonetheless “relieved and grateful” that the “immensely disproportionate” sentence passed by Cooke J was reduced. “I never asked for a dishonest or inaccurate LIBOR rate to be submitted. I was at secondary school when these practices started,” is how Tom Hayes still places himself in the grand scheme of things. The three judges found that Cooke J was right to conclude that the expert evidence sought by Hayes was of low probative value. He initially entered into an agreement with the prosecution under section 73 of the Serious Organised Crime and Police Act 2005 (SOCPA) in order to avoid extradition to the US but later withdrew and changed his plea to not guilty. In more ways than one, Hayes is somewhat of a comeback kid and Cooke J had called him a “gambler”.

However, the Court of Appeal held that ordinary standards of reasonable and honest people, rather than the standards of the market or a group of traders, determined judging the extent to which a banker had acted dishonestly in manipulating financial markets. The court was clear that an example had to be made of Hayes so as to deter others with similar ideas from misbehaving. “I continue to maintain my innocence. I look forward to pursuing every avenue available to me to clear my name,” is how he intimated a possible appeal to the Supreme Court. In relation to his conviction, Hayes advanced six grounds of appeal but was granted permission to appeal on only one. The details contained in paragraphs 38 to 60 of the court’s judgment cannot be reported until the conclusion of Trial 2 (see here) before Hamblen J.


On 3 August 2015, after a 47-day trial Hayes was convicted of eight counts of conspiracy to defraud in relation to the manipulation of the Japanese Yen LIBOR. During his trial, Hayes argued that his conduct was not extraordinary. He said the methods employed by him were common practice, considered legitimate and encouraged by the management. He was the first person to be convicted of benchmark rigging.

At trial, the jury was directed pursuant to the objective limb of R v Ghosh [1982] QB 1053 that they had to decide whether his conduct was dishonest by the ordinary standards of reasonable and honest people, not by the standards of the market, his employers or his colleagues. Because of the sophistication of the offences, his leading role, and the fact that he had pressured junior colleagues to join his scheme to abuse the market, Hayes’s culpability was high and Cooke J took that into consideration as regards sentence. As regards mitigation, the judge observed that Hayes was a trader and not a manager, that he was of previous good character and aged 27 when the four-year spell of offending began.

The judge also noted that he suffered from mild Asperger’s syndrome, was of previous good character and was the primary carer of his young child. Yet in the judge’s eyes, the maximum sentence of 10 years did not send out a sufficiently strong message to the finance sector and he therefore imposed concurrent 9½ year terms for the first four counts, to run consecutively to concurrent 3½ year terms on the remaining counts.

Court of Appeal

In the Court of Appeal, Hayes argued that that the sentence was manifestly excessive and that consecutive sentences should not have been used to overcome the statutory maximum. He also submitted that Cooke J had been wrong to (a) decide that evidence relating to banking ethos and practice in connection with LIBOR setting was inadmissible in relation to the objective limb of the Ghosh test (b) refuse to order the Crown to disclose information about his daily profit, loss and risk and (c) refuse to allow the defence to adduce medical evidence to establish that Hayes was suffering from a depressive disorder when he signed the SOCPA agreement.

The point on the ethos prevalent in the marketplace was founded on a sixfold evidential rationale. Between 2006-2009, more than one hundred commercial LIBOR requests, by traders to LIBOR submitters, in currencies other than Yen had been made and Hayes played no part in these requests. The same issue arose in the banking sector generally. It was said that interdealer brokers are used to discuss potential LIBOR submissions. Notably, the British Bankers’ Association’s relaxed attitude about LIBOR not being accurate was highlighted. It was also said that despite knowing that LIBOR’s governance was flawed and was inaccurate, the Financial Services Authority was content to keep its head in the sand until the Commodity Futures Trading Commission announced an investigation in 2008. It was argued that these factors militated against the suggestion that banks or individuals within the banks who were engaged in the LIBOR market were acting dishonestly.


Standard of Honesty

After extracting and analysing large chunks of proceedings below, the Court of Appeal found at para 29 that the evidence on banking ethos and practice was relevant for the subjective limb of the Ghost test but that it was irrelevant to the objective limb. Hayes tried to have it admitted for the sole purpose of asking the jury to evaluate his conduct against an objective standard for a market or a group of traders, and not by the ordinary standards of honest and reasonable people. The authorities did not support the approach and in Royal Brunei Airlines v Tan [1995] 2 AC 378, Lord Nichols’s reference to “acting as an honest person would in the circumstances” did not erode the principle that honesty was to be determined by the objective standards of honest and reasonable people. The court went on to hold:

42. Not only is there is no authority for the proposition that objective standards of honesty are to be set by a market, but such a principle would gravely affect the proper conduct of business. The history of the markets have shown that, from time to time, markets adopt patterns of behaviour which are dishonest by the standards of honest and reasonable people; in such cases, the market has simply abandoned ordinary standards of honesty. Each of the members of this court has seen such cases and the damage caused when a market determines its own standards of honesty in this way. Therefore to depart from the view that standards of honesty are determined by the standards of ordinary reasonable and honest people is not only unsupported by authority, but would undermine the maintenance of ordinary standards of honesty and integrity that are essential to the conduct of business and markets.

43. Thus although the evidence to which we have referred was irrelevant to the determination of the objective standards of honesty, it was plainly relevant to the second limb subjective limb. The judge expressly directed the jury to have regard to it and summarised the evidence at length. In the circumstances, although in the light of the argument advanced we considered we should grant leave to appeal on this ground, we reject the argument in its entirety as misconceived.


Thomas LCJ, Leveson PQBD and Gloster LJ also found that Cooke J had been correct in refusing to order disclosure of information about Hayes’s daily profit, loss and risk because these details were incapable of addressing the Crown’s contention that he had been motivated by a desire for financial gain. The court found it “wholly unreal to suggest” that Hayes had been disadvantaged by the lack of disclosure. Noting that the Crown’s obligation under the Criminal Procedure and Investigations Act 1996 was to disclose material that could reasonably be capable of either undermining its case or assisting the defence case and that the judge was entitled to conclude that further disclosure would obfuscate the issues before the jury, the court remarked that:

74. … The legislative scheme is not intended to require disclosure of a document simply on the basis that it may be relevant in some undefined or diffuse way other than undermining the prosecution or assisting the case for the defence. Neither is it appropriate for the judge to require the prosecution (or a third party) to perform an exercise of tangential significance.

Mental Illness

The court rejected the submission that the jury was in need of medical evidence to understand what was going on in relation to Hayes entering into the SOCPA process with a view to precluding the possibility of his extradition to the US. Apart from the reasoning adopted by Cooke J, the jury did not need medical evidence to understand the pressure (and the consequent distress) that Hayes was burdened with at the material time. Moreover, it was not suggested that Hayes’s depressive disorder affected his ability to comprehend events unfolding before him. The court found that Cooke J was right to conclude that the expert evidence sought by Hayes was of low probative value and was irrelevant and it therefore held:

84. Mental distress is a concept which would have been readily understood by the jury who would not have been assisted by a diagnosis of a depressive illness to assess the issue in the case which was not whether he would or would not have made admissions of the type which he made in the SOCPA interviews but, rather, whether what he said was true. That had to be assessed in the light of all the evidence and not on the basis of a medical opinion reached three years later, based on the appellant’s description of his state of mind in respect of which it had never been suggested that it had impacted on his comprehension of the SOCPA process or his ability to engage in it.

The approach was at one with Lord Pearce’s classic statement on the admissibility of expert evidence in R v Toohey [1965] AC 595 as recently restated by the Court of Appeal R v H [2014] EWCA Crim 1555, i.e. evidence is admissible when it is necessary to inform the jury of experience of a scientific and medical kind of which they might be unaware, which they ought to take into account when they assess the evidence in the case in order to decide whether they can be sure about the reliability of a particular witness.


The court held that Cooke J’s approach had been correct in his identification of the high level of culpability, serious harm, and the need for deterrence and had similarly also been correct in determining that consecutive sentences were appropriate. Those who acted dishonestly had to expect severe deterrent sentences and this was equally true in all financial markets and not just the LIBOR market. His fortunes had risen from a pay of £40,726 in 2006 to a payment of £1.96 million for the month of December 2009 when he joined Citibank and his pay from January to September 2010 was £1.54 million (with a bonus of £943, 225).

The court observed at para 99 that sole issue was whether or not he had taken too high a starting point and failed to take sufficient account of the mitigating features. It endorsed Cooke J’s analysis that Hayes’s abandonment of the SOCPA process and explain away his admissions deprived him of mitigation that would have led to a much shorter sentence.

However, at para 107, the court held that Hayes’s young age (he was about 27 when he began to manipulate the market), his non-managerial position and the fact that he had Asperger’s syndrome meant that 14 years was longer than was necessary to punish him and deter others. Instead, appropriate total sentence was 11 years’ imprisonment. Despite the reduction in sentence, sending out a reminder to others of Hayes’s ilk the Court of Appeal concluded its judgment by saying:

109. However, this court must make clear to all in the financial and other markets in the City of London that conduct of this type, involving fraudulent manipulation of the markets, will result in severe sentences of considerable length which, depending on the circumstances, may be significantly greater than the present total sentence.


“I believe that banking institutions are more dangerous to our liberties than standing armies,” are the words used by Thomas Jefferson – the third US president – to voice his concerns in relation to the necessity of financial power belonging to the people. Retributive justice in the US would have come down on Hayes much harder had he failed in using dodgy tactics to avoid being extradited (compare him for instance to Nav Sarao, the flash crash trader, who faces 380 years’ imprisonment for multiple counts of wire fraud and spoofing). Hayes seems to have done well out of this appeal and it will be exciting to see how, if at all, his case progress in the Supreme Court.

Despite judgments like this one stressing deterrence, in some quarters there is wholesale abdication of commitment to reform culture in the banking sector. For example, the Banking Standards Board (BSB), which was set up in the aftermath of the LIBOR scandal so as to improve standards, is now rowing back on earlier commitments on reforming bank culture. Uncannily, the banks seem to possess the ability to hijack every initiative designed to bring accountability and transparency to the haphazard and widespread culture of corruption that has been uncovered by the events of the past decade.

It has reported today by Jill Treanor and Larry Elliott that the UK’s biggest banks have received first “report cards” from the BSB and these assessments have been sent to Barclays, HSBC, Lloyds, RBS, Santander, Standard Chartered, Nationwide, Metro, Citi and Morgan Stanley. These informal rubber-stamped reports assess behaviour and culture in the major banks and the chair of the BSB Dame Colette Bowe compared them to those delivered by top end auditors. She was appointed as chair through a selection process led by Bank of England governor Dr Mark Carney. With the greatest of respect to her views and arguments, the chairman of the Treasury Select Committee Andrew Tyrie MP, has urged an investigation of KPMG’s audit of HBOS because it audited the bank before its failure in 2008 but decided not to investigate the banking group.

The BSB will publish its own annual report in the spring and the aim is allow banks to create their own solutions to conduct related disasters such as LIBOR rigging and PPI mis-selling rather than imposing an industry wide standard – envisaged by the Fair and Effective Markets Review (FEMR) for example.

Before being rebranded as the BSB, the Banking Standards Review Council (BSRC) aimed at anchoring and restoring moral standards to ensure that improved ethics become engrained in a new banking culture in the UK. However, the BSB appears to have failed to rise to its full potential. In relation to the so-called report cards, concerns have been raised by Professor Roger McCormick – the managing director of the Conduct Costs Project Research Foundation (CCPRF) – who interprets Treanor and Elliott’s article as highly suggestive of the fact that:

the BSB does not have as an ambition a set of standards that would apply across the industry. The May 2014 Report (at page 19) referred to the “common pursuit of aspirational standards” and to “standard setting work” (of the BSRC). The FEMR echoes this).

In May 2014 there was reference to the BSRC needing to “make an early start in developing standards, since momentum is important”. The BSRC was to “own the standards”. Working groups were to be set up to develop the standards. There would be “comply or explain” requirements. All this seems to have gone … with no explanation.

Similarly, Chris Stears, research director of the CCPRF is concerned that:

There appears no consensus on the manner of public disclosure of the “report cards”. How is the public to assess performance for itself … extracts cited in the Annual Report … ?

Stears’s concerns about the dangers posed by incoherent banking institutions to society probably converge with those raised by Thomas Jefferson and he also said underlining the CCPRF’s agenda for 2016:

The BSB’s spring report will be most instructive. I’m hopeful that it will lift what is quickly becoming a concerning veil of secrecy over the appraisals. At the very least we need to know what the BSB uses to benchmark performance.

If the BSB report cards are not published (publishable), then why not mandate a Conduct Costs Report

Originally conceived by Sir Richard Lambert as a device to limit reputational damage, the so-called report cards will probably not be the radical instruments that they are made out to be by the BSB’s bank-dominated board. On proper analysis, it is quite inconceivable that they will be a panacea and make an actual difference to the culture prevalent in banking institutions.



8 responses

8 01 2016
SFO v Standard Bank: First UK Deferred Prosecution Agreement | Global Corporate Law

[…] in a recent two-day fixture, his lawyer argued that his sentence was excessively long (see update here). Neil Hawes submitted that the overhauling of the criminal law was so significant there was no […]

9 03 2016

Jailed Libor trader Hayes denied UK Supreme Court appeal

Tom Hayes, a former UBS (UBSG.S) and Citigroup (C.N) trader serving an 11-year jail sentence for conspiring to rig Libor global interest rates, was on Tuesday blocked from appealing to the UK’s Supreme Court against his conviction.

Hayes, the first person tried by jury after a global inquiry into allegations of Libor-rigging, has redoubled efforts to overturn his conviction since six former brokers he is alleged to have plotted with were found not guilty in a separate London trial.

London’s Court of Appeal on Tuesday formally refused leave for the case to be taken to the UK’s highest court, which hears appeals in exceptional cases of general public importance, according to a spokesman for the Serious Fraud Office (SFO).

Since he was jailed last August, 36-year-old Hayes has succeeded in persuading the Court of Appeal to cut his initial 14-year jail sentence – one of the longest on record for UK white collar crime – by three years. But he failed to overturn his conviction.

Hayes said in a statement from Lowdham Grange prison in central England that he was disappointed with the decision, continued to maintain his innocence and would pursue all avenues available to him to clear his name.

“My application is clearly in relation to a point of law and is of public importance because it concerns the test of dishonesty that applies to all criminal cases in this country,” he said.


The former star derivatives trader was found unanimously guilty of eight charges of conspiracy to defraud related to Libor, the London interbank offered rate that banks use to set interest rates on $450 trillion of loans and financial products worldwide.

He is now expected to take his case to the Criminal Cases Review Commission (CCRC), which looks at miscarriages of justice. However, one lawyer has said without exceptional new evidence, it will be like “getting through the eye of a needle”.

In the meantime, the SFO is pursuing confiscation proceedings against Hayes to claw back around 3.8 million pounds ($5.3 million) of alleged proceeds of crime. Four days of hearings are scheduled to begin on March 12.

Prosecutors presented Hayes, who was diagnosed with mild Asperger’s syndrome shortly before his trial began last May, as the ringleader of a dishonest scam to fix Libor with brokers and other traders to benefit his trading book between 2006 and 2010.

Hayes denied dishonesty during his 47-day trial, saying he had been open about his practices, such as sending scores of messages cajoling, pressuring and offering rewards to those who could influence rates. He said his bosses had condoned methods that were common practice at the time.

But his defense was complicated by previous admissions of dishonesty while initially cooperating with investigators in 2013. Hayes said during his trial that he later decided to fight the charges out of rage at being turned into a scapegoat.

Two former Rabobank traders, Anthony Allen and Anthony Conti, are due to be sentenced on Thursday by a U.S. judge after they were found guilty of fraud-related offences last November in the first U.S. Libor trial.

22 03 2016
Benchmark Manipulation and Corporate Crime: Insights on Financial Misconduct | Global Corporate Law

[…] by the Court of Appeal (Lord Thomas of Cwmgiedd CJ, Sir Brian Leveson PQBD and Gloster LJ, see here) on the ground that he was not in a managerial position and suffered from autism, the fact that […]

28 03 2016
Navinder Sarao: ‘Flash Crash’ Trader’s Extradition Request Upheld | Global Corporate Law

[…] justice in his case makes a telling comparison with avaricious individuals such as LIBOR rigger Tom Hayes who managed to dodge extradition and will only serve a few years by way of a custodial sentence. […]

24 04 2016
Supreme Court on the ‘Houdini Taxpayer’ | Global Corporate Law

[…] infamously explained by jailed fraudster Tom Hayes, UBS must be credited with issuing a handbook on rigging LIBOR. Doubling Hayes up, in the ongoing […]

2 08 2017
Andrew Bailey on the Death of LIBOR | Global Corporate Law

[…] in the criminal context it resulted in “clustered criminality” of which convicted LIBOR rigger Tom Hayes is a prime example. Clustered criminality, which only reflects a very small part of the ills […]

26 09 2017
Current Accounts in a ‘Hostile Environment’: Bad Banks to Police Immigration Law from Next Year | United Kingdom Immigration Law Blog

[…] the back of the head with a foot long baseball bat. But the defence betrayed Mathew as it had done Tom Hayes, the first man to be convicted of rigging LIBOR who claims he is […]

28 03 2018
Banking and Misconduct: A Critique of the Cure of Culture | Global Corporate Law

[…] about the reality of things. Blaming bad culture has failed as a defence for many people such as Tom Hayes, Jonathan Mathew, Jay Merchant and Alex Pabon who were prosecuted and jailed for benchmark rigging. […]

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