Rachel Adamson

The financial services industry needs to get to the bottom of what went wrong with Libor and Euribor. Were the right people charged and convicted for the offences that took place, Rachel Adamson asks?

Almost 18 years after the London interbank offered rate (Libor) scandal first hit the headlines and sent shockwaves through the financial services industry, it has reared its head again this year.

Leaked audio, recently released by the BBC, has revealed that two of the first traders to have been jailed for alleged rigging of Libor and euro interbank offered rate (Euribor), Colin Bermingham and Peter Johnson, were actually the original whistle-blowers of the scandal itself. However, perhaps most surprising to onlookers, is that this evidence played a key part in the individuals’ defence at the time, but was ultimately dismissed by the trial judge and had very little bearing on the final judgment.

Following a wave of overturned convictions over the past few years in both the UK and the US, this latest development once again brings about the question: are the existing Libor and Euribor convictions safe?

Verdicts overturned

The beginning of 2022 saw a US Court of Appeal upend two of the US’s Libor convictions. The reversal of the convictions of Gavin Black and Matthew Connolly — two former Deutsche Bank employees — means that every Libor-related conviction handed out in the US has now been reversed.

In concluding that the convictions were to be expunged, the federal court judges found that the US government had “failed to show that any of the trader-influenced submissions were false, fraudulent, or misleading”. A damning indictment, and one that will no doubt pique the interest of those convicted of similar convictions in the UK.

Further to this, a similar picture of upended convictions has also been painted in the UK over the past few years. As it stands, eight of the 13 individuals that the Serious Fraud Office (SFO) brought Libor-related charges against have since been acquitted. What’s more, when the SFO finally concluded its five-year investigation into the rigging of Euribor in 2020, withdrawing arrest warrants for four ex-traders, it had only secured four convictions, with another three acquittals of the 11 individuals originally accused. So, of the 24 individuals accused of either Libor or Euribor rigging, only nine were convicted.

Compounded by the ‘new’ revelations regarding the original whistle-blowers, the latest ruling in the US overturning the final Libor convictions could potentially clear the way for a wave of reviews into UK Libor and Euribor convictions. While there is no denying that the financial services regulations and legislations in place in the US are fundamentally distinct from those in the UK, individuals do now have a proven and successful line of argument to appeal convictions from one of the most well-regarded judicial regimes in the world.

Going further, if we really want to know what went wrong with Libor and Euribor, there is certainly an argument to be made for a full-scale, independent public inquiry into the scandal. After all, such a drastic scale of overturned convictions certainly raises the question: were the right people charged and convicted for the offences that took place? This is potentially a huge miscarriage of justice.

A new time

Despite the momentum of recent months, individuals convicted of Libor and Euribor rigging still face several obstacles to overcome. First, individuals that have Libor- and Euribor-related convictions against their name face the possibility of being judged falsely against the current landscape and regulatory environment.

At the time, trading in this way was the norm and common practice; it was well-known in most circles and traders faced pressures from senior figures in both the UK and US banking industries to adjust the rate. This was evident in the trial of Mr Bermingham, where the judge and jury were played phone conversations where those convicted reported their concerns over the abuse of Libor and Euribor, including calls made to senior officers at the US Treasury. Yet, these concerns were more or less ignored.

The world has changed profoundly since then, and it is only right that individuals are judged against the rules, practice and laws that were in place at the time of any alleged offences.

There is no doubt that Libor rigging should not have happened. However, it is fast becoming a scandal of injustices, with a select group of individuals convicted for offences that were widespread at the time. To clear this up once and for all, and to ensure that all the true facts are laid bare, a public inquiry is now needed.

Rachel Adamson is head of fraud and regulatory at Adkirk Law.

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