On 3 August, the UK’s Serious Fraud Office (SFO) secured a conviction on eight counts of conspiracy to defraud against a former trader.  He was sentenced to 9.5 years imprisonment in respect of the first four counts, each to run concurrently, and 4.5 years imprisonment for the next four, each to run concurrently to each other, but consecutively with the first four – a total of 14 years imprisonment.  Confiscation proceedings will be determined at a later date.   

This was the first trial of an individual in the UK arising out of the SFO’s continuing investigation into LiBOR manipulation.  Tom Hayes had been charged with conspiring with others to procure or make false or misleading statements in respect of the submission of Yen LiBOR rates, thereby intending to prejudice the economic interests of others.

The sentence is a very significant one, and at first blush appears to depart from the standard approach set out in the Sentencing Council’s Definitive Guideline on Fraud, Bribery and Money Laundering Offences.  The judge, Mr Justice Cooke, considered that the conduct reflected the highest degree of culpability, and that the loss caused/intended, and the victim impact both fell into the highest category.  The recommended category range for the sentence is 5 – 8 years imprisonment, with a starting point of 7 years.

That said, the Guideline does envisage that where, as here, the (potential) value greatly exceeds the amount of the starting point in category 1 (£1 million), it may be appropriate to move outside the identified range.  The judge noted that the figures exceeded that amount by a distance and the number of counts “must” drive the sentence up.

The Guideline suggests that consecutive sentences for multiple offences may be appropriate where large sums are involved, and there are both aggravating factors (e.g. offences committed across borders) and mitigating factors (e.g. no previous convictions) that the judge would have weighed up.  The judge saw little by way of mitigation, although he recognised that some information Hayes supplied might assist the prosecuting authorities in pursuit of some lines of inquiry.

In the event, the judge imposed consecutive sentences in respect of conduct that occurred over consecutive periods (the second period shorter than the first).  In passing sentence, the judge said the maximum sentence of 10 years for conspiracy to defraud was “generally recognised” as too low and that:

“The conduct involved here must be marked out as dishonest and wrong and a message sent to the world of banking accordingly. The reputation of LIBOR is important to the City as a financial centre and of the banking industry in this country. Probity and honesty are essential, as is trust which is based upon it.”

Practitioners, industry experts and commentators will have been surprised at the length of this sentence, which goes well beyond sentences historically imposed in fraud cases.  The Court of Appeal may yet be given the opportunity to consider whether the total sentence was just and proportionate to the overall offending behaviour.

Plainly this is a landmark case.  It is worth noting that a senior banker also pleaded guilty to charges of conspiracy to defraud in October 2014, and another 11 individuals are set to face trial in the UK: the trial of some alleged co-conspirators will begin on 21 September 2015; individuals charged with manipulation of US Dollar LIBOR are due to stand trial  on 11 January 2016.