Tracing the LIBOR Conspiracy’s Tangled Roots


Fordham Law School’s Corporate Law Center hosted an April 5 discussion on the recent LIBOR-rigging scandal with Fordham professor Mark R. Patterson and Wall Street Journal financial enterprise editor David Enrich.

Enrich, who covered the scandal for the Journal and released the book The Spider Network about it last month, shared his experience interacting with the bankers and prosecutors at the scandal’s center. Patterson addressed the scandal’s legal ramifications, a topic explored in his recent book Antitrust Law in the New Economy: Google, Yelp, LIBOR, and the Control of Information. He argued that the financial institutions involved should have been prosecuted under antitrust law, rather than tried for fraud.

“The way market information is being communicated has changed in the last 10 years and now much information is being offered as a product,” said Patterson. “We need to apply antitrust law to those products, though the practices that firms engage in anti-competitively with information products are somewhat different from those in traditional antitrust practice.”

The LIBOR scandal remains infamous in financial circles for both its audacity and scope. In 2011, the Wall Street Journal’s reporting revealed a conspiracy of traders at major financial institutions such as UBS AG, Barclays, and Citibank to manipulate the London Interbank Offered Rate (LIBOR), a group of benchmark interest rates set daily by the British Bankers’ Association and used to determine the interest rates for trillions of dollars in loans. By manipulating their banks’ LIBOR submissions, traders hoped to unfairly advantage their trading positions.

Patterson and Enrich argued that, for a scandal of this magnitude, the banks and individual actors involved had faced relatively slight consequences.

“I talked with almost everyone who was involved in building this case, and I think that the law in this case worked in a way that I don’t think anyone who was involved in building the law would want it to work out,” said Enrich.

Though litigation concerning the LIBOR scandal is still pending, Enrich explained that several of the banks involved, particularly UBS, avoided facing the worst consequences of their actions by cooperating with prosecutors early, on the advice of attorneys from the law firm Gibson Dunn. In the end, UBS and its executives were mostly shielded from prosecution, as blame fell primarily on the bank’s Japanese subsidiary and a handful of rank-and-file traders.

Enrich built The Spider Network around his close relationship with one of these traders—a Briton named Tom Hayes. This relationship, said Enrich, gave him new insights into the banking industry and changed his opinion about how institutional actors should be held accountable for their actions.

“I have been one of the many people on the bandwagon demanding that more individuals be held responsible and that prosecutors find new and creative ways to charge individuals and charge institutions,” said Enrich. “And then of course I met one of the individuals being charged and started feeling immense sympathy for him, and that the law was executed in a really unfair, arbitrary, and pernicious way.”

Enrich said that he believes that a toxic culture at the major banks, combined with a lack of willingness on the part of prosecutors to pursue risky charges, has allowed banks to blame scapegoats for their institutional failures while leaving their business practices more or less unchanged.

Both Enrich and Patterson said that preventing market manipulations of this sort would require fresh legal approaches.

“Market power in the information context is a very different phenomenon from market power in the more typical product contexts,” said Patterson. “We think of conspiracies in constraint of trade as involving products on the market, and LIBOR is not like that. It’s an information benchmark. So you’re messing with trade but you’re messing with trade in an unusual way.”



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