Arvedlund - Open Secret: The Global Banking Conspiracy That Swindled Investors Out of Billions

Wall Street Journal

Mark Whitehousejournalist

Carrick Mollenkampjournalist

Bankers Trust International

Evan G. Galbraithinventor of the floating-rate note

David Clarkbroker

U.S. Treasury

Timothy GeithnerTreasury secretary, 20092013

Henry PaulsonTreasury secretary, 20062009

Robert RubinTreasury secretary, 19951999

Jacob LewTreasury secretary, 2013present

Robert SteelTreasury undersecretary, 20062008

Manufacturers Hanover Limited

Minos Zombanakisinventor of the formula for LIBOR

Citigroup

Scott PengInterest rate strategist

UBS

Marcel Ospelgroup chair

Marcel RohnerCEO

Tom Alexander William Hayestrader

ICAP

Darrell Readbroker

Daniel Wilkinsonbroker

Colin Goodman (aka Lord LIBOR)broker

Michael Spencerfounder and chief executive

Federal Reserve Bank of New York

William Dudleypresident, 2009present

Timothy Geithnerpresident, 20032009

Federal Deposit Insurance Corporation (FDIC)

Sheila Bairchair, 20062011

British Bankers Association (BBA)

John Ewanmanaging director

Angela Knightchief executive, 20072012

Marcus Agiuschair, 20102012

Bank of England

Mervyn Kinggovernor, 20032013

Paul Tuckerdeputy governor, 20092013

U.S. Federal Reserve

Benjamin Bernankechair, 20062014

UK Parliament

John MannLabour minister

Barclays Capital

Robert E. Diamondchief executive, 19962012

Rich Riccicochief executive officer, 20002013

Jerry del Missierchief operating officer, 20002012

John Varleygroup chief executive, 20042011

U.S. Securities and Exchange Commission (SEC)

Mary Jo Whitechair, 2013present

Brevan Howard

Alan Howardco-founder

Royal Bank of Scotland (RBS)

Tan Chi Mintrader

Scott Nygaardhead of short-term markets for Asia and Edinburgh-based RBS

Paul Walkerhead of money market trading

Sim Suh-Tingexecutive director and head of regulatory risk and compliance (SE Asia)

Deutsche Bank

Anshu Jaincochief executive

U.S. Commodity Futures Trading Commission (CFTC)

Gary Genslerchair, 20092014

Vincent A. McGonagledirector of the Division of Market Oversight

Stephen J. Obieacting director of the Division of Enforcement

David Meisterhead of enforcement

Bart Chiltoncommissioner, 2007present

Jill Sommerscommissioner, 20072009

Mark Wetjenacting chairman, 20132014

Timothy Massadchairman, 2014present

Long-Term Capital Management (LTCM)

James G. RickardsWall Street lawyer and hedge fund investor

J.P. Morgan Chase

Paul Glandstrader

Rabobank

Piet Moerlandchairman, 20092013

New York University

Rosa Abrantes-Metzprofessor and director in antitrust, securities, and financial regulation practices of Global Economics Group

U.S. Department of Justice

Lanny Breuerhead, Criminal Division, 20092013

MF Global

Jon CorzineCEO and chairman, 20102011

James Koutoulashedge fund manager and MF Global customer

Contents

Prologue

T om Alexander William Hayes looked the part of the unremarkable British man. He sported short, dark blond hair, slightly wide-set eyes ringed with brown circles, a white button-down dress shirt, grayish blue V-neck sweater pilling on the back, and black trousers over black leather slip-on shoes. Like most Londoners commuting around town, he carried an umbrella, as that autumn day it was drizzling.

A private man by nature, Hayes remained largely in seclusion at his home in Surrey, with his wife and one-year-old son. He had stayed behind closed doors for good reason: On the days he did go out into the world, television cameras and paparazzi followed him like buzzards.

This particular day, October 21, 2013, was no exception. Outside the gray, modern-style courthouse, photographers waited to snap photos of him entering and leaving the building. Hayes offered no answers to their questions, yet one word seemed to hang over the proceedings as if written in Londons cloudy sky.

It was an acronym, one that consisted of five letters: L-I-B-O-R. Shorthand for London Interbank Offered Rate.

That little wordand its complex financial ramificationsrepresented countless billions of dollars in allegedly illegal gains and the means by which Hayes might lose his freedom.

Hayes had grown up in London, a middle-class lad with a gift for math and computers (a classmate called him an incredibly smart geek). His college record was such that employers flew him first-class to their offices for interviews, and, long before he became the poster boy for the largest financial scandal in London in anyones memory, he accepted, in 2001, a position as a junior trainee at the Royal Bank of Scotland.

At RBS, his specialty was derivatives, the financial instruments that, with the advent of electronic trading in the 1990s, represented finances new magic. Derivative agreements are contracts that specify an exchange of cash or other assets owned by one party for the second partys assets within some time frame. Hayess talents aligned nicely with Wall Streets growing appetite for derivatives. The market included options, swaps, and other transactions priced off of interest rates, commodities, and a variety of other underlying assets, and Hayes demonstrated a particular knack.