By Estelle Shirbon
LONDON (Reuters) - Tom Hayes, the former trader on trial over rate-rigging charges, denied on Thursday that fake trades he had performed to generate commissions for brokers amounted to bribes for their help in manipulating benchmark interest rates.
Hayes, the first person to stand trial over alleged rigging of the London interbank offered rate (Libor), has pleaded not guilty to eight counts of conspiracy to defraud between 2006 and 2010.
Libor, a benchmark used to price $450 trillion of financial products worldwide, is an average interest rate calculated from submissions from a panel of banks.
The prosecution alleges that Hayes' greed for bigger bonuses led him to persuade and sometimes bribe a network of contacts in brokerages and other banks to try to influence Libor in ways that would increase his trading profits.
Hayes, who was a yen derivatives trader in Tokyo for UBS (VX:UBSG) and later Citigroup (N:C), has told Southwark Crown Court in London that he had not acted dishonestly. He said he was open about his attempts to influence rates and that his managers were aware of it and that the practice was widespread in the industry.
Asked by his defense counsel on Thursday to respond to the accusation that the fake trades, known as wash trades, amounted to bribes, Hayes said: "I wouldn't describe it as bribes at all. They were primarily done because liquidity dried up ... I was trying to find the cheapest way for UBS to pay brokers."
Hayes likened brokers to car dealers who knew of someone who wanted to sell a Ferrari for one pound. He said the brokers were powerful because they could decide who would get to do the deal.
"The first thing I was told when I started trading, by the guy who was training me, was 'all brokers are liars'," Hayes said.
'VERY LITTLE INTEGRITY'
"They'll say one thing to your face and then something else to someone else. There's very little trust, there's very little integrity."
Hayes later became agitated when asked about his attempts to influence a broker who used to issue a run-through of his views on where Libor numbers were heading.
"The run-throughs were random," Hayes said, adding that in any case, if the broker had followed all his suggestions it would not have resulted in better Libor rates for Hayes over time.
Hayes also suggested that the process of making Libor submissions was not always taken seriously at panel banks.
"The submissions at RBS (LONDON:RBS) were done by a whole range of people," he said, giving several names of traders before adding: "Sometimes it was a graduate trainee, sometimes it was the cleaner."
Hayes was asked questions about an electronic chat from June 2009 in which he agreed with a trader at another bank to try to get six-month yen Libor up at a certain date. He insisted several times until the other trader wrote "enough, enough".
"That's my obsessionality for you. Why say something once when I can say it five times?" he told the court.