'What the f--- kind of bank is this?': The moment the biggest financial conspiracy ever seen started to fall apart
"What the f*** kind of bank is this?"
Chris Cecere, a Citigroup executive based in Japan, was asking Andrew Morton, a London-based colleague, why the compliance department was looking into the conduct of Tom Hayes.
Hayes, considered at the time a star trader, was later jailed for rigging Libor, a key interest rate that has been called the world's most important number.
The inside story of the Libor scandal is detailed in The Fix: How Bankers Lied, Cheated and Colluded to Rig the World's Most Important Number, by Bloomberg reporters Liam Vaughan and Gavin Finch. The following is an extract from the book.
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Hayes had no idea what had just happened in London or the repercussions it would have. As ever, his mind was squarely on his trading book, and he was stressed.
Waking on Saturday, Hayes composed an e-mail to Cecere and Morton apologizing for how much money he'd lost and promising to make amends. Morton told him not to worry, but said that he needed to reduce his risk-the size of the bets he had outstanding-as soon as possible. It was a blow to Hayes's ego.
While Hayes was unwinding his positions in Tokyo in the weeks that followed, Citigroup's lawyers and compliance officers in London were poring over every e-mail, instant message and recorded phone call he'd made since arriving at the bank. Hoshino was pulled in for questioning, as were Celtik and some of the other rate-setters.
Cecere got wind of the situation on July 12. He waited until the Japanese markets had closed and called Morton, the one man at the bank who he knew would give it to him straight.
"I have a question for you: is there some issue with Little Hoshino in London and risk treasury? Did those guys, like, report him?" Cecere said.
Cecere couldn't believe what he was hearing."Those f***ing c****," he spat. "What is wrong with them? Pardon my language, but that drives me f***ing mental. Pick up a phone and have a word with me."
"I've told you, dude, multiple times, be f****ing careful with those guys," Morton replied.
"What the f*** kind of bank is this?" said Cecere."Turn your people in instead of just picking up a phone and saying: 'look this is really not comfortable, please drop it."'
Hayes didn't hear about the internal investigation until later that month. Cecere rang him on his mobile on a Sunday and suggested they go for a drink. They met that evening at the Windsor Bar, a UK-themed pub in Tokyo where the American was a regular, Hayes would later testify.
Over a beer and a Coca-Cola, Cecere told Hayes that he was going to be questioned by Citigroup's lawyers that week as part of a probe into Libor.
Over the next few weeks, Hayes spent more than 12 hours being quizzed by Citigroup's in-house and external lawyers. He stuck firmly to the same line: That he had no idea what Hoshino had said to the London rate-setters or why.
Hayes assumed he was being questioned as part of a wider investigation, but strange things started happening that made him nervous. Attachments to e-mails he was trying to send kept getting blocked, and he was prevented from leaving the office one evening with some documents. What annoyed Hayes more than anything else was that the lawyers kept pulling him off the desk during trading hours, which was costing him money.
A week later, as Hayes strode across the trading floor to his desk, he got a tap on the shoulder and was pulled into a meeting room. It was a Monday morning. As he walked in, he would later recall, he saw Morton and McCappin, the CEO for Japan, sitting at a conference table.
He hadn't even known that Morton was in town. Citigroup's local head of HR, Moira Lynam,was also there, as was Akiko Yamahara, the bank's general counsel in the country.
Hayes was told that the bank had been investigating him for weeks and had uncovered multiple instances of him trying to manipulate yen Libor to benefit his trading positions. Not only had he been attempting to influence the bank's own rate-setters but he had been acting in concert with traders at other banks and interdealer brokers. Such conduct violated the bank's code of conduct, and probably the law, and consequently he was being fired immediately.
Hayes was floored. Every time he'd asked his bosses what was going on they'd told him not to worry. The previous week he'd been trading as usual. Recovering quickly from the shock, Hayes came out swinging.
"Oh, but he wasn't, he didn't have any trading positions," Yamahara interjected.
"That's not really true is it?" Hayes shot back at McCappin. "As a CEO you have responsibility for every trading position the bank's got. How much are you going to pay me to go quietly? Otherwise I'm going to make a real fuss about this."
All eyes were trained on Hayes. They'd heard about his vitriol on the trading floor. Now it was directed at them. Ever the trader, Hayes knew the strength of his position.When he stopped ranting, they asked him to leave the room.
A few minutes later Hayes was called back. This time he was told that, while he wouldn't be getting any more money, he could keep his $3 million signing bonus. In Hayes's eyes it was hush money. There was nothing more to be said.