In the first of this three-part series, we explored how LIBOR worked pre-2008 and outlined how submitting commercially-minded rates was normal market practice. The first time the practice was outlawed was by a non-expert judge in 2015, at which point the law was applied retrospectively. In the second part, we looked at the Serious Fraud Office’s use of non-expert witnesses and the failure to prosecute senior officials for “lowballing.” In this final piece, we will look at the human cost and whether the LIBOR traders have any hope of justice.
The Damage Done
When discussing the LIBOR trials, it can be easy to forget that real lives have been affected by this. The frenzy that swept the world after the financial crisis means bankers are sometimes seen as a separate breed of men: they are the pantomime villains, caricatures which we are encouraged to loathe. Indeed, to a considerable degree, the SFO’s prosecution benefited from this feeling: juries probably did not need too much persuading to lock some bankers up for a long time. But as we begin to realise the extent to which the justice system has seriously failed, it is necessary to look at the very real damage which has been done.
While all the traders have been severely wronged, Tom Hayes has suffered particularly badly. He was originally sentenced to an incredible fourteen years in prison. Later reduced to eleven on appeal, he served the best part of six years and was only released last year. The sentence itself is close to barbaric: as Hayes noted, “people are convicted of rape or kill people and get lesser sentences.” Worse, he was held in maximum security prisons for the majority of his sentence. “I was sharing cells with guys who’ve assassinated people with machine guns. I was with guys who were serving a minimum of thirty or thirty-five years for gangland killings. I was with some extremely violent people.” The mental toll that takes is devastating. Though Hayes turned to religion in prison, in an attempt “to understand why this happened to me,” he still suffers from PTSD and has therapy every week. “I lost my marriage. I lost my liberty. I lost time seeing my son grow up. I lost a lot. Notwithstanding the material possessions I lost, which are far smaller in magnitude in terms of the impact on my life,” Hayes told DisruptionBanking.
All the traders have similar stories. Jay Merchant missed the birth of his child. Having lived in the United States for thirty years, he “was locked up for 25 months, thousands of miles away from my wife and kids” and is now unable to return home because of his criminal record. His father-in-law, “one of my best friends and a wonderful man,” died of cancer shortly after he was locked up and Merchant was not able to be there. The extent to which the prosecution engaged in dirty tricks is astonishing: even “my wife’s blind dog” was declared as an asset that could be seized. Upon his release, Merchant could not bear to remain in the UK given how he had been treated. He now lives in Europe with his family, but is still waiting for the US to allow him to go back home.
Carlo Palombo is trying to rebuild his life after his spell in prison. He was in the middle of completing a doctorate in Philosophy at the University of California when he was charged, and is now unable to return to the States. He has now re-started another doctorate from scratch in London, but has lost his teaching position in California. Like Merchant, Palombo missed the birth of his child while in prison: “my wife had to raise my daughter alone for two years.” His daughter has not seen most of his family at home in Italy, because his ability to travel remains very restricted. The SFO is still insisting that he pays the prosecution costs, which could ruin him financially. “I try to live as normally as possible […] but this has just destroyed my life.”
Philippe Moryoussef avoided prison by fleeing home to France during the trial. As we noted in Part One, he became terrified when he realised a non-expert judge was ignoring all the advice of financial professionals and effectively inventing a law out of nowhere. “I realised everything was biased against us,” he said. The British authorities responded to this by putting out a European Arrest Warrant, and sentencing him to eight years imprisonment in absentia. Within France, he remains relatively free, but is unable to leave the country without facing arrest. France recognises that he has not committed any criminal acts, but there has been little in the way of diplomatic pressure to try and get his conviction overturned in the UK. For now, Moryoussef remains in limbo: free within his home country but, effectively an international fugitive, is still unable to live his life as he would please.
Those which were found not guilty, Ryan Reich and Stylianos Contogoulas, or who have been subsequently acquitted, Matthew Connolly, have also had their lives impacted hugely. Reich told us that he has never been able to get a job in finance after his trial because compliance teams won’t allow it. He is successfully running a real estate company with a friend, and seems to have moved on in life, but resents that his career ambitions were so derailed through no fault of his own. Perhaps most significantly, he is “so tired of talking about it and having to explain [himself]” to people viewing him with suspicion. “Why do you get to judge me because of something the UK Government randomly accused me of ten years ago?”
Contogoulas also had his career “completely ruined” despite his acquittal. A career in banking was one that he had always dreamt of and aspired to: “I always studied hard at school […] I then spent all those years on the trading floor working extremely long hours in a very difficult and demanding environment. It was a sequence of events that spanned decades, that brought me to the point that I was as a successful trader.” All of this was “shattered – a whole life’s work destroyed.” And that is to say nothing of the “mental side of the trials.” Having had to face the possibility of being locked up for ten years, with two very young children at home, continues to take a mental toll even after an acquittal.
Connolly has now had his conviction overturned in the States. Having been released on bail during his appeal, he spent only a day in prison and considers himself relatively lucky compared to Hayes, Merchant, Palombo and Moryoussef. “I was under bail restrictions for six years, but thank goodness had no jail time […] The other exonerations are more important than mine in my eyes. They went to jail.” Connolly is throwing himself behind the ongoing campaigns in the UK. “My only real mission is to make sure the mistakes made on both sides of the Atlantic get exposed,” he told us. “So that going forward no other innocent people are put through what I was put through. Sunlight is the best disinfectant.”
Justice at last?
Having convictions in the UK overturned will be a difficult task, but the traders have a few friends in Parliament which may help. Lord Vinson in the House of Lords is submitting a written question to try and have the issue examined by Parliament. Kevin Hollinrake MP in the Commons similarly recognises the nature of the injustices that have taken place. While this political support is welcome, ultimately the traders will need to go through the courts.
As Merchant noted, this is tricky because – remarkably – “four times the Court of Appeal refused to let us go to the Supreme Court.” Given everything we have documented throughout this series, the idea that the cases are not eligible for appeal is astonishing. “How can they deny us an appeal when there are so many irregularities?,” Merchant wonders. Hayes has also previously had his attempts to appeal blocked, while Moryoussef’s ECHR requests have been filtered out twice – by the same judge. His legal team is currently putting together an extraordinary appeal.
Palombo, however, is still in the process of trying to appeal to the European Court. While a hearing date has not yet been set, Palombo intends to argue that the UK has breached Article Seven of the European Convention on Human Rights – that regarding the certainty of the law. As he told us, “the idea is the fundamental legal principle of no punishment without law: one cannot be punished for a crime if at the time of his conduct, one could not have clearly known (with proper legal advice), that his conduct was a crime and that therefore he could be punished for it accordingly.” Given how commercially-minded LIBOR submissions were first outlawed in 2015 and retrospectively applied, this case seems strong. “I believe our case to the ECHR that our conduct was not foreseeably criminal and that the UK judiciary made the law retroactively is very strong,” Palombo said, “the whole world agrees that what we did was not a crime.”
If and when it comes, this appeal at the European Court will be a watershed moment. Will the UK authorities finally be forced to acknowledge how outrageously they have behaved? Over a decade on from the financial crash, we must now be honest about the injustices that have taken place. Innocent traders have had their careers and lives ruined on wholly illegitimate grounds. None of them are criminals, but people who were unlucky enough to be in the wrong place at the wrong time – convenient victims of the demand for blood post-2008. It is time for all of these convictions to be quashed so these men can at least try to start putting their lives back together.
Author: Harry Clynch
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