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The Trial of 'Tommy Chocolate,' the First Trader Convicted of Rigging Interest Rates

Finally someone got prison time for destroying the worldwide financial system—but that doesn't mean anyone's fixed it.
August 5, 2015, 2:55pm

Tom Hayes arrives at Southwark Crown Court in London, Thursday, July 30, 2015. AP Photo/Frank Augstein

This article originally appeared on VICE UK.

They called him Tommy Chocolate. Because, when the big swinging dicks of the trading world were at the pub each lunchtime, downing their lager, cussing out their rivals, deciding which office girls they'd like to do from behind and which they'd let be done frontwards, Tommy Chocolate would also be stood there too: drinking his traditional mug of hot chocolate, cutting a quieter, altogether more awkward figure.


This despite the fact that, in his own right, Tommy Chocolate—real name Tom Hayes—was actually one of the biggest swinging dicks of all.

So much so that when the star trader left his job at UBS and signed to Citigroup, his new employers handed Hayes £2.2 million [$3.4 million] as a golden hello. Even in the world of high-powered trading, this was a stoinking sum. But Hayes had made £20 million [$31 million] for UBS in 2007. By the middle of 2008, he was already up £30 million [$47 million]. His success exceeded the market's norms by so much that he became the subject of gossip. What exactly, people wanted to know, was his secret?

A year after joining Citi, the answer to that question became obvious. Hayes was sacked from his job in Tokyo for manipulating the Japanese version of inter-bank lending rate—"Libor"—and so began the process that led Tommy Chocolate to his trial at Southwark Crown Court, star of the only major UK banker trial of the post-crash era. Yesterday, that trial finally with a guilty verdict. Tommy C is now a prisoner of Her Majesty, looking towards a 14-year sentence.

Of course, Libor rigging didn't cause the Crash. It simply coincided with it. But as the only proper banker prosecution on the CPS's books, the events playing out at Southwark since the end of May have become symbolic of that same seedy, fuck-you-all era of banking, where some insiders rolled-over the outsiders by whatever means necessary.

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Libor matters because it sets the rate for a range of financial products as crucial as they are terminologically obscure: swaptions, interest syndicated loans, collateralized debt obligations.

In its simplest form, Libor represents the rate at which banks are prepared to lend money to each other. High Libor = there isn't much spare cash in the market. Low = take all you want. That then influences the rate at which they will lend to the public—it establishes a base-line for what's happening with interest rates outside of the Bank of England or US Federal Reserve's own rates.


The value of the market for Libor has been estimated at $450 trillion—that's pretty-much-everything-sized, which is why manipulating it has implications everywhere. The city of Baltimore, for instance, tried to sue Barclays for their role in Libor fixing, after the interest rates on their loans were kept artificially high by the fix, costing them millions.

The extraordinary thing about Libor is not that it was rigged, but that there was ever a time when it wasn't rigged. Libor was a gentlemen's agreement enacted in an environment where everyone was a scuzzy street pimp pounding their a knuckle-duster.

The British Banking Association was in charge of setting this global rate, which is why, in a charmingly ramshackle British way that Richard Curtis might have been proud of, all this bogglingly complex trillion-dollar financial architecture was kept safe by a system about as effective as paper locks.

The entire rate was effectively a matter of the personal opinion of eight people. The British Banking Association would take submissions from 16 global banks about the rate at which they would be prepared to loan money to other banks. They knocked off the four highest and lowest answers, then aggregated the remaining eight. Bam: Libor.

It didn't take Gordon Gecko to figure out that if you influence the eight people who get to chip in on that rate, you control a $450 trillion market. Which is where Hayes, an unrelenting, obsessive maximizer, re-enters the picture.


In endless phone calls replayed to the jury, Hayes could be heard grunting down the line to traders at other banks in his estuary wide boy accent about how he's looking for a "low three-month," or a "high six-month." In endless instant messages shown on video screens in the court, Hayes butters up his trader contacts, then idly slips to them the notion of the "low three-month."

In one email, a trader called Darrell Read, who was leaving to move to New Zealand, gushes in chummy valediction about how much Hayes has helped him out—what a rip-roaring roller coaster ride they have taken together.

In a world already run on bullying and daft luxury perks, Hayes's methods slotted right in, even if his overall side-payments spending was surprisingly modest. He dropped a grand on lunch for one bunch of submitters. He asked a colleague to sort out another group with a money-sloshing night at a strip club to soften them up. Then there are the so-called "wash trades"—where Hayes was alleged to have paid people for their services by trading with them at a distinct disadvantage to himself. He told one broker: "If you get that up I will fucking reward you."

In the face of this quantity of tightly documented evidence, Hayes's strategy was simple and brazen: "So what?" "It's a free country." "Why would someone who thought they were committing a crime leave such a huge paper trail?"

He thought he was innocent because this was an innocent and widely accepted pursuit. He even wrote his Libor upping ambitions on his Facebook wall, his lawyers pointed out: "Tom needs a high three-month." Plain as that. In a letter to his HR managers, Hayes challenged them to point to anything in the Citigroup guidelines he'd overstepped.


Unfortunately for him, the law is very clear on why ignorance of the law is no excuse. But then, the law was also peculiarly vague when it comes to what Hayes actually did. Libor was so loosely defined that there doesn't seem to be one, direct, clear contravention. A specific crime of rate-rigging has since been brought in, but no such thing existed at the time. Which was why he ended up charged with something as vague as "conspiracy to defraud."

In fact, his legal team presented a surprisingly robust case, for someone who seemed so bang-to-rights. The stack of evidence against him included an 82-hour-long taped police interview from 2012, in which he sang like the Placido Domingo of canaries.

To counter this obvious defensive issue, he retracted all the admissions of guilt therein, arguing that he was desperate to get charged in the UK, not the US. Had he been extradited, Tommy C would have faced a 30-year sentence, rather than the book-throwing 14 he got over here—the very upper reaches of British justice's ability to throw the book at a financial criminal. Say what you like about no-holds laissez faire American capitalism, but fuck with their financial system and they go at you with sticks.

The trial was a vast encyclopedia of tedium that extended from May until yesterday: days of people testifying about the floor plan in Citigroup's Tokyo HQ.

A month in, the star finally made his way into the witness box. And when he did, he wasn't alone. By his side at all times, sat a woman in a suit, her long dark hair tied-off neatly. Occasionally, she would lean in and ask the judge whether Tommy could have a little time out, or whether an ambiguous question could be re-worded. But she wasn't a lawyer.


Hayes's other nickname in his early trading days was "Rainman," and it turned out that the pop diagnosis of some bully-boy banker down the pub can also be right from time to time. During the early days of the case, Hayes was been diagnosed as spectrum autistic: He had mild Asperger's. Her role was to make sure he understood the questions—to tell the barristers when they changed the subject too rapidly, or to advise against the making of jokes, most of which Hayes admitted he "doesn't really get."

Hayes admitted his diagnosis could explain why he'd kept the same superhero duvet from age eight to age 24. Or his general "obsessionality." "I wanted to do my job as perfectly as I could," he said, about teenage McWork jobs. "It doesn't matter if I was cleaning a deep fat fryer or picking chicken off the bone, those jobs were left to me because I'd do them the best possible."

On July 10, as his spirited, often combative self-defense peaked, he broke down in tears on the stand. "I wanted to tell them… I haven't done anything wrong," he wept, before going full Jerry Maguire: "At the time I didn't think about any of it, whether it was right or wrong. People go to work every day… on the train or on a bike… or however they get there… and they do a job. They don't sit and think, 'Is doing my job honest or dishonest?' They do their job."

He emphasized every word of "do their job," and it actually sounded stirring, until you thought about it for half a second. Then, you started to wonder whether this non-insight had been swirling around his head for weeks. Whether he'd lain awake, the big thing he had to say forming and dissolving and re-forming before his eyes, until one three am the wording finally perfected itself. They. Do. Their. Jobs. Nuremberg, eat your heart out.


But don't underestimate the role of that sort of psychological self-justification. Hayes was just bullish and obsessive enough to have take such a blinkered view up a gear. He'd been a true believer in the culture. Then the culture had whipped the rug out from underneath him. No wonder he was feeling so sore.

In fact, at times it felt like Hayes had gone for a full, exhaustive trial rather than just pleading guilty in order to spread some muck around. Again and again, he painted himself as the fall guy. "UBS had thrown me under the bus," he said, when his barrister asked him again why he'd originally decided to plead guilty. "I was up against two $50 billion organizations [UBS and Citi], the DOJ [US Department of Justice], the FSA [Britain's then financial regulator], you name the acronym. I was the guy everyone was going to blame."

Amongst many others who'd stood idly by in the culture he foregrounded, he named his own boss at Citigroup, Mike Pieri, who is also alleged to have also gone around asking for high three and six month Libors. In a text to the Wall Street Journal just before the trial kicked off, Hayes put it plainly: "This goes much higher up than me."

"The practice was tried and tested," he told the court. "It was so endemic within the bank [UBS], I just thought … this can't be a big issue because everybody knows about it … [it was] such an open secret."

The court has spoken. Hayes is guilty. As representative of Banking Evil (2006 - 2010 variety), you can certainly feel pumped up and angry at him. Maybe you can also still feel sorry for him. And in small personal ways, I certainly did. Regardless of what had happened on the stand, he always cut an awkward figure—sad, a bit anxious, misplaced, not much of a master of the financial universe, or even the sort of guy who could take a lead in rigging the world's most important interest rate. You wanted to reach over to him and go: "It's OK mate. You'll be alright. Really. Even if you're not."

Is there something wrong with the fact that the only guy to have been brought to trial under the Libor scandal so far is an autistic Tommy Chocolate with his own superhero duvet? Is this—ladies and gentlemen of the popular opinion jury—the sum total of all evil in the financial services sector? Or is this something we're being bought-off with? Should we be expected to choose between the statements: "He is guilty" and "He is being thrown under the bus"?

We have had our pound of flesh. Great. But if we're satisfied by that, then we're missing the ton of rotting carcass that is the financial system just behind it.

Follow Gaivn Haynes on Twitter.