UK prosecutor charges US-based ex-Barclays staff for rigging Libor

LONDON (REUTERS) - Britain on Monday filed its first criminal charges against US-based Libor traders, as the UK arm of a complex global investigation into alleged benchmark interest-rate rigging stretches across the Atlantic.

The Serious Fraud Office (SFO) charged three former traders at British bank Barclays with conspiracy to defraud in connection with its Libor inquiry. The three were director of dollar fixed-income swaps Jay Merchant and dollar interest rate derivative traders Alex Pabon and Ryan Reich.

A provisional hearing has been scheduled at Westminster Magistrates Court in London on May 27 for the three men, who are currently in the United States. Their lawyers were not immediately available to comment.

The charges could prompt the first extradition to Britain from the US in the lengthy investigation into the alleged rigging of Libor, a central cog in the global financial system. The SFO declined to comment on any extradition request or give further details about the charges.

The investigation into benchmark interest rates has been overshadowed by a parallel inquiry into allegations of foreign-exchange market rigging, which on March 5 reached into the heart of London's financial establishment when the Bank of England suspended a staff member. However, the inquiry into alleged fixing of Libor and related Euribor rates, against which around US$450 trillion (S$565 trillion) of financial contracts from derivatives to consumer loans are priced, has so far seen US and European authorities fine 10 banks and brokerages US$6 billion and charge 16 men.

The SFO in February charged three former London-based Barclays Libor submitters - Peter Johnson, Jonathan Mathew and Stylianos Contogoulas - over a two-year scheme to rig rates and in March charged three former ICAP brokers with fraud-related Libor offences.

Barclays was the first bank to settle US and UK regulatory allegations of rate manipulation, paying around US$450 million in fines in 2012. But even regulators admitted privately they were taken aback by an ensuing public and political backlash, which forced out four top Barclays directors, sparked a fraud squad probe and several parliamentary reviews.

In their case to date against former London-based Barclays traders already charged, SFO lawyers have said they have sifted through "vast amounts" of documents, adding that much of the evidence against Johnson, Mathew and Contogoulas was in email form. The three men, who are next expected to appear in court towards the end of July, are the first to face charges for the alleged manipulation of the US dollar-denominated Libor rate.

Ten other men face US and UK criminal charges for manipulating yen-denominated Libor. The SFO has already charged three other men as part of its Libor investigation, including Tom Hayes, a former yen derivatives trader at UBS and Citigroup, who pleaded not guilty in December. Hayes is due to stand trial in January 2015 on eight charges of conspiring with staff from at least 10 major banks and brokerages to manipulate yen Libor rates between 2006 and 2010.

Terry Farr and James Gilmour, two brokers from RP Martin, have been charged and pleaded not guilty to similar fraud-related offences. Their trial has been scheduled for September 2015, in part to allow the SFO time to bring charges against further alleged co-conspirators.