US Prosecutors Preparing to Make Libor Arrests in US

By Reuters

23 July 12

Sources familiar with investigation say American prosecutors close to arresting individuals over Libor scandal.

merican prosecutors and European regulators are close to arresting individual traders over the Libor scandal and charging them with colluding to manipulate global benchmark interest rates, according to sources familiar with the investigation.

Federal prosecutors in Washington DC have recently contacted lawyers representing some of the individuals under suspicion to notify them that criminal charges and arrests could be imminent, said two sources speaking anonymously.

Defence lawyers representing individuals under suspicion said prosecutors have indicated they will begin making arrests and filing charges in the next few weeks. In long-running financial investigations it is not uncommon for prosecutors to contact defence lawyers for individuals before filing charges to offer them a chance to co-operate or take a plea, the lawyers said.

Alongside the investigation into how traders allegedly sought to influence the London Interbank Offered Rate, or Libor, and other global rates there in an effort by regulators to punish major banks with fines.

"The individual criminal charges have no impact on the regulatory moves against the banks," said a European source familiar with the matter. "But banks are hoping that at least regulators will see that the scandal was mainly due to individual misbehaviour of a gang of traders."

"More than a handful of traders at different banks are involved," said the source.

There are also probes in Europe concerning Euribor, the Euro Interbank Offered Rate.

It is not clear what individuals and banks federal prosecutors are most focused on. A top US Department of Justice lawyer overseeing the investigation did not respond to a request for a comment.

Reuters previously reported that more than a dozen current and former employees of several large banks are under investigation, including Barclays, UBS and Citigroup, and have hired defence lawyers over the past year as a federal grand jury in Washington DC continues to gather evidence.

The activity in the Libor investigation, which has been going on for three years, has quickened since Barclays agreed last month to pay £290m in fines and penalties to settle allegations with regulators and prosecutors that some of its employees tried to manipulate key interest rates from 2005 through 2009.

Barclays, which signed a non-prosecution agreement with US prosecutors, is the first major bank to reach a settlement in the investigation, which also is looking at the activities of employees at HSBC, Deutsche Bank and other major banks.

The Barclays settlement sparked outrage and a series of public hearings in Britain, after which Barclays chief executive Bob Diamond announced his resignation.

The source familiar with the regulatory investigation in Europe said two traders who have been suspended from Deutsche Bank were among those being investigated. A Deutsche Bank spokesman declined to comment.

The Financial Times reported on Wednesday that regulators were looking at suspected communication among four traders who had worked at Barclays, Credit Agricole, HSBC and Deutsche Bank.

Banks also face a growing number of civil lawsuits from cities, companies and financial institutions claiming they were harmed by rate manipulation. Morgan Stanley recently estimated that the 11 global banks linked to the Libor scandal may face £9bn in regulatory and legal settlement costs through 2014.