United States v. The Royal Bank of Scotland plc (3:13-CR-74-MPS)
United States v. RBS Securities Japan Limited (3:13-CR-73-MPS)
On February 6, 2013, RBS Securities Japan Limited (RBS Securities Japan), a wholly owned subsidiary of The Royal Bank of Scotland plc (RBS), signed a plea agreement with the government and has agreed to plead guilty to one count of wire fraud (Count 1: 18 U.S.C. § 1343) and pay a $50 million fine for its role in manipulating the Japanese Yen London Interbank Offered Rate (LIBOR), a leading benchmark used in financial products and transactions around the world. The penalty specified in the plea agreement is subject to the review and approval of the District Court. A press release, which describes the scheme in greater detail, can be viewed at http://www.justice.gov/opa/pr/2013/February/13-crm-161.html.
In addition, RBS has agreed to enter into a deferred prosecution agreement (DPA) with the government, and has agreed to the filing of a criminal information in U.S. District Court for the District of Connecticut charging RBS with wire fraud for its role in manipulating LIBOR benchmark interest rates, and with participation in a price-fixing conspiracy in violation of the Sherman Act by rigging the Yen LIBOR benchmark interest rate with other banks. As part of the DPA, which is pending approval by the Court and has not yet been entered, RBS will be required to admit and accept responsibility for its misconduct as described in an extensive statement of facts, to continue cooperating with the Justice Department in its ongoing investigation, and to pay a $150 million penalty, minus the amount of any fine imposed on RBS Securities Japan in connection with its guilty plea.
Together with approximately $462 million in regulatory penalties and disgorgement – $325 million as a result of a Commodity Futures Trading Commission (CFTC) action and approximately $137 million as a result of a U.K. Financial Services Authority (FSA) action – the Justice Department’s criminal penalties bring the total amount of the resolution with RBS and RBS Securities Japan to approximately $612 million.
LIBOR, published by the British Bankers’ Association (BBA), a trade association based in London, is calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year. The LIBOR for a given currency at a specific maturity is the result of a calculation based upon submissions from a panel of banks for that currency (the Contributor Panel) selected by the BBA. From at least 2006 through 2010, RBS has been a member of the Contributor Panel for a number of currencies, including Yen LIBOR and Swiss Franc LIBOR, which are the focus of the plea agreement and DPA.
According to the DPA, at various times from at least 2006 through 2010, certain RBS Yen and Swiss Franc derivatives traders – whose compensation was directly connected to their success in trading financial products tied to LIBOR – engaged in efforts to move LIBOR in a direction favorable to their trading positions. Through these schemes, RBS allegedly defrauded counterparties who were unaware of the manipulation affecting financial products referencing Yen and Swiss Franc LIBOR. The alleged schemes included hundreds of instances in which RBS employees sought to influence LIBOR submissions in a manner favorable to their trading positions in two principal ways: internally at RBS through requests by derivatives traders for Yen and Swiss Franc LIBOR submissions, and externally through an agreement with a separately charged derivatives trader to request Yen LIBOR submissions. The trader, Tom Alexander William Hayes, was formerly employed by a Japanese subsidiary of another Contributor Panel bank, UBS AG (UBS).
According to the DPA, RBS employees engaged in this conduct through electronic communications, which included both emails and electronic chats. For example, in an electronic chat on March 16, 2009, an RBS Swiss Franc derivatives trader, (Trader-7), sought to benefit his trading book by asking the RBS LIBOR submitter (Submitter-1), "can we pls get a very very very low 3m [3 month] and 6m [6 month] fix today [please]" because "we have rather large fixings!" Submitter-1 responded, “perfect, if that’s what u want." After thanking Submitter-1, Trader-7 informed Submitter-1 that "from tomorrow . . . we need them thru the roof!!!!!"
By entering into a DPA with RBS, the Justice Department credits RBS’s cooperation in disclosing LIBOR misconduct within the financial institution, recognizes the significant remedial measures undertaken by RBS’s management to enhance internal controls, and acknowledges the additional reporting, disclosure and cooperation requirements undertaken by the bank. The DPA does not prevent the Justice Department from prosecuting individuals for related conduct.
- U.S. v. UBS Securities Japan Co., Ltd.: On December 19, 2012, UBS Securities Japan (“UBS SJ”), an investment bank, financial advisory securities firm, and wholly owned subsidiary of UBS AG, signed a plea agreement with the government and agreed to plead guilty to one count of wire fraud (Count 1: 18 U.S.C. § 1343), and pay a $100 million fine for its role in a long-running scheme to manipulate of the London Interbank Offered Rate (LIBOR), a leading benchmark interest rate used in financial products and transactions around the world. The penalty specified in the plea agreement is subject to the review and approval of the District Court. In addition, UBS AG, the parent company of UBS SJ headquartered in Switzerland, entered into a non-prosecution agreement (NPA) with the government requiring UBS AG to pay a $500 million penalty minus any amount imposed as a fine on UBS SJ in connection with its guilty plea, to admit and accept responsibility for its misconduct as set forth in an extensive statement of facts, and to continue cooperating with the Justice Department in its ongoing investigation. The NPA does not prevent the Justice Department from prosecuting individuals for related misconduct.
The case is before Judge Robert N. Chatigny of the United States District Court for the District of Connecticut. For more information on this case, please visit the case page at http://www.justice.gov/criminal/vns/caseup/ubssecurities.html.
- Charges Filed Against Two Former UBS Employees: On December 19, 2012, a criminal complaint (No. 1:12-mj-03229-UA) was unsealed in the U.S. District Court for the Southern District of New York charging two former UBS employees, Tom Alexander William Hayes of England and Roger Darin of Switzerland, with conspiracy to commit wire fraud. In addition, the complaint charges Hayes with one count of substantive wire fraud, based on the same scheme, and one count of violating the Sherman Act’s antitrust provisions arising from his collusive activity with a trader at another bank to manipulate Yen LIBOR. This case has not yet been assigned to a judge.
The information on this webpage will be updated periodically to reflect case developments and important court dates.