LONDON â€" American and British regulators fined the financial firm ICAP a combined $87 million on Wednesday for its role in the manipulation of the benchmark interest rate known as Libor, making it the fourth major financial company to reach a settlement in the global investigation.
ICAP, a London-based company that acts as a broker for firms that trade financial products, agreed to a $65 million settlement with the Commodity Futures Trading Commission in the United States and a £14 million, or $22 million, settlement with Britain’s Financial Conduct Authority.
The Justice Department also brought criminal charges against three former ICAP employees on Wednesday over their roles in the scandal. The men, Darrell Read, Daniel Wilkinson and Colin Goodman, could face up to 30 years in prison for each count, according to American prosecutors.
The scandal over Libor, a benchmark to which interest rates on trillions of dollars of financial products are pegged, erupted in the summer of 2012, as investigators unveiled evidence that many big investment banks had manipulated the benchmark for their own profit. Libor is short for the London interbank offered rate.
American and British regulators said that some of ICAP’s employees had tried to alter the reported figures from which Libor is compiled. The brokers also received payments and other incentives from bank traders for the efforts to change Libor rate submissions, according to regulatory filings.
‘‘This was insolent conduct impacting a benchmark rate that influences almost anything consumers buy on credit,’’ a commodities commission member, Bart Chilton, said in a statement on Wednesday. ‘‘These benchmarks are just too important to become a playground for some big-talking bad guys.’’
Over more than four years through early 2011, ICAP employees spread misleading information about a number of Libor-linked interest rates in an effort to manipulate the rates, according to the regulatory filings released on Wednesday. The ICAP brokers, one of whom was called Lord Libor, received more than 400 requests from a single senior trader at a large international bank to alter the rates for financial gain.
During the lengthy attempts to manipulate the benchmark rates, the ICAP employees referred to individuals at other banks that helped to set Libor as “sheep,†while other traders provided the brokers with Champagne, dinners and eventually $72,000 in kickbacks to alter the rates.
“The misconduct in relation to Libor has cast a shadow over the financial services industry,†Tracey McDermott, director of enforcement and financial crime at the Financial Conduct Authority of Britain, said in a statement. “The findings we publish today illustrate, once again, individuals within the industry acting with a cavalier disregard both for regulatory obligations and the interests of the markets.â€
The latest settlement follows a number of previous fines for some of the world’s largest financial institutions in connection to the global rate-rigging scandal.
Britain’s Barclays, the Royal Bank of Scotland and UBS of Switzerland already agreed to pay a combined $2.5 billion in fines related to Libor. Other banks, including Citigroup and Deutsche Bank, also remain under investigation, and future penalties could be announced before the end of the year.
The American criminal charges against some of ICAP’s former employees signify a new effort to bring prosecutions against individuals who have been implicated in the rate-rigging scandal. The three each face one count of conspiracy to commit wire fraud and two further counts of wire fraud.
While several large banks have paid multimillion dollar fines, no people have yet been convicted for their role in the global scandal.
“By allegedly participating in a scheme to manipulate benchmark interest rates for financial gain, these defendants undermined the integrity of the global markets,†Attorney General Eric Holder said on Wednesday. “They were supposed to be honest brokers, but instead, they put their own financial interests ahead of that larger responsibility.â€
British prosecutors also have started to file charges against individuals in the Libor case. In June, a former UBS and Citigroup trader Tom A. W. Hayes was charged on eight counts of fraud. Britain’s Serious Fraud Office also charged Terry J. Farr and James A. Gilmour, two former brokers at RP Martin Holdings, a rival of ICAP. Mr. Hayes is accused of conspiring with employees at several financial institutions, including UBS, Royal Bank of Scotland and ICAP.
ICAP’s fine is much lower than those imposed on the banks that already have reached settlements because the authorities had to take into account the size of ICAP and its financial resources. The firm previously said that it had suspended one employee and placed three others on administrative leave. It said in June that its senior managers were not aware of or involved in any attempts by traders at large banks to manipulate Libor.
“We deeply regret and strongly condemn the inexcusable actions of the brokers,†ICAP’s chief executive, Michael Spencer, said in a statement on Wednesday, adding that none of the brokers still worked at the firm. “Their conduct contravenes all that ICAP stands for.â€
Barclays was the first bank to agree on a Libor settlement of $453 million in June last year. UBS followed later that year with a $1.5 billion fine. The Royal Bank of Scotland, which is majority-owned by the British government following a bailout in 2008, settled Libor charges for $610 million in February.
The latest Libor settlement was accompanied by the publication of a series of colorful e-mail exchanges between ICAP employees and unnamed traders at some of the world’s largest banks. The messages outline the financial and other incentives that were offered to ICAP employees in exchange for manipulating the Libor rate.
In one series of messages, a senior trader at UBS offers to buy an ICAP broker a Ferrari if he alters some of the Libor rates.
“If you can get them up there and keep them there tomorrow reckon the trader from UBS Tokyo will come over and buy you a curry himself!†read another message.
A year after the first Libor fines were announced, global regulators are trying to rebuild confidence in one of the world’s most-used benchmark rates.
In July, the parent company of the New York Stock Exchange won a contract to administer and improve the benchmark, which has been overseen by the British Bankers’ Association, a trade body. The European Union also is considering regulating Libor and other financial benchmarks, according to a draft legislation published last week.
‘‘As should be clear from today’s action, any market participant who seeks to undermine the integrity of a global benchmark interest rate must be held accountable,’’ David Meister, the commodity commission’s director of enforcement said on Wednesday.
