The Justice Department filed criminal charges on Monday against three former traders from the Dutch lender Rabobank, the latest step in the wide-ranging investigation into the banking industry’s manipulation of interest rates.
In a criminal compliant filed with the Federal District Court in Manhattan, the Justice Department accused Paul Robson, Paul Thompson and Tetsuya Motomura with wire fraud and conspiracy to commit wire fraud and bank fraud for their supposed role in the rate-rigging scandal. The traders are cited for submitting false estimates of interest rates to benefit their own trading positions â€" a scheme that became commonplace on Wall Street amid the 2008 financial crisis.
The charges come on the heels of Rabobank itself striking deals with government authorities across the globe, agreeing to pay more than $1 billion in criminal and civil penalties. Rabobank, whose chief executive stepped down when the deal came to light, was the fifth financial firm to settle accusations that its employees manipulated the London interbank offered rate, or Libor, following such global banking giants as Barclays and UBS.
And with the charges on Monday, the Justice Department has now taken aim at eight individual employees at some of those firms. The actions represent a shift for the Justice Department, which has come under fire for not charging individual employees tied to financial crimes.
“These cases we’ve brought in the Libor investigation show how important it is not only to charge the institutions but also the individuals responsible for the misconduct,†Mythili Raman, the acting assistant Attorney General for the Justice Department’s Criminal Division, said in an interview.
But the Justice Department’s charges come with limitations. Of the eight individuals charged, none was an American citizen, undercutting the chance of a trial. Mr. Robson resides in London, while Mr. Thompson lives in Australia and Mr. Motomura lives in Tokyo. It is unlikely that they will face extradition.
Still, the Libor scandal breathed new life into the government’s enforcement of financial fraud in the aftermath of the crisis. The investigations, led by the Commodity Futures Trading Commission in Washington, also put Wall Street on high alert.
Most of the world’s biggest banks submit estimates to form the daily Libor rate, which serves as a benchmark for trillions of dollars in loans and other financial products. Some banks, seeking to profit from slight shifts in Libor, would low-ball or overstate their submissions on a regular basis.
The complaint filed on Monday shined a light on the overt way in which the traders carried out the scheme. One day in August 2008, for example, Mr. Motomura asked Mr. Robson to “Please set today’s 6mth LIBOR at 0.96 I have chunky fixing.†Mr. Robson, who was both a derivatives trader and a submitter of Libor, responded, “no worries mate.â€
The activity went on for years, with some submissions coming in too high and others too low. In an e-mail exchange from May 2006, Mr. Robson acknowledged that “it must be pretty embarrassing to set such a low libor.â€
He also submitted rates described as “ridiculously high†and “obscenely high.â€
