The United Kingdom Supreme Court today commissioned the convictions of Tom Hayes and Carlo Palombo, who was accused of handling Libor and Euribor (respectively).
Tom Hayes and Carlo Palombo appealed against their beliefs, respectively, in August 2015 and March 2019 for extinction crimes. They were accused of conspiracy with others to manipulate the basic reference rates used in financial markets: in the case of Mr Hayes, the percentage offered by Interbat (“Libor”). And in the case of Mr Palombo, the Euro Inter-Bank offered the interest rate (“Euribor”).
In both cases, the Public Prosecutor’s Office claimed that the defendant had dishonestly agreed with others to supply or submit interest rates for the determination of Libor or Euribor who were false or misleading because they were intended to create a commercial advantage and to infringe themselves. others.
Mr Hayes and Mr Palombo were sentenced to trial.
Mr Hayes was sentenced to 14 years in prison, declined after an appeal in 11 years. Mr Palombo was sentenced to 4 years in prison.
One of the reasons why Mr Hayes attempted to appeal to the belief was that the judge had condemned the jury for what they had to decide, with a result of withdrawing a substantial issue of reality from examining the jury. The Court of Appeal rejected this argument and rejected the appeal. The Court of Appeal again approved the instructions given to Mr Hayes’ trial in a later case.
In 2023, the Criminal Affairs Review Committee refers to the convictions of the appellants in the Court of Appeal after a court in the United States decided differently a similar case of the Libor manipulation, which led to convictions and the charges fell to this jurisdiction. The appellants renewed their argument that the judge’s instructions to the jury in their tests were wrong by law. The Court of Appeal has decided that the appellants should not be allowed to do this argument because they are not related to the reason for the report and, in any case, had already been taken and rejected by the Court of Appeal as evil.
The Court of Appeal rejected the appeals and confirmed the convictions, but certified that the appeals raised the following point of law of wider public importance:
“Either as a legal issue regarding the proper construction of the Libor and Euribor definitions:
(a) If submission of Libor or Euribor is influenced by the negotiation advantage, so it is not a real or honest answer to the question posed by the definitions. and
(b) Submission must be an assessment of the only cheaper interest rate in which the Bank of the Commission or a Prime Bank, respectively, could be borrowed at the time of submission rather than a selection of a range of lending rates. “
The Supreme Court granted an appeal permit.
The Supreme Court unanimously responded to both parts of the certified question negatively, allowed both the appeals and the abolition of the convictions of the appellants.
The definition of Libor asked the banks to the banks group that helped set the Libor to submit the interest rate at which the Commission’s bank could borrow funds (in a particular currency, for a specific period) at the time of submission. The question raised by the definition of Euribor was similar, except that it requested the percentage by which a “primary bank” could borrow funds. Determining the interest rate by which a bank could borrow funds at the specified time was not just a matter of reading a number from a screen. It required a subjective evaluation of various data sources and was a matter of opinion – especially as the number submitted had been declared in two (or in some cases five) decimal positions.
Although a bank is generally expected to borrow at the cheaper interest rate available, specifying the percentage that usually included the choice of a number from a range of lending rates that could legally be considered as a real answer to the question raised by the definition.
An essential part of the Public Prosecutor’s Office was that the defendant had agreed with others to supply or submit interest rates that were “false or misleading”. As the answer to the question posed by the definition of Libor or Euribor was a matter of opinion, the submission of an interest rate could be “false or misleading” if it does not represent the true opinion of the submitter for the relevant lending rate.
This was a real issue that, in a criminal trial, is the province of the jury and not the judge to decide.
In his defense, Mr Hayes admitted that when there was a number of possible lending rates, he tried to influence those subject to submit numbers within that range that would benefit from his transactions. But he denied that he had attempted or agreed with others to cause submissions to submit percentages that did not represent their true opinion.
In Mr Hayes’ trial, the judge ordered the jury that, if the percentage submitted would have been to the Bank or a trader’s commercial advantage, then, as a legal issue, the percentage submitted could not be a genuine or honest answer to the question. Since it was not disputed that Mr Hayes had asked the submissions to promote the percentages intended to benefit from his transactions, the judge essentially ordered the jury – as a legal issue – that Mr Hayes agreed to supply the submission of the interest rates that were not rates that were not raised by his interest rates or rates of interest rates. therefore false or misleading.
This was an error. The law could not dictate if the answer asked the question posed by the definition of Libor represented the candidate’s true opinion. Nor was Mr Hayes intended or agreed to supply interest rates that did not represent their true opinion.
These were questions that had to be left to the jury to decide.
The jury could consider the fact that a submission was influenced by the advantage of negotiating as a support of a conclusion that the number submitted was not actually a percentage by which, in the candidate’s view, the Bank of the Commission could borrow money at the time. But it was the jury to decide whether to draw this conclusion, and not for the judge to tell them that they should do so because the law required it.
There were plenty of evidence for which a jury, properly directed, could find the appellant to be a conspiracy to deceive. But the jury was not properly directed.
The impact of the judge’s instructions was to usurp the operation of the jury and to remove Mr Hayes’ defense from the claim that he had agreed to submit percentages that were false or misleading.
This made the trial unfair and leads to the conclusion that Mr Hayes’ convictions must be canceled.
In the case of Mr. Palombo, the Jury’s instructions are not open to the same degree of criticism. But they were still included in the same substantive error to deal with an event as if it were a legal issue.
Combined with other errors and doubts in the directions, the result is that Mr Palombo’s conviction was also found insecure and canceled.