In comparison to Tom Hayes (who got 14 years’ imprisonment and is appealing his sentence and conviction) and others being prosecuted for benchmark rigging, it is arguably quite scandalous that UBS rogue trader Kweku Adoboli (who was convicted of two counts of fraud and sentenced to seven years’ imprisonment) was released from prison after spending just a bit over three years behind bars for losing $2.5 billion in unauthorised trading. Ghana-born Adoboli – who travelled the world as a child – is said to be the son of a United Nations official/diplomat. Because of his misconduct, the Financial Conduct Authority (FCA) understandably wishes to ban Adoboli, who reckoned he had a “magic touch”, from being a regulated person in financial services. But now it has emerged that Adoboli was notified of his liability to deportation and has lost his appeal in relation to the decision to deport him from the UK. The 35-year old Ghanaian national, who has resided in the UK for 23 years but never got around to obtaining British nationality, was released from prison in June 2015 and reportedly found the immigration tribunal’s decision upholding his deportation to be “heartbreaking”. His rogue trading wiped off £2.7 billion ($4.5 billion) from UBS’s share price.
The media suggests that the former public school head boy and University of Nottingham graduate – holding a degree in e-commerce and digital business studies – plans to appeal the tribunal’s decision. It has been reported that the home office only seeks to deport individuals whose sentence is longer than four years (Immigration Rules, Part 13, Deportation and Article 8, paragraph 398(a)) unless they are able to demonstrate otherwise. (A sentence of four years’ imprisonment or more means the person is a serious criminal and “very compelling circumstances” is an extremely high threshold. As a general principle, the greater the public interest in deporting the foreign criminal, the more compelling the foreign criminal’s circumstances must be in order to outweigh it.) However, under paragraph 398(b) the deportation of a person from the UK is conducive to the public good and in the public interest where they have been convicted of an offence for which they have been sentenced to a period of imprisonment of less than four years but at least 12 months. It is common knowledge that anyone who has been convicted of an offence exceeding 12 months’ imprisonment is caught by “automatic deportation” because after the foreign national prisoners crisis the government legislated in the form of the UK Borders Act 2007 to close the “institutional blind spot” represented by the authorities’ negligence in releasing foreign criminals (who had served prison terms) into the community without considering them for deportation.
This round up looks at some of these themes and also examines the crackdown on benchmark rigging in which the figure of former UBS trader Tom Hayes – the “ringmaster” with a large network of co-conspirators in the business world – remains central. The relevant provisions of the 2007 Act were brought into force on 1 August 2008 by the UK Borders Act 2007 (Commencement No. 3 and Transitional Provisions) Order 2008. They apply to all convicted persons who are not British citizens, whether they are citizens of the EU or not.
Adoboli’s arrogance did not serve him well during his criminal trial and the court remarked that he was a rogue trader who disregarded the rules for trading. UBS was fined £30 million for lack of adequate oversight mechanisms, control and supervision – shortcomings that allowed the largest loss for unauthorised trading to precipitate without its signs showing up on the Swiss lender’s radar.
In Seven Deadly Sins: ‘Retrospectivity, Culpability and Responsibility’ my friend Professor Roger McCormick (tweeting as @ConductCosts see also the Conduct Costs Project) expertly classifies Adoboli’s misconduct as “Individual Criminality”, or a “Case 5 event”, which is where there is clear evidence that a crime has been committed by a bank employee and the culprit (usually acting alone) is identified. Insider trading and the “rogue trader” are classic examples of Case 5 events.
Although Adoboli thinks that his nationality has nothing to do with his offence the plain sad truth for him is that his actions were such that deportation to Ghana is very much on the cards for him. People have been deported for doing much less but, with two decades of UK residence under his belt, Adoboli does have a good claim under Article 8 of the European Convention on Human Rights (ECHR), i.e. his right to a private and family life.
A foreign criminal is by section 32 of the 2007 Act any person who has received a sentence of imprisonment of at least 12 months after 1 August 2008 or is in custody pursuant to such a sentence on that date and had not been served with a notice of deportation before then. Moreover, section 32(4) and (5) provide that for the purpose of section 3(5)(a) of the Immigration Act 1971, the deportation of a foreign criminal is conducive to the public good and that the home secretary must make a deportation order in respect of a foreign criminal (subject to section 33). So far as is material, under section 33, section 32(4) and (5) do not apply where an exception in this section applies and for example exception 1 is where removal of the foreign criminal in pursuance of the deportation order would breach his ECHR rights or UK’s obligations under the Refugee Convention.
Section 32(2) of the 2007 Act sets out that the automatic deportation provisions apply to those sentenced to a period of imprisonment of at least 12 months and section 38 defines what is meant by “imprisonment”: see section 32(2) and section 38.
A foreign criminal is defined, as set out at section 117D(2) of the Nationality, Immigration and Asylum Act 2002, as a person who is not a British citizen, who has been convicted in the UK of an offence, and who has been sentenced to a period of imprisonment of at least 12 months, or has been convicted of an offence that has caused serious harm, or is a persistent offender.
Pending in the Supreme Court
The deportation system is the subject of constant controversy and some appeals are pending in the Supreme Court on this nebulous but interesting area of law. On 28 July 2015, Lord Kerr, Lord Wilson and Lord Carwath JJSC granted permission to appeal in the following trio of cases:
- Makhlouf (AP) (Appellant) v Secretary of State for the Home Department (Respondent) Case No: UKSC 2015/0092, Neutral Citation No:  NICA 86.
- Secretary of State for the Home Department (Appellant) v TH (Bangladesh) (AP) (Respondent) Case No: UKSC 2015/0105 Neutral Citation No:  EWCA Civ 250, see here.
- HA (Iraq) (AP) (Appellant) v Secretary of State for the Home Department (Respondent) Case No: UKSC 2015/0126 Neutral Citation No:  EWCA Civ 1304.
The Public Interest
Article 8 claims advanced by foreign criminals are considered under paragraphs 398 to 399A of the Immigration Rules and these rather troublesome rules are underpinned by sections 117A to 117D of the Nationality, Immigration and Asylum Act 2002 (as amended by section 19 of the Immigration Act 2014 see here). The provisions came into force 28 July 2014 and:
- Section 117A sets out how the Article 8 provisions are to be applied.
- Section 117B sets out Parliament’s view of the public interest in Article 8 claims made by any foreign nationals, including foreign criminals.
- Section 117C sets out Parliament’s view of the public interest in Article 8 claims made by foreign criminals liable to deportation.
- Section 117D sets out the interpretation of sections 117A to 117C.
Some notable tribunal cases on these new public interest provisions are:
- Dube (ss.117A-117D)  UKUT 90 (IAC) (24 February 2015, see here)
- Chege (section 117D Article 8 approach : Kenya)  UKUT 165 (IAC) (5 March 2015).
- AM (section 117B)  UKUT 260 (IAC) (17 April 2015).
- Badewa (ss. 117A-D and EEA Regulations)  UKUT 329 (IAC) (29 May 2015).
- Forman (ss 117A-C considerations)  UKUT 412 (IAC) (19 June 2015)
- Bossade (ss.117A-D-interrelationship with Rules)  UKUT 415 (IAC) (16 July 2015).
- Deelah and others (section 117B – ambit)  UKUT 515 (IAC) (30 July 2015).
- KMO (section 117 – unduly harsh)  UKUT 543 (IAC) (25 September 2015).
The Criminal Trial 2012
In fighting the fraud case against him at UBS’s London unit, the Ghanaian argued at trial that managers at Zurich-based UBS pressurised him to take multiple risks and like Tom Hayes he contended that disregarding the rules the bank was widespread. Although Adoboli admitted that he caused the losses, he nevertheless argued that his actions were not dishonest. His application for permission to challenge the conviction was rejected by a panel of three judges at the Court of Appeal in London on 4 June 2014 when Sir Brian Leveson, Patterson J and Sir Richard Henriques decided to throw out his case.
“The case was in truth overwhelming and the applicant can have no complaint,” explained Sir Brian Leveson. Pointing out that all the grounds upon which the application was mounted had been considered with “great care” by the panel, the Court of Appeal concluded that:
We have no doubt that his convictions are unassailable.
Similarly, in his sentencing remarks, Keith J made it extremely clear to Adoboli:
Whatever the verdict of the jury you would forever have been known as the man responsible for the largest trading loss in British banking history.
Your fall from grace as a result of these convictions is spectacular. The fact is you are profoundly unselfconscious of your own failings …
There is a strong streak of the gambler in you. You were arrogant to think the bank’s rules for traders did not apply to you.
During the trial, the judge gave the jury a majority verdict direction, saying they could deliver a 9-1 verdict on the second fraud charge and the four false accounting charges. The jury – which found Adoboli guilty by a majority verdict of fraud but acquitted him of the other charges – had been reduced to five men and five women after two jurors were discharged. Adoboli, who claimed to have lost control over his trades during a period of market turbulence in 2011, informed the jury that his senior managers encouraged him to take risks and were aware of his actions.
Adoboli claimed to have been acting in the bank’s interest, calling his colleagues “family”, but the prosecution attacked him for being a gambler who had misconceptions about his own “magic touch” abilities. He also said that employees at UBS were encouraged to take risks until they got “a slap on the back of the wrist”. Arguing that he had “lost control in the maelstrom of the financial crisis”, he pleaded his case on the basis that he was doing well until he changed his conservative “bearish” position to an aggressive “bullish” stance because of pressure from his senior management.
The role of section 3(6), which has not been repealed, of the Immigration Act 1971 has been reduced in light of the regime created by the 2007 Act and in R v Kluxen  EWCA Crim 1081 analysing the circumstances in which a court should recommend an offender’s deportation, the Court of Appeal (Criminal Division) held that:
- Subsequent to the coming into force of the 2007 Act, it was generally inappropriate for a court to recommend the deportation of a “foreign criminal” as defined by section 32: para 9.
- In light of the observation that the “conducive” liability to deportation within the meaning of section 3(5)(a) of the 1971 Act remained available, “it will rarely be appropriate to recommend the deportation of an offender who is not a British citizen, but to whom the 2007 Act does not apply and this is so whether or not offender is a citizen of the EU”: paras 27-28.
- Thomas LJ, Maddison J and Sir Geoffery Grigson upheld Kluxen’s sentence but dismissed the recommendation to deport her because it should never have been made. However, at para 35, the court wrongly found that she was a Ghanaian national. See my post on an interesting judgment connected to deportation proceedings in Kluxen’s case: she was a poor and elderly woman in a difficult predicament that involved her young grandchildren. So if a high-ranking judicial figure like Sir John Thomas of Cwmgiedd can make a mistake in Kluxen’s case, then Kweku Adoboli may well have a chance of mounting a successful challenge against the dismissal of his deportation appeal.
- It will be interesting to see how far Kweku Adoboli’s case will get in the court system and whether he will make it to the Court of Appeal and the Supreme Court? It is hard to see why the son of an African diplomat should be treated any better than the “common criminals” routinely deported by the home office.
Deportation Order and ILR
Adoboli is neither British nor a Union citizen and information in the public domain suggests that he is a settled person with indefinite leave to remain (ILR). If he is loses his immigration appeal then he may apply for the revocation of his deportation order. Notably, under the Supreme Court’s decision in R (George) v Secretary of State for the Home Department  UKSC 28 the revocation of a deportation order does not revive a criminal immigrant’s past ILR. Rather, the home secretary is free to decide afresh what leave to grant: see Deportation Order Terminates ILR.
Where it is decided to abandon deportation action against a foreign national for whatever reason, e.g. removal would breach human rights, consideration must be given to punish the foreign criminal by revoking any ILR.
Benchmark Rigging Trials
Just to compare Adoboli’s predicament with others caught up in corporate crime – such as the “flash crash” trader Navinder Sarao who is resisting extradition to the US and is accused of “spoofing” and may get sentenced to 380 years’ imprisonment – getting deported to Ghana is probably not that bad an outcome. (It will be interesting to see how far Sarao gets with his extradition appeal? He was luckily able to have it adjourned from September 2015 to January 2016.)
I posted on benchmark (LIBOR) rigging, in which UBS remained a core institution, a few days back and soon enough @MChawlaQC followed me on @globalcorplaw so I thought I should share my post here to expose the kind of environment people like Adoboli were operating in.
Arguably, such high-flying criminals have no respect for anyone and really should be punished in a full-on kind of way. Why should only the poor suffer under the law?
After all, Adoboli’s actions not only cost other traders their jobs and prompted the CEO’s resignation but they also wiped off £2.7 billion ($4.5 billion) from UBS’s share price. It does not look like he got the full-treatment for his mischief.
Here is the latest on the British LIBOR trials:
Only recently former rogue UBS trader Tom Hayes, who accused the Swiss lender of distributing a manual on rigging LIBOR, became the first person ever to be convicted of benchmark rigging. He got 14 years’ imprisonment for eight counts of fraud and is appealing his conviction and sentence. However, episode two of the LIBOR trial is underway in London this week and a number of brokers thought to be acting in cahoots with Hayes are facing a jury in Southwark crown court for manipulating the interbank rate. These proceedings constitute a continuation of the long promised clean up (being overseen by the Serious Fraud Office) of rampant cheating in the banking and financial services industry that erupted in the aftermath of the global financial crisis. The sequel proceedings involve a batch of allegedly crooked individuals, namely Darrell Read (50), Colin Goodman (53), Danny Wilkinson (48) of ICAP (“a leading markets operator and provider of post trade risk mitigation and information services”); Terry Farr (44) and James Gilmour (50), formerly of RP Martin; and Noel Cryan (49, of Tullet Prebon). Their criminal trial began today and is expected to last 12 to 14 weeks and is likely to end early in the new year. All six deny the charges and have elected to plead not guilty.
The new/emergent point in these cases is the part played by brokers, and not traders and submitters, in LIBOR manipulation. The half a dozen individuals identified above stand accused of conspiring with Hayes to rig LIBOR by suggesting numbers which were falsified and misleading. Darrell Read and Colin Goodman are said to have conspired with Brent Davies (also of ICAP) and Hayes. Terry Farr and James Gilmour are said to have conspired with Luke Madden of HSBC and Paul Robson of Rabobank to rig LIBOR. Farr also faces charges for conspiring with Hayes during his time at Citibank (which ultimately reported him over his cheating ways). Noel Cryan is accused of conspiring with UBS traders. Hamblen J, a highly accomplished and respected judicial figure, will hear the case and it is being prosecuted by Mukul Chawla QC who saw to it that no loose boards were left dangling from Hayes’s coffin when he went down. Opening the case for the prosecution, Mukul Chawla QC argued that all six defendants conspired with Hayes and others and that they were:
rewarded in various ways to corrupt the system.
These proceedings are the result of a wide-ranging crackdown on corporate crime involving an alignment of tactics and enhanced coordination by international regulators. Employees of big banks such as HSBC, Deutsche, UBS, RBS and Citibank – which have already paid billions to settle their bad behaviour entailing “clustered criminality” – are caught up in these high profile investigations and regulatory actions and the interlinked civil and criminal legal proceedings. (Clustered criminality is part of the Case 1 cohort of which benchmark rigging and tax evasion are classic examples.)
As I have noted here, the “ringmaster” of manipulation, Tom Hayes, pleaded not guilty in December 2013 to eight charges of fraud: instead, he insisted that he was operating in a “grey area” where there were “no rules” and that UBS distributed “an instruction manual on fixing LIBOR.” “Petrified” of extradition, Hayes explained to the jury:
the only consideration was getting charged and avoiding extradition … I didn’t think about innocence or guilt.
Despite being brutally sentenced for his crimes Hayes was able to achieve his objective of avoiding extradition to the US where he was a wanted man. Hayes famously wrote an email correspondence to a broker stating that:
just give the cash desk a Mars bar and they’ll set you whatever they want.
Hayes initially agreed to plead guilty but later, changing his mind, he somersaulted on his plea. He contended that he always acted with “complete transparency” and that LIBOR rigging was an open secret. According to him, all his managers (even the CEO) were well aware of his methods.
Will these new accused say the same?
Chawla also maintained that they corrupted a process which “should not have been corrupted” and argued that Hayes was the “central figure” and that as the master puppeteer he manipulated the brokers. According to the prosecutor:
Each one of these six defendants was essentially helping him to cheat those who had entered into trades with.
Read was Hayes’s partner in crime at ICAP and the broker at the euro yen cash desk in London and New Zealand was reportedly known by the moniker “Big Nose”. Goodwin was known by moniker “Lord LIBOR”. Read’s manager Wilkinson who also allegedly participated in the rigging was known as “Sarge” and described the rigging as “arbi” (shorthand for “arbitrage”) . The prosecution’s case will continue until the middle of November 2015 and the accused will present their defence thereafter. The first three counts on the indictment relate to Hayes’s activities at UBS whereas the second two are connected to his time at Citigroup. Chawla has had to explain quite a lot of technical jargon to the jury; terminology used in the banking trade – such as a “yard” signifying a billion and a basis point meaning .001% and so forth – which these individuals relied upon to carry out their malevolent designs.
Chawla said that Hayes’s actions “loom large in everything” and that the six accused were “middlemen” in his cheating ways. The jury heard the prosecution argue that the immediate victims of handsome rewards for the middlemen were the traders at the other end of Hayes’s trades.
Hayes used inducements such as posh restaurant meals, beer and even curry to get these defendants to rig the rate in his favour. The Guardian has reported today (8 October 2015) that on his first trading day at UBS in Tokyo, i.e. on 29 September 2006, told Farr on Bloomberg chat to “do me a favour today and get LIBORS right up? started trading today and am long of em.” Farr replied: “I’ll do what I can.” Moreover, Read got a request from Hayes and responded: “Do my best mate.” Soon afterwards, Hayes sought Read’s collaboration to get someone else at another firm to manipulate the six-month LIBOR rate, saying he had a “fix” worth 350 billion yen – then equivalent to about £1.75 billion – depending on it, the jury heard.
On another occasion, Hayes said to Read: “I’m getting absolutely done on this, I’ve lost a fortune”, and Read replied “Shite … will push as high as I can.” The prosecution alleges that Read changed over to night shifts so he could do more to manipulate things in a different time zone.
“Can you please get 3 and 6-month [LIBOR rates] as high as is possible today. We’ll sort you out with a curry takeaway next week in recognition of your efforts. Thanks mate,” Read told ICAP colleague Goodman on 20 October 2006. Email exchanges recorded that while at UBS Hayes wrote: “Well done Darrell and Terry [Farr]. I owe them a beer.” Similarly, Read promised Goodman “copious amounts of curry” in return for LIBOR manipulation. Another treat offered was a meal at K10, a Japanese restaurant in the City.
Chawla said to the jury:
It is small things like beers or a curry. The process is not so trivial.
Phone calls played to the jury between the accused included Farr appearing to ask someone (who did as he was told) to lower LIBOR as a favour for a “geezer at UBS, he’s a mate and he does us a lot of favours … anything above that [a certain rate] is going to fucking lose us a load of money so I said I’d have a word with you.”
In arguing his case, Chawla explained that:
It has got nothing to do with the LIBOR definition and how LIBOR should be set. It is all to do with trader manipulation, to do with causing maximum advantage to his [Hayes’s] trading book to the disadvantage of others.
Reportedly, in March 2007, Read wrote to Hayes:
I need to make up some ground on the average monthly brokerage fee to get myself a contract worth having in New Zealand … Good luck Tom hope you make us both lots of money!
As noted above, five sets of charges are involved in these cases. Three involve Hayes until 2009 when he was at UBS and two turn on his time at Citibank. All six defendants have pleaded not guilty.
Episode Three: Forex: The Next Criminal Bombshell?
Notably, on 21 July 2014 the Director of the Serious Fraud Office opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange market.
As noted before on this blog, the LIBOR scandal is just the tip of the iceberg because the rigging of the $5.3 trillion-a-day forex markets completely dwarfs the total $500-$800 trillion value of financial contracts underpinned by LIBOR.
The rigging of forex markets was achieved by rogue traders who congregated in chat rooms under aliases such as “The Cartel” and the “Coiled Cobra”.
FMSA and Third Party Rights
In relation to the forex investigations, Rohan Ramchandani (previously European head of spot trading at Citigroup) and Richard Usher (formerly the chief currency dealer in London for JP Morgan) are also pursuing challenges because of being identified by the FCA in the $4.3 billion global settlement in November 2014 as regards forex manipulation involving a half a dozen banks. Usher and Ramchandani are due to be interviewed by the SFO at the end of this month.
Ramchandani, who was allegedly part and parcel of the Cartel, is presently under investigation by the Serious Fraud Office. Apart from Ramchandani, other alleged members of the Cartel include Usher, Matt Gardiner and Chris Ashton (a temporary member). The details of these venal networks have emerged out of May 2015’s forex rigging penalties.
As noted before on this blog, the case of Macris is not just a one-off case. Macris contended that the notice clearly identified him and that he should have been given third party rights within the meaning of section 393 of the Financial Services and Markets Act 2000. Longmore, Patten and Gloster LJJ found against the FCA: see The Financial Conduct Authority (FCA) v Achilles Macris  EWCA Civ 490 which the FCA is appealing to the Supreme Court.
The Court of Appeal ruled that the FCA should have given Macris the right to make representations on certain matters set out in the final notice issued to JPMorgan Chase Bank N.A (JP Morgan) on 19 September 2013 which related to the ‘London Whale’ trades (entailing losses of $6.2 billion) .
Quite literally following suit, Deutsche Bank’s former super star trader Christian Bittar is also taking action against the FCA for improperly identifying him in April’s historic LIBOR manipulation settlement – which left Deutsche Bank nursing fines totalling $2.5 billion – with American and British regulators. Bittar, who has been privately warned by the FCA that it wants to fine him £10 million for benchmark rigging, alleges that he was not provided the opportunity to make representations before the watchdog’s findings were published. He was identified in the FCA’s final notice as “Manager B” and in the US as “Trader 3”.