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    Senior Member JohnDoe2's Avatar
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    Two Former UBS Traders Charged in Libor Probe

    Updated December 19, 2012, 2:18 p.m. ET

    Two Former UBS Traders Charged in Libor Probe


    By EVAN PEREZ And ALAN ZIBEL

    WASHINGTON—U.S. prosecutors charged two former traders at UBS AG UBSN.VX $-0.33%on Wednesday with conspiring to manipulate a key global interest rate to boost profits, a rare case of senior bankers facing personal criminal liability for alleged misconduct before and during the financial crisis.

    The charges came as U.S. officials announced their part of a global $1.5 billion settlement with the Swiss bank.

    The former traders, Tom Alexander William Hayes, 33 years old, who lives in England, and Roger Darin, 41, a resident of Switzerland, were both charged with conspiracy, the Justice Department said. Mr. Hayes was also charged with wire fraud and price fixing.

    Lawyers for the two men couldn't immediately be located. U.S. officials said they would seek the extradition of the two to face charges in the U.S.

    In the settlement, UBS acknowledged that dozens of its employees were involved in efforts to manipulate the London Interbank Offered Rate and other benchmark rates that lie behind trillions of dollars of financial contracts around the world.

    "The alleged conspirators we've charged—along with others at UBS—manipulated the benchmark interest rate upon which many transactions and consumer financial products are based," Attorney General Eric Holder said. "They defrauded the company's counterparties of millions of dollars. And they did so primarily to reap increased profits, and secure bigger bonuses, for themselves."

    For at least six years, UBS "regularly tried to manipulate benchmark interest rates for profit," the Commodity Futures Trading Commission said, citing more than 2,000 instances of illegal conduct.

    "The bank's conduct is simply astonishing," Lanny Breuer, the assistant attorney general for the Department of Justice's criminal division, said at a news conference.

    Average people were affected by the UBS scheme because they carry mortgages, credit-card debt and other financial products dependent on Libor, he said. The bank and its traders carried the manipulation to maximize profits and to ensure that "the bank would not appear to be vulnerable to the public during the financial crisis."

    Traders who participated in the misconduct were rewarded with commission and cash bonuses, according to Mr. Breuer.

    As part of the settlement, the CFTC said UBS would pay a $700 million penalty, the largest in the agency's history.

    David Meister, the CFTC's director of enforcement, said UBS traders worked with counterparts at other banks who weren't aware of the manipulation. The traders referred to these counterparts as "sheep," he said.

    UBS provided cooperation, but only after the agency in 2009 told the bank to investigate the alleged manipulation, he said.

    Messrs. Holder and Breuer defended the Justice Department's decision not to prosecute UBS, although this is second time in four years that UBS has admitted to criminal violations. In 2009, UBS agreed to pay $780 million and admitted to aiding tax evasion under a deferred prosecution agreement with the Justice Department.

    Mr. Breuer cited the company's cooperation and new bank leadership. He said indicting the bank would likely have had severe repercussions on the financial system and on innocent employees whose jobs would be put in jeopardy.

    Mr. Holder said the Justice Department consulted outside experts to determine the impact of any charges against the company. "The impact on the stability of the financial markets around the world is something we take into consideration," he said.

    "By any fair criteria, this is very real, a very robust and very forceful resolution," Mr. Breuer said.

    The Justice Department said the investigation continues into the conduct of other banks. In July, Barclays BARC.LN +2.07%agreed to pay $453 million to settle similar Libor manipulation allegations.

    Write to Evan Perez at evan.perez@wsj.com and Alan Zibel at alan.zibel@dowjones.com

    http://online.wsj.com/article/SB10001424127887323277504578189371787055876.html
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