Ex-Rabobank trader says 'Libor time' was call to fix rates

[MANHATTAN] "It's Libor time." That was the call ahead of Rabobank Group's daily morning Libor submission as bank employees gathered to rig the rate to make money, a former trader testified at the first US trial of bank colleagues, Anthony Allen and Anthony Conti.

Paul Robson is the second former Rabobank trader to testify at the Manhattan federal court trial of former colleagues Conti and Allen, who are accused of engaging in a four-year scheme to manipulate the bank's London interbank offered interest rate submissions.

It's the first US trial of alleged manipulation of the benchmark tied to more than US$350 trillion of loans and securities.

Robson, who pleaded guilty to a scheme to manipulate the rates with others at the Utrecht-based Rabobank, sat at the same trading desk with both men in London.

Mr Robson, known as "Pookie" by co-workers and was the bank's Yen Libor submitter to the British Bankers' Association, said it was accepted practice to set a rate that would benefit the bank's trading positions of its employees.

Minutes before the bank made its Libor submission, the traders would ask the bank's Libor submitter for the "tenor," or the amount of time for the repayment of an interest rate swap, Mr Robson said.

"So at approximately 11 o'clock, the shout would go out, 'It's Libor time,' or 'What are we going for Libor today?'" Mr Robson said. "So all the parties would gather to discuss what are the tenors for their position. They would say, 'I need this' or 'I need that.'" Conti usually replied, "Right guys," to the requests, Robson said.

Allen, who was Robson and Conti's supervisor, was privy to these conversations and consented to the practice, he said. Allen even instructed him on the importance of heeding requests from the bank's Asia traders, according to Allen.

ASIA'S ROLE

"Mr. Allen informed me of Asia's role in the bank," Mr Robson said, "about what an important role they played and how we were to look out for them and help them as much as possible." Mr Robson testified he felt uncomfortable and broached the subject with Allen.

"I was covering my backside," Mr Robson said, adding, "He was fine with that," he said.

Allen, 44, the former global head of liquidity and finance in London while Conti, 46, was the bank's primary US dollar submitter. Both men, who face more than a decade in prison if convicted, have pleaded not guilty to the charges.

Their lawyers argue the government's theory is flawed and that their clients were relying on many factors when calculating a Libor submission. They say their clients weren't part of the government's case until three former bank colleagues pleaded guilty and implicated Allen and Conti to avoid going to prison.

Jurors on Monday also saw a series of e-mails which Allen and Conti received, including a Nov 29, 2006, e-mail in which a New York-based Rabobank trader, asked Allen, "Hi Mate, high 3s Libor please!!!" "OK Mate, will do my best," Allen replied.

"Cheers," the New York trader replied. "Bang on the money!"

On Monday, before Mr Robson began testifying, jurors also heard former Rabobank trader Lee Stewart complete his testimony. Stewart also pleaded guilty and is cooperating with the US.

Under questioning by Conti's lawyer, Aaron Williamson, Stewart testified Rabobank officials never corrected the practice of having traders tell Libor submitters where they wanted the Libor to be set.

"No," Stewart said. "At Rabobank, it wasn't considered inappropriate to do that," Stewart said.

Stewart, who traded interest rate swaps, said the bank expected him to share the information he'd gathered with colleagues who were making the bank's Libor submission.

He testified he came to believe the Libor figure which Rabobank submitted was "a made-up number," testifying, "it was very difficult to calculate."

Stewart also said when he left the bank in 2009, he never thought he was doing anything wrong. He later pleaded guilty in March to one count of conspiracy.

Seven former Rabobank traders were charged by the US with wrongdoing. Two are considered fugitives by the US. The bank agreed to make a US$325 million payment to resolve a federal investigation.

BLOOMBERG