Barclays LIBOR Trial Convictions - The Jury Has Spoken: Will We Listen?


Jay Merchant, Jonathan Mathew, and Alex Pabon - three former employees of Barclays Bank - have today been found guilty of manipulating the LIBOR interest rate between 2005 and 2007.  A jury at Southwark Crown Court was unable to reach decisions on two other men, Ryan Reich and Stelios Contogoulas.

The dealings of the world’s banks have become more and more complex. This  means that there are more complex ways of committing fraud; ways which are farther removed from the ken of those of us not privy to the goings on in the high citadels of major city instututions. (See the vivid description of the collapse of Salomon Brothers in the 1990s in Michael Lewis’ book Liars’ Poker.)


Non-specialists are often left bewildered when something goes wrong with increasingly complex consumer items, such as computers, and the sense of bewilderment is no less when something goes wrong with the banking sector. We call in the specialists when our computers stop functioning. In relation to financial services, however, society cannot afford to leave it to the specialists to sort it out, because these institutions are so central to our financial, and indeed national, life. If it was not clear before 2008, it has been clear to everyone since: the banks are the heart of our whole economy. This is why trials such as the recent LIBOR trials, the latest of which ended today, are so important.


What went wrong? This probably depends on your perspective. Perhaps it can be said that, as a society, we sanction greed. One word makes the point: bonuses. It follows that the line between what is lawful (approved by society) or unlawful (disapproved by society) can be very difficult to find. The complexity of modern financial dealings only makes this worse. Few of us had heard of, still less understood, LIBOR before a number of banks and bank employees were arrested and then charged for rigging the rate.


How curious then, that society entrusts the decision about whether individuals are or are not guilty of having conspired together to defraud to 12 women and men whose experience of banks may be limited to finding the nearest cashpoint. The reason society leaves it to such persons is simple: who else could better decide what was and was not dishonest?


The verdicts in this third LIBOR trial are as interesting about the criminal justice system as they are about the banking system. Despite the complexity, despite the scope for the dishonest to hide their nefarious activities beneath layer upon layer of obfuscation, the issues almost always come down in any criminal trial for fraud to one question: was the accused dishonest? And that question often includes the sub-question: was what he did approved, expressly or implicitly, by others? If it is possible to show that there were others who were sufficiently large in number or sufficiently senior in position who approved it, then it becomes increasingly hard for the prosecution to prove that it was dishonest. If those who have the responsibility in society for managing the complex financial structures which make our economy work thought it acceptable, how can society convict an individual a criminal offence a person who goes along with that?


But this is where the wonder of the jury system comes into its own. In the case of the institutions, specialist regulators (most particularly the Financial Conduct Authority) have the responsibility for assessing failings and punishing them if they are bad enough. In the case of individuals, we leave it to a jury of 12 persons, none of whom may have any financial expertise. They decide what society does and does not mark as criminal. It is important that they do so according to fixed standards. Society should not now render dishonest act or acts years ago which would not have been viewed as dishonest then. The law rightly prescribes behaviour which is criminally reprehensible. And they will have been carefully directed by the judge to approach the matter in this way.


What can be said about this LIBOR trial is that the jury anguished about that critical decision. They took a number of days to decide three individuals are guilty for what they did then. They could not agree about two others. Those who would abolish juries in such cases fail to understand this central point: no one is better placed than a jury of twelve women and men, whether angry or not, to assess whether an individual has crossed the line of criminal dishonesty. And by and large, juries take their task very seriously indeed.

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