Ex-UBS Trader Loses Appeal as Judges Call Case a `Tragedy'

(Bloomberg) -- An ex-UBS Group AG trader, banned from the finance industry over allegations he manipulated Libor rates, lost a bid to challenge the Financial Conduct Authority’s sanction despite London judges calling his case a "tragedy."

Arif Hussein, a former head of UBS’s sterling rates desk, didn’t personally manipulate the benchmark interest rate and acted with “integrity” in online chats however, “there is no doubt that Mr. Hussein did mislead” the U.K. agency during interviews, tribunal judges ruled in a decision made public Wednesday.

“We characterize what happened as Mr. Hussein being economical with the truth rather than deliberately giving false answers,” Judge Timothy Herrington said in the ruling. “His sin was one of omission.”

Despite losing the challenge, Hussein found support among the three-judge panel who said he shouldn’t face a lifetime ban and said they were “troubled” by the fact the FCA investigated a junior trader while senior managers didn’t garner much attention.

The FCA has handed out hundreds of millions of pounds in fines -- including a 160 million-pound ($211 million) penalty for UBS -- over the manipulation of the London interbank offered rate, a key benchmark tied to the value of many financial products. Traders caught up in the scandal have tried, with varying degrees of success, to use their inexperience as a defense in proceedings in criminal and civil courts as well as employment tribunals.

Tom Hayes, the former UBS Group AG and Citigroup Inc. trader jailed for 11 years over Libor rigging, was the first trader to face criminal charges.

‘A Tragedy’

“This is a tragedy for Mr. Hussein because we do not believe him to be a thoroughly bad person," the judges said. The tribunal doesn’t have the power to reduce the ban but it encouraged the FCA to look at what it can do to revoke the sanction.

“Hussein was a relatively junior trader at UBS and he was put under investigation in relation to a limited number of chats which took place over a very short period,” the judges said. “This was against a background of widespread manipulation of Libor within UBS for which senior managers bear ultimate responsibility and which” was widely condoned.

Several traders charged with criminal misconduct over Libor-rigging have regularly pointed toward the fact that senior management at the offending banks got away without punishment while their own careers were over. During a retrial of two ex-Barclays traders, one of them, Stylianos Contogoulas, tweeted that "until bankers see someone SENIOR (including lawyers) get jailed, nothing will change. Meanwhile they’ll keep scapegoating juniors. Fact."

Inherent Unfairness

"Not only does this give rise to an inherent unfairness, with more junior people taking the fall whilst more senior individuals escape unscathed," Hannah Laming, a white-collar crime lawyer with Peters and Peters in London, said by email. "It also risks sending a dangerous message -- that senior managers can encourage unlawful behavior with impunity."

The FCA said in its own court papers that Hussein “knowingly participated in conduct intended to improperly influence” UBS’s Libor submissions. Hussein tried to influence interest-rate benchmark submissions 21 times between January and March 2009 to benefit his trading positions, according to the agency.

The FCA said the tribunal found that Hussein “was not candid and truthful” with the regulator. The agency said its penalties took into account evidence, the person’s responsibilities and locations, and whether it had approved the person.

“Impecunious and Vulnerable”

UBS declined to immediately comment.

“I did not, ever, seek personally to manipulate Libor,” Hussein said in an emailed statement. “I ask the FCA to observe the judges’ findings and investigate and bring to account those senior managers at UBS and reconsider its policy of pursuing only the most junior, impecunious and vulnerable.”

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