Barclays Traders Shouted Rigging Requests for All to Hear

(Bloomberg) -- There was nothing secret or subtle about how traders at Barclays Plc tried to move the bank’s submission to an important benchmark interest rate in a way that helped their own positions, a former trader told a court Tuesday.

Co-workers would yell and collectively discuss their desire to move the bank’s Euribor position for their own benefit, according to Carlo Palombo, who is on trial for his role in manipulating the benchmark rate. He testified that an email he’d sent requesting a low three-month rate was normal practice for someone in his role.

“That trader would turn around and shout to the whole team, ‘Today I need a low three month,’” Palombo, 40, said during his second day of testimony. “Then if people say ‘Me too, me too,’ and something like that, then a request like this could be made.”

Palombo and former colleagues, Colin Bermingham and Sisse Bohart, are being tried for conspiracy to defraud related to their time at Barclays from January 2005 to December 2009. The three former Barclays employees deny the allegations.

Euribor, the Euro interbank offered rate, is tied to trillions of dollars worth of loans and derivatives. The figure is set by a poll of major banks, which give a rate that is meant to reflect the daily cost of borrowing money. The banks’ submissions are then averaged out to set Euribor.

Prosecutors at the U.K. Serious Fraud Office have said Euribor and other indexes were manipulated to benefit traders.

Palombo said he sought to change the bank’s submission at the request of his boss, Philippe Moryoussef, who was convicted last year for manipulating Euribor. Heads of the swaps desk, including Conor Brown and Clement Perrette, were aware that traders regularly made similar requests to benefit their positions, Palombo said.

Normal Business

“There was no suspicion anything was dodgy or secret,” Palombo said. “Everything seemed like completely normal business.”

During the early days of the investigation, Barclays only turned over emails Palombo exchanged with Bermingham, who worked on the bank’s cash desk, he said. All the messages involving management and instructions from management hadn’t been disclosed, Palombo said.

Through his lawyers, Palombo gave financial regulators an additional email sent by Perrette asking the swaps team to speak with Bermingham about a trader’s position.

“Big 3s6s day tomorrow for Simon, could we make sure we spoke to Colin tomorrow morning to remind him,” Perrette wrote in a 2008 email shown to the jury that referred to different time periods for Euribor positions.

Perrette forwarded the message to his boss in New York, Harry Harrison, according to an email chain that was also entered into evidence. Palombo said Harrison wasn’t involved in requesting rates, but would assume the senior banker knew about it because the practice was done so openly.

A prosecutor for the Serious Fraud Office, James Waddington, said Harrison didn’t know the swaps desk made requests to the cash desk.

Palombo said no one ever explained to him how banks made submissions. He only had a general understanding that there was a range of rates that the bank could submit on any given day, he said.

‘Round it Down’

“I just had the idea there wasn’t one rate and that would leave the submitters with a bit of flexibility on whether to round it up or round it down,” Palombo said.

When he messaged colleagues to request adjustments to their submission, he only meant for them to submit a rate within a correct range, he said.

“If you also are okay with going high, then our team preference would be for a high one,” Palombo explained. “I’m not imposing anything. I’m just saying this is our preference.”

The prosecutor pressed Palombo on whether or not the purpose of the benchmark was for the bank to make money and if the practice threatened Euribor’s independence.

Palombo was adamant that it’s obvious the individual institutions would try to make money, “because they’re banks.” But he added that the averaging of dozens of submissions would negate this effect.

Palombo also addressed the jury to point out evidence in addition to what the prosecutor was focusing on during the questioning. In one instance Palombo, pointed out that on a day when he had asked for a lower rate, Barclays’s submission was the same as a number of other banks and that two had submitted even lower rates.

He also told the jury about a day when Moryoussef had instructed him to email Deutsche Bank AG’s Christian Bittar to speak to his bank’s cash desk about submitting a high six-month fixing. Bittar did ask his desk about other positions, but not the one requested by Palombo, according to documents in the investigation that were cited by Palombo.

“Do I actually have any expectation that Christian Bittar, this really big trader in the market, will speak to his cash desk on my behalf?” Palombo said. “I send a message as instructed. I move on with my day.”

To contact the reporter on this story: William Mathis in London at wmathis2@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Christopher Elser, Keith Campbell

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