tv Inside the Litter Police - Panorama BBC News April 14, 2017 3:30am-4:01am BST
the latest headlines from bbc news. imike the latest headlines from bbc news. i mike embley. —— i'm. the us military has dropped the world's largest non—nuclear bomb in a remote area of eastern afghanistan — the first time it's been used in combat. the pentagon says it was trying to destroy a network of caves and tunnels used by the extremist group that calls itself islamic state. president trump described the drop as "very successful". speculation is growing that north korea may be ready to carry out its sixth nuclear test as soon as this weekend, to coincide with the country's most important national holiday — the anniversary of the birth of its founder kim il—sung. syria's president has dismissed reports that his forces carried out a chemical weapons attack on a rebel—held town in idlib province last week. he says they are 100% per cent fabrication. bashar al—assad said western nations had invented the claims so they had an excuse to bomb a government airbase. now it's time for panorama. tonight, the scandal at the top of britain's banking establishment, caught on tape. interest rates were rigged.
there are calls for an enquiry into whether parliament was misled. that is shocking. we need an immediate enquiry to look into exactly who knew what when. last week, two barclays bankers walked free from court. how are you feeling? delighted. but what about the bankers accused of conspiring with them who've been jailed? barclays just threw us to the wolves. they get off with their fine while we rot in jail. we ask, should they have been prosecuted 7 you know, it's my opinion that if this was available last year, the result might have been very different. how are you feeling? delighted. last week, two former barclays traders, ryan reich and stylianos contogoulas, walked free from court, cleared of conspiracy to defraud by rigging interest rates. it was the end of a long battle to clear their names. i'm very happy obviously.
this has been 5.5 years of my life and ijust want to go back to my family. that's it. thank you very much. thank you. sometimes i look at it and i think i'm in a bad movie. it's just something completely... you know, if you had told me this ten years ago i would have said you're mad. it has destroyed big parts of my life, my career, totally gone. i'm very sad people are injail when they shouldn't be. that's my opinion. the acquittals raised serious questions about the convictions of four other barclays bankers who stylianos contogoulas was accused of conspiring with. they were convicted and jailed lastjune. four ex—employees of barclays bank have been sentenced to jail for rigging libor, the benchmark for how much it costs banks to borrow from each other. i've been investigating this story for the last 18 months. ijust can't believe it
that my son goes to jail. jay merchant, who is a5, he was sentenced to 6.5 years. peterjohnson, 61, was sentenced to four years. jonathan, do you have anything to say? jonathan matthew, 35, was sentenced to four years. how are you feeling about it? not great. and alex pabon, an american who worked for barclays. he was sentenced to nearly three years. just two hours before he was jailed, he and this wifejulie agreed to speak to me. i never thought that what we were doing was wrong. we've been saying the same story for ten years. they didn't do anything wrong. we don't know what's going to happen from here, you know? it's just very scary and i feel like it could happen to anyone to be honest, you know?
alex pabon and the other barclays bankers were all prosecuted over rigging an interest rate call libor. the london interbank offered rate is meant to track the cost of borrowing money. it has a big influence on your mortgage and other loans. libor is now more tightly policed, but until recently it used to be set by taking an average each day of what the big banks thought they'd have to pay to borrow money. libors if you like are interest rates, that is the major benchmark for global interest rates. £350 trillion or so of financial products based on libor. it's the major global benchmark for interest rates. the very same banks involved in setting libor had big money staked on whether libor
went up or down. if a trader could influence the rates, the bank could make money. it's been called trader manipulation. the convicted barclays traders say what they were doing was encouraged by their bosses, a normal commercial practice dating back to the ‘90s. in the city, it was common knowledge for years that traders would try to secure tiny shifts in libor rates every day. pippa malmgren is a leading us financial expert and was an economic adviser to president bush. when you work on a trading floor, your whole job is to buy something for one price and you sell it for something a little higher. so this is the way every trader on our trading floor thinks. so when they're asked to establish a rate, they're thinking of the two sides, so this is their attempt to create a little space because of course
you always want to make money on the deal. the way i saw it, it was perfectly 0k to do it, it's what we call a free option, you might as well do it, you can do it, it's perfectly normal and proper, you can do it, and if it works, great, if not, that's it. in august, 2007, the world changed. global financial markets went into meltdown. british banking was on the brink. tonight at 10: northern rock appeals for calm and urges customers not to panic. banks became scared of lending to each other, worried they wouldn't get their money back. the markets seized up. the economy was heading towards a crisis. not since the beginning of the first world war has our banking system been so close to collapse. whenever you have a major financial crisis, you always have what might be called the recrimination phase of the economic cycle,
which is when everybody goes, "wait a minute, how the heck did this happen and who is responsible for it? " the public and politicians on both sides of the atlantic wanted to know what had gone on and who was to blame. banks had to be called to account. financial regulators targeted the so—called trader manipulation of libor. tom hayes was the very first trader to be jailed for it, found guilty of conspiracy to defraud. he was working for the swiss bank ubs. tom hayes is now in prison. i feel angry about it. why do you feel angry? because daddy shouldn't be in his new place, should he? we call it daddy's new place. that new place is lowdham grange prison in nottinghamshire, where tom hayes is serving 11 years.
the sentence is just inexplicable. what does it compare with, what are you talking about? i think you can get less time for killing somebody. sarah, a lawyer, is fighting to get her husband released. all i really want is for the truth to come out because if the truth came out i think he would come out of prison, but the truth has never come out about this. tom hayes had a reputation as a trading superstar. he earned millions. from his base in tokyo he had a network of london brokers who he tried to use to make small changes to libor. one of them was noel cryan. he was the biggest trader at the time. he had power over not only the brokers but other traders were scared of him as well. he would always take advantage of that. tom hayes started asking noel to start influencing libor.
the requests tom hayes was making were tiny. but because his bank had billions staked on libor, even a miniscule move could make big money. everyone knew that there was this very important benchmark that was out there that the banks were in charge of setting, and that there were lots of traders making their livings based on playing with it. no—one made any efforts to stop that or impose order on it. tom hayes said he had tried to influence libor, like the barclays traders who later followed him into the dock. but they all said it was a day—to—day banking practice, something their bosses expected them to do. tom hayes says he should never have been prosecuted by the serious fraud office, or sfo. there's e—mails, there's phone
recordings, there's chat transcripts that show people up and down the organisational ladders knew about, condoned and in some cases participated in what was going on here. don't forget, tom hayes never made any secret of it. he was completely open. he never acted once as a man who thought he was doing anything wrong or illegal. noel cryan and five other brokers were later charged with conspiring with tom hayes. they told the court they hadn't done what he'd asked them to do. they were all acquitted. we've been scapegoated in the whole thing. they've gone to the bottom of the food chain. six yen brokers answering the libor question really. if there's things to be answered, we're not the ones should be answering the questions. the sfo need to ask themselves, should they have wasted that much time and money bringing this case against six money brokers? i don't think so.
ubs, tom hayes's employer, was fined $1.5 billion for allowing his traders to rig libor. ubs told us: but ubs wasn't the only bank punished for manipulating libor. barclays bank was fined £290 million. a week later, its boss, bob diamond, was forced to resign. the bank's chief executive bob diamond has surprised the city by quitting with immediate effect. when mps demanded to know what had been going on, bob diamond told them a handful of traders down the ranks deserved to be punished. mr diamond, just think of criminal prosecution of a banker... he was asked if any of those bankers should be locked up. it's reprehensible behaviour
and if you're asking me should those actions have been dealt with, absolutely. thank you very much indeed. but throwing the book at a handful of bankers is not where this story ends. hundreds of miles from the city in cumbria, a family of caravan park owners were about to discover evidence of what looked like a cover—up at the top of the banking establishment. in 2005, paul holgate and his father, martin, wanted to borrow £3.5 million to expand their business. we were recommended to move to barclays. it was absolutely fine, it was very, very good long—term prospects. barclays lent the money on condition the holgates bought a financial product to protect them against rising interest rates. what barclays didn't tell them was that if interest rates went
down, they'd end up losing money. lots of money. that's where the problems arose because the liabilities that they put on us were incredible. interest rates plummeted. and in 2012, the business went under. i was thrown off the park that day when the administrators were sprung upon us. i had some clothes in an overnight bag, and for the next 1a months i had to make do with the clothes in that bag because the administrators wouldn't even let me obtain my own clothes. after barclays boss, bob diamond, resigned over libor, the holgates began investigating. if they could prove that senior people inside barclays knew about libor rigging, they might get compensation. during their legal case against the bank, they discovered thousands of confidential documents from inside barclays. we'll be fighting the bank for seven to eight years. we have to have great tenacity to be
able to carry this through. most people can't do it. the documents revealed that senior managers within the bank had instructed staff to rig libor. this wasn't about the tiny shifts of libor made by the traders, this was massive rigging ordered from the top of the bank. as the bank started running out of cash during the financial crisis, most of them started doing something called lowballing, deliberately submitting artificial low libor rates so they would look in better shape than they actually were. if i asked to borrow £1000 from you and you heard my finances were in a mess, you might want to charge me more in interest to cover the risk that you don't get your money back. but if i admitted i was paying
higher interest rates, people might think i was in trouble, so i might lie and pretend i was paying no more than anyone else. that's what many banks did in the financial crisis. the bank of england had warning signs about this certainly in 2007. it's not just like little whispers they were hearing, there's unequivocal signs that there's something very wrong with this rate. in october, 2008, the government launched emergency measures to get stricken banks lending again. it's been a tumultuous day. it started with the announcement of a giant rescue package for the british banking sector. the government pumped £37 billion of capital into the troubled banks. it was part of a huge rescue plan. if it worked, libor would fall, but it stayed frozen.
the problem for the bank of england was even with a huge bailout, the banks knew they were all in trouble. it still wasn't getting any cheaper for them to borrow money from each other, and barclays kept their libor rate high to reflect that. the bank of england wasn't happy. 0n the 29th of october, 2008, it's then executive director paul tucker phoned up the barclays boss paul diamond. a conversation was had. that conversation was interpreted by barclays, by senior people within barclays, as an instruction to change their libors and they acted on that. this leads to a flurry of phone calls and e—mails between senior people, traders, libor seniors at barclays. bob diamond has said he was misinterpreted, but that instruction to lower libors was passed down to the bank submitters. one of those submitters was this peterjohnson. he pleaded guilty to manipulating libor and is now serving four years in prison.
during the holgate investigation, they found the transcript of a phone call between peterjohnson and his boss, mark dearlove. it also happened on the 29th of october, 2008. i got hold of the actual recording, crucial evidence that barclays was setting false libor rates on instructions from above. it's never been broadcast before. mark dearlove didn't respond to our questions. chris philp is part of the house of commons treasury select committee, we played him the recording. what do you think? if what dearlove is saying is true, that is shocking.
this tape suggests that, in fact, the bank of england knew about it and indeed were encouraging, or even instructing, it. so we need an immediate enquiry to find out exactly what is going on in given we have just heard on this tape. the banking system was on life—support. the bank of england wanted libor down. if it dropped, it would look like things were on the mend. banks were so unwilling to lend to each other that... but when mervyn king, the then governor of the bank of england, was called to answer questions before parliament in 2012, he said there was no instruction to doctor the libor rate. this is like, with a doctor, if the patient is sick, you want to bring the temperature down. but there is a world of difference between thinking about what measures you could adopt to bring the temperature of a patient down and actually tampering with a thermometer. but tampering with that thermometer,
libor, is exactly what the bank of england had ordered. we were not aware that... mervyn king's second—in—command at the bank of england was paul tucker. despite making that call to barclays boss, paul diamond, back in 2008, he told mps he'd only just found out about lowballing. do you recollect when libor was first raised as an issue to lowballing? umm, the... i mean, i wasn't aware of allegations of lowballing until the last few weeks. ditto, bob diamond. for the third time, what month did you discover about what was going on? just give me a date. this month. it sounds to me like those people giving evidence, particularly paul diamond and paul tucker, were misleading
parliament. that is a contempt of parliament, it is a very serious matter. and i think we need to summon them back before parliament to explain why it is they appear to have misled mps. it is extremely serious. paul tucker said he never misled parliament stands by everything he said previously. mervyn king says his evidence was clear and he stands by it and that there is a world of difference between dysfunctional markets and criminal behaviour. paul tucker didn't respond to our questions. but panorama has discovered evidence that the bank of england was involved in libor rigging even earlier. we found a confidential us department ofjustice document that shows paul tucker began pressuring barclays to lower its libor rates from the first of september, 2007. so, you've now got two
separate pieces of evidence, one dating from 2008, september, 2007, a year before, clear evidence that the bank of england was pressuring barclays to lower libor. it shows it is part of a more systematic and ongoing attempt by the bank of england to put pressure on barclays. but the trials of the barclays bankers did not get to hear this, and much of the other evidence of lowballing, because the serious fraud office said their libor conspiracy had come to an end on the first of september, 2007. that is the thing, you know, in these trials that they went through, they separated requests and lowballing. so anything to do with this, it did not go in. so you are asking me, do i think if all of this was in, would it make a difference umm, probably, yes.
alex was one of the barclays bankers jailed last summer. he was released from prison three weeks ago and immediately deported to his home in texas. he still thinks he didn't get a fair trial. what effect do you think it had on the case they did not bring in what we know about the bosses of the bank of england? the failure to not put in the jury specific evidence hamstrung the defence and how we could respond to what the prosecution was saying. what's the scale of difference between what you might achieve with libor requests and what your bosses in the bank of england might achieve?
we were were asking for an eigth of a basis point and they were asking for 50 basis points. so, about 400 times more. the bank of england says libor was not regulated in the uk or elsewhere during the period in question. but it has been assisting the criminal investigations into libor manipulation by employees of commercial banks. the serious fraud office says it's still investigating lowballing. it says it follows the evidence and aims to judge the most senior people where there is a realistic prospect of conviction. the prosecution period, which ended on the first of september, 2007, was led by the evidence, and material dated after this point was provided to the defence. the 2008 recording was disclosed to the defence but it wasn't permitted in the court. barclays, they just threw us to the wolves. they were happy, i think,
because they get off with their fine, and then they get some low—level guys that go to jail, and theyjust continue to work and make millions of dollars a year while we sit there and rot in jail. but there is one more twist in the libor tale. back in cumbria, these sleuths came across a huge piece of evidence. at the height of the financial crisis, barclays sensed an opportunity. having been instructed by the bank of england to lower libor rates, it hatched a top—secret plan with the ricardo master fund. hours into the secret fund. this is
a transcript of a telephone conversation. more evidence that paul tucker told barclays to get its libors down. i have been told to get libors down. i have been told to get libor rates down. it is political from very, very high, so it is tucker. because barclays knew that the interest rates would fall, the master fund made $100 the interest rates would fall, the masterfund made $100 million for the bank in a matter of months. and who was in charge of the barclays company that ran the fund? bob diamond, the man who told mps he knew nothing about libor until 2012. what months did you know this was going on? this month. as the caravan
business was being destroyed by falling interest rates, like lee's was making a killing. —— barclay‘s. they didn't answer questions about the master fund but they didn't answer questions about the masterfund but told us... the bank reached a financial settlement but insisted the amount of compensation they received would be kept confidential. you would just not think that in a country that has the reputation and the pride of being an upstanding, honest nation would allow these things not only to happen but they are not sorted out. they are just ignored and swept away. i think that is the big issue, not just what has away. i think that is the big issue, notjust what has gone on, but the way it has been dealt with afterwards. tom hayes, the first
bank to be jailed, has lost an appeal against conviction and is now in his second year behind bars. —— banker. his son, joshua, will be eight by the time his father is due to be released. it is hard, because, you know, when we go to the field, i have to keep the football with him because his dad is not around to do it. tom hayes sent his wife and son video messages recorded from prison. hello again, josh, high, video messages recorded from prison. hello again,josh, high, mummy. i hope you are both 0k. hello again,josh, high, mummy. i hope you are both ok. i love you loads. see you soon, goodbye. no senior banker in the uk has ever been prosecuted for fixing senior banker in the uk has ever been prosecuted forfixing libor. senior banker in the uk has ever been prosecuted for fixing libor.|j think that they don't want to go after the guys at the top, so they
come for the low guys and then just leave the top guys to float away. to the bankers who have been prosecuted there is a huge double standard in there is a huge double standard in the libor blame game. it is now clear the scandal of the big banks fix goes far higher than the banking establishment ever wanted us to know. bbc news, broadcasting to viewers in north america and around the globe. my north america and around the globe. my name is mike embley. the us military drops the "mother of all bombs", seen here in tests, on so—called islamic state hideouts in afghanistan. a show of force in north korea amid fears that pyongyang is about to carry out its sixth nuclear tests. president assad says his —— says that claims his forces carried out a chemical attack ona forces carried out a chemical attack on a rebel town at fabricated to justify an american missile strike. the west — mainly the united states — is hand in glove