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Libor Scandal: “Biggest Financial Fraud of All Time”

Posted by Larry Doyle on December 13, 2012 2:00 PM |

With news leaking that Union Bank of Switzerland is poised to pay a $1 billion fine for its involvement in the manipulation of Libor, we once again are led to the conclusion that, for those involved in running the major global financial institutions, “CRIME PAYS.”

It is insulting to those who have even an ounce of decency in their body to think that institutions such as Barclays, UBS, and certainly many more can engage in the “biggest financial fraud of all time” and simply write a check for their complicity.

The “biggest financial fraud of all time,” LD?  Yes, I have defined this price rigging racket in just such a fashion many times. Those are not merely my words today. Who else joins me and echoes those sentiments? 

None other than Adrian Blundell-Wignall, a special adviser to the secretary general of the Organization for Economic Cooperation and Development in Paris. Bloomberg highlights the special adviser’s assessment and much more in writing, Rigged Libor With Police Nearby Shows Flaws of Light Touch:

For years, traders at RBS,Barclays Plc (BARC), UBS AG (UBSN), Deutsche Bank AG (DBK), Rabobank Groep and other firms that stood to profit worked with employees responsible for setting the benchmark to rig the price of money, according to documents obtained by Bloomberg and interviews with two dozen current and former traders, lawyers and regulators. Those interviews reveal how the manipulation flourished for years, even after bank supervisors were made aware of the system’s flaws.

The conspiracy wasn’t confined to low-level employees. Senior managers at RBS knew banks were systematically rigging Libor as early as August 2007, transcripts of phone conversations obtained by Bloomberg show. Some traders colluded with counterparts at other banks to boost profits from interest- rate futures by aligning their submissions. Members of the close-knit group knew each other from working at the same firms or going on trips organized by interdealer brokers such as ICAP Plc (IAP) to Chamonix, a French ski resort, or the Monaco Grand Prix.

“We will never know the amounts of money involved, but it has to be the biggest financial fraud of all time,” said Adrian Blundell-Wignall, a special adviser to the secretary general of the Organization for Economic Cooperation and Development in Paris. “Libor is the basis for calculating practically every derivative known to man.”

Senior managers knew . . . PLUS . . . manipulation flourished for years . . . PLUS . . . even after bank supervisors were made aware of the system’s flaws . . . PLUS . . . colluded with counterparts . . . PLUS . . . close-knit groups . . . PLUS . . . we’ll never know the amounts of money involved . . . EQUALS . . . A RACKET THE ENVY OF WHICH THE MAFIA AND OTHER “FAMILIES” COULD ONLY DREAM!!

For all this, the banks and their executives are merely paying a fine? Let’s make sure they throw in the “neither admit nor deny” language just to add some salt in that wound.

Crimes not properly punished simply steel the will of those who will ply their illicit trade elsewhere in the markets.

Is it plausible to think that the more commonly regarded “organized crime” was able to get in on this action and served as both donor and recipient in the “biggest financial fraud of all time?” I mean they like to do business in laundromats and typically have a lot of things looking to be washed.

Just sayin’ . . .

Thoughts and comments encouraged and appreciated.

Sense on Cents/Libor Scandal

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Russ

    Larry , yes, this is huge, but consider how many people and entities were involved to pull it off. Now, Madoff pulled off a 65 Billion scam with only a few knowing (plus JP Morgan Chase) I think Madoff is a bigger fraud.

    • LD


      I would actually make the point that there is no comparison here. I think it is far easier to commit a fraud regardless of size if there are only a handful of people involved. Getting more individuals to get along and go along becomes far more challenging.

      Madoff was effectively an inside job, that is, he had gotten so close and comfortable with the financial cops. This was operated very much like a Mafia racket in terms of organization and execution.

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