UPDATE 4-ICAP fined $87 mln over Libor, three former staff charged
* ICAP is first broker to be sanctioned in global scandal
* US lands criminal charges against three former ICAP employees
* ICAP calls former staff "rotten apples"
LONDON, Sept 25 (Reuters) - U.S. and British authorities on Wednesday fined ICAP, the world's biggest interdealer broker, $87 million and laid criminal charges against three former employees over the Libor interest rate rigging scandal.
The scandal, which has laid bare failings by regulators and bank bosses over several years, has triggered a sprawling global investigation that has already seen three banks fined a total of $2.6 billion, four other people charged, scores of institutions and traders interrogated and a spate of lawsuits launched.
The U.S. Department of Justice (DoJ) charged New Zealand resident Darrell Read and Daniel Wilkinson and Colin Goodman from England with conspiracy to commit wire fraud and two counts of wire fraud - offences carrying sentences of up to 30 years.
Simultaneously, the U.S. Commodity Futures Trading Commission (CFTC) and Britain's Financial Conduct Authority (FCA) ordered ICAP's ICAP Europe Ltd unit to pay $65 million and 14 million pounds ($22 million) respectively.
"These three men are accused of repeatedly and deliberately spreading false information to banks and investors around the world in order to fraudulently move the market and help their client fleece his counterparties," said Acting Assistant Attorney General Mythili Raman of the DoJ's criminal division.
ICAP called its former staff "rotten apples" and said it would improve systems to ensure compliance with regulations.
A central cog in the global financial system, the London interbank offered rate (Libor) is used as a benchmark against which hundreds of trillions of dollars worth of products from complex derivatives to personal mortgages are priced worldwide.
Based on a survey of what banks would charge each other for loans, traders colluded on answers that could nudge the reported rates by amounts that were tiny but translated into big profits.
ICAP, run by London businessman and former Conservative Party treasurer Michael Spencer, is the first interdealer broker sanctioned in the affair. Firms like ICAP match buyers and sellers of bonds, currencies and derivative financial instruments, such as swaps.
"ICAP and other interdealer brokers are expected to be honest middlemen," David Meister, the CFTC's Director of Enforcement, said in a statement. "Here, certain ICAP brokers were anything but honest. They repeatedly abused their trusted role when they infected the financial markets with false information to aid their top client's manipulation of Libor."
The FCA said ICAP unit's yen derivatives desk routinely tried to manipulate Libor and that at least 10 individuals, including two managers, on three desks took part.
Traders promised derivatives brokers anything from curries to Ferraris in kickbacks for helping rig rates, according to computer messages published by regulators and prosecutors.
Daniel Wilkinson, once employed in the London office of ICAP, supervised a group of derivatives brokers, including Darrell Read, who specialised in yen-based products.
According to the charges, the desk's biggest client between 2006 and 2009 was Tom Hayes, a former UBS and Citigroup trader who is also facing criminal charges in Britain and the United States for alleged Libor manipulation.
Read talked to Hayes almost daily, prosecutors said, and a sizeable chunk of what the ICAP traders earned was tied to the business from him. Read passed Hayes's requests for what to tell the Libor compilers on to Colin Goodman, according to the DoJ.
Goodman, a cash broker in ICAP's London office nicknamed "Lord Libor", was in contact with derivatives traders at other institutions and sent out to them a daily email with "SUGGESTED LIBORS" which, according to the CFTC, reflected biased rates.
While purporting to offer predictions of where yen Libor would fix later in the day, the DoJ said, Read, Wilkinson and Goodwin used the email to misinform banks and so skew Libor.
The CFTC said the broker demanded compensation for "LIBOR services" or, he warned, there would be "no more mr libor." This grew from dinners and champagne, to additional commission-generating trades, to "kickbacks" totalling $72,000.
The conduct stretched into 2010, well after allegations of Libor manipulation had surfaced in public.
Wilkinson - who now writes fiction for young adults, according to a LinkedIn profile in his name - and Goodman did not respond to requests for comment sent via the social media site. Read could not immediately be reached. Hayes's lawyer, Lydia Jonson, did not respond to a request for comment.
"ROTTEN APPLE SITUATION"
Michael Spencer, who founded one of the firms that make up today's ICAP in 1986 and has become one of the richest men in Britain, said all individuals linked to the wrongdoing had either left the company or were being disciplined.
"We deeply regret and strongly condemn the inexcusable actions of the brokers who sought to assist certain bank traders in their efforts to manipulate yen Libor," he said.
But he denied the problems were cultural. "It is very sadly a rotten apple situation here," he said.
Three banks - Britain's Barclays and RBS and Switzerland's UBS - have already paid around $2.6 billion to secure civil settlements for rate-rigging with British and U.S. regulators.
Britain's Serious Fraud Office (SFO) has brought criminal charges against three people and U.S. prosecutors have now charged five. Prosecutors on both sides of the Atlantic have charged Hayes, who once complained in a text message to the Wall Street Journal: "This goes much higher than me."
The SFO has said it hopes to charge more people over Libor in the coming months and that will not hesitate to also pursue senior industry figures or institutions.