What happens when a corporation decides to sacrifice an individual to save its own skin? This episode of Employee Survival Guide® dives deep into the gripping legal saga of Tom Hayes, the former UBS trader who found himself at the center of a scandal that rocked the financial world. After serving five years in prison for allegedly manipulating LIBOR rates, Hayes is now fighting back, suing UBS for malicious prosecution. He argues that the banking giant scapegoated him to deflect blame and protect its executives, raising critical questions about corporate accountability and the ethics of self-preservation.
Join Mark Carey and his co-host as they unravel the complexities of Hayes’ case, including the controversial corporate investigation known as ‘Project Chocolate’ that seemingly targeted him. This episode is not just about one man’s fight against a powerful institution; it’s a broader exploration of employee rights, corporate governance, and the lengths to which companies will go to maintain their reputations. How do corporate interests intertwine with individual rights in the workplace? What does this mean for employees navigating the tumultuous waters of employment law?
Throughout the discussion, the duo examines the legal strategies employed by both Tom Hayes and UBS, scrutinizing the evidence, affidavits, and the broader implications of outsourcing criminal investigations to corporations. This episode is a must-listen for anyone interested in workplace culture, employee advocacy, and understanding the rights of employees in a system that often favors corporate power.
As we dissect the ramifications of this case, we invite you to reflect on your own experiences in the workforce. Are you equipped with the knowledge to negotiate severance, understand employment contracts, or advocate for yourself in a hostile work environment? With insights into workplace discrimination, retaliation claims, and the importance of employee empowerment, this episode serves as a vital resource for navigating employment disputes and ensuring fair treatment in the workplace.
Don’t miss this eye-opening discussion that not only sheds light on Tom Hayes’ battle but also equips you with essential tools for survival in today’s complex work landscape. Tune in to the Employee Survival Guide® and become an informed advocate for your rights!
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For more information, please contact our employment attorneys at Carey & Associates, P.C. at 203-255-4150, www.capclaw.com.
Disclaimer: For educational use only, not intended to be legal advice.
Transcript:
Speaker #0
Hey, it’s Mark here. Welcome to the next edition of the Employee Survival Guide, where I tell you, as always, what your employer does definitely not want you to know about and a lot more.
Speaker #1
Welcome to another episode of the Employee Survival Guide produced by employment attorney Mark Carey.
Speaker #2
Thank you. I mean, it is it’s great to be here to talk about this because this situation is just wild.
Speaker #1
It really is. I mean, imagine spending five years in a maximum security prison.
Speaker #2
Right.
Speaker #1
You lose your career, you know, your reputation, half a decade of your life. And then years after the fact, the highest courts in the land look at your case and basically say, oops, our mistake.
Speaker #2
Yeah, a massive oops.
Speaker #1
Right. They say the foundational theory of your conviction was just fundamentally flawed. And today we are looking at a man who survived exactly that nightmare.
Speaker #2
And he is not just, you know, moving on quietly.
Speaker #1
Oh, no. Definitely not. He is unleashing this legal firestorm against the multibillion dollar bank that he claims actually engineered his downfall just to save themselves.
Speaker #2
It is a staggering scenario. Honestly, we are looking at a guy who was held up globally as like the ultimate face of banking greed.
Speaker #1
Yeah. The mastermind of it all.
Speaker #2
Exactly. The mastermind behind one of the largest financial scandals in history. And now he’s flipping the camera around, right? He’s trying to expose the corporate machinery that actually put him in the crosshairs.
Speaker #1
So just to ground this for everyone listening, this episode is part of an ongoing series we are doing focusing on the current lawsuit Tom Hayes is bringing against his former employer, the Swiss banking giant UBS.
Speaker #2
A massive institution.
Speaker #1
Huge. And we are framing this case for you, the listener, because it is this truly fascinating interplay between powerful corporate interests and a former employee’s attempt to vindicate himself.
Speaker #2
Right. It’s an incredibly rare. David and Goliath story.
Speaker #1
Yeah. But in this one, David actually survived Goliath’s best shot. And now he’s armed himself with, I mean, thousands of pages of internal corporate discovery. And he’s dragging the giant into a Connecticut superior court.
Speaker #2
Yeah. And the documents we have on the table today are just a masterclass in high stakes corporate litigation.
Speaker #1
They are heavy.
Speaker #2
Literally and figuratively. Yeah. We are analyzing UBS’s motion to dismiss the case. Tom Hayes is pretty blistering opposition to that motion. And just a massive cache of supporting affidavits, internal emails and exhibits.
Speaker #1
Because this isn’t just a dispute over a wrongful termination. Oh,
Speaker #2
no. This is an autopsy of a global criminal investigation.
Speaker #1
So if you’ve ever wondered what actually happens when the federal government catches a massive corporation breaking the rules, you know, the company conducts an independent internal investigation.
Speaker #2
Right. Quote unquote, independent.
Speaker #1
Exactly. And then they package the results up and just hand them to the Department of Justice. Well, today we are unpacking the brutal legal battle over who actually pulled the strings in that process during one of the biggest financial prosecutions of the century.
Speaker #2
It’s fascinating. But to fully grasp the magnitude of the allegations in these Stanford court filings, we kind of have to contextualize the environment Tom Hayes was operating in.
Speaker #1
Yeah, we have to go back a bit.
Speaker #2
Right. Back to the late 2000s. We need to travel to the trading floors in Tokyo, Japan and examine the financial benchmark. that basically sits at the center of this entire saga.
Speaker #1
And that is LIBOR.
Speaker #2
Yes, LIBOR.
Speaker #1
The London Interbank Offered Rate. Let’s break this down a bit, because I think for a lot of people, LIBOR is just, you know, financial alphabet soup that occasionally makes the front page of the Wall Street Journal.
Speaker #2
It sounds so dry, yeah.
Speaker #1
Right. But according to the regulatory filings and the history detailed in these lawsuits, this was arguably the most important number in the global capitalist system.
Speaker #2
It is not an exaggeration to call it the foundational building block of modern finance. I mean, LIBOR was a benchmark interest rate intended to reflect the cost of borrowing unsecured funds in the London interbank market.
Speaker #1
OK, so banks borrowing from other banks.
Speaker #2
Exactly. And the mechanics were seemingly straightforward, though wildly consequential in practice.
Speaker #0
Yeah.
Speaker #2
Every single day, a panel of the world’s major banks would submit a number.
Speaker #1
Just their estimate, right?
Speaker #2
Right. That number was their estimate. of the interest rate at which they could borrow money from other banks. And then a mathematical trim was applied.
Speaker #1
Meaning they threw out the outliers?
Speaker #2
Yeah, they threw out the highest and lowest submissions just to prevent extreme, you know, weird outliers from skewing the data. And the remaining submissions were averaged out. That daily average became
Speaker #1
LIBOR. And the reason we are spending time on this, for you listening, is because that single daily average dictated the flow of… Trillions, literally trillions of dollars.
Speaker #2
Trillions with a T. It’s hard to even fathom.
Speaker #1
It really is. I mean, if you had an adjustable rate mortgage, an auto loan, a student loan, or if you owned a small business and took out a line of credit, the interest rate you paid was inextricably tied to LIBOR.
Speaker #2
Exactly. If LIBOR ticked up even a tiny bit, money became more expensive for average people everywhere.
Speaker #1
But consumer loans were just a fraction of the exposure here, right?
Speaker #2
Oh yeah, just the tip of the iceberg. The real volume. was in complex financial derivatives. Traders like Tom Hayes were operating in this vast universe of interest rate swaps, futures, and options that were directly pegged to the micro movements of LIBOR.
Speaker #1
I want to focus on that for a second because the scale of the money involved is just hard to wrap your head around.
Speaker #2
It is.
Speaker #1
Let’s walk through like an interest rate swap. Two parties agree to exchange cash flows, right? One party pays a fixed interest rate and the other pays a floating rate.
Speaker #2
Which in this case is LIBOR.
Speaker #1
Right. So if you have a multi-billion dollar position on your books, you are hyper-focused on the daily LIBOR fixing.
Speaker #2
Hyper-focused. And Hayes was trading derivatives tied specifically to yen LIBOR, so the Japanese currency version of the benchmark.
Speaker #1
And the filings emphasize that he was running this incredibly massive book of these derivatives for UBS in Tokyo.
Speaker #2
Yeah. And when you have a position that large, a microscopic movement in the benchmark translates to just an astronomical swing in your profit and loss.
Speaker #1
We are talking about fractions of a basis point, right?
Speaker #2
Right. Very, very tiny fractions.
Speaker #1
Yeah. The discovery documents actually mention a specific internal estimate Hayes once made. He calculated that a 0.01% movement, like one hundredth of a single percent in the final yen LIBOR fixing could result in a two million dollar profit for UBS.
Speaker #2
Which is just crazy. It fundamentally alters the incentive structure of a trading desk.
Speaker #1
I mean, obviously.
Speaker #2
Right. When a hundredth of a percent equals two million dollars. The pressure to optimize that benchmark even slightly is immense. It’s built into the system.
Speaker #1
And into this pressure cooker steps Tom Hayes. And he’s described in the filings and in all the media, not as your typical, you know, slick Wall Street alpha male archetype.
Speaker #2
Far from it. Yeah,
Speaker #1
right. He has this nickname that just completely defines his public persona in this whole scandal. They called him Tommy Chocolate.
Speaker #2
It is such a striking detail that prosecutors in the press just totally latched onto.
Speaker #1
It’s so catchy.
Speaker #2
It is. And the filings confirm that, you know, while the prevailing culture among traders and these inner dealer brokers involved aggressive socializing, long lunches, really heavy drinking, Hayes just didn’t partake in that way.
Speaker #1
He would order a hot chocolate.
Speaker #2
Exactly. He’d order a hot chocolate while everyone else was drinking beers. And it highlighted him as an outsider, someone quirky and obsessive operating within this hyper masculine beer drinking finance bro culture.
Speaker #1
And the nickname Tommy Chocolate was used universally across the industry.
Speaker #2
Right. Everyone knew him as Tommy Chocolate.
Speaker #1
It’s the kind of detail a screenwriter would invent just to make a character memorable, honestly. But here is the jaw-dropping twist in the discovery document.
Speaker #2
Oh, this is where it gets crazy.
Speaker #1
Right. So fast forward a few years. UBS comes under intense scrutiny from global regulators for manipulating LIBOR. They panic. They launch this massive, highly confidential, bet-the-company internal investigation to figure out What happened and who to blame?
Speaker #2
A huge undertaking.
Speaker #1
And they have to give the secret investigation a codename. What do they call it? Project Chocolate.
Speaker #2
It is one of the most remarkable revelations in the civil filings, I think.
Speaker #1
It’s insane.
Speaker #2
It really is. You have this enterprise-wide, multi-million dollar legal probe led by one of the most prestigious law firms in the world, Gibson Dunn. And it’s named directly after the quirky beverage preference of one specific trader in Tokyo.
Speaker #1
OK, let’s unpack this for a second. If you are an employee and your company names a massive criminal investigation after your personal nickname, that doesn’t exactly scream objective fact finding mission, does it?
Speaker #2
No, it really doesn’t.
Speaker #1
It implies the target was painted squarely on his back from the very first meeting. It’s like a police department naming a homicide probe operation Get Steve before they’ve even looked at the crime scene.
Speaker #2
That’s a great analogy. It fundamentally undermines the premise that UBS is just, you know. impartially following the evidence wherever it led.
Speaker #1
Exactly.
Speaker #2
And that is the absolute core of Hayes’ malicious prosecution claim here. He argues the name itself reveals the predetermined outcome.
Speaker #1
Right. It shows their hand.
Speaker #2
But to maintain objectivity and look at the whole picture, we have to examine the timeline UBS lays out in their defense filings.
Speaker #1
Sure. Let’s look at their side.
Speaker #2
According to their filings, regulators initially approached UBS around April of 2010. But crucially, The regulators were exclusively asking about U.S. dollar LIBOR.
Speaker #1
OK. And Hayes had nothing to do with U.S. dollar LIBOR. He was exclusively trading yen.
Speaker #2
Precisely. So UBS argues that they did not instantly point the finger at Hayes to deflect from the U.S. dollar probe. That’s his narrative, but they disagree.
Speaker #1
So what’s their narrative?
Speaker #2
Their narrative is that by December 2010, months into this rigorous internal review, they genuinely uncovered anomalous communications regarding Yen Libor entirely on their own.
Speaker #1
Ah, OK.
Speaker #2
Yeah. They claim they followed a separate trail of evidence, self-disclosed this entirely new, unprompted conduct of the Department of Justice, and pointed authorities toward Hayes simply because his own electronic footprint led them there.
Speaker #1
And I have to admit, when you read the motion to dismiss, UBS points to a lot of ugly electronic footprints.
Speaker #2
They definitely have receipts.
Speaker #1
Yeah. They cite these Bloomberg chat logs, instant messages between Hayes and the employees who actually submitted the daily LIBOR rates. In one chat pulled from the criminal complaint, Hayes flat out asks a submitter to, quote, skew the LIBORs a bit.
Speaker #2
Yeah, that’s a tough one to explain away.
Speaker #1
Right. And he explicitly says he really needs, quote, high six and fixes till Thursday.
Speaker #2
And the submitter actually responds in the affirmative. They say, quote, yep, we on the case there will def be on the high side.
Speaker #1
Wow.
Speaker #2
And in another instance from March 2007, Hayes asks to go, quote, low three month and six month. A colleague pushes back slightly, saying he can’t set it too far from the truth or he’ll get the bank banned.
Speaker #1
And Hayes replies, quote, anyway, any help appreciated.
Speaker #2
Right.
Speaker #1
So reading those cold printed on a page in a legal brief, UBS has a very. compelling superficial argument.
Speaker #2
Or absolutely. Yeah. They’re essentially saying, look at these messages. This is a rogue trader manipulating global interest rates just to line his own pockets and hit his bonus targets.
Speaker #1
Yeah. They’re saying we found this undeniable proof and we handed it over to the authorities as any responsible corporate citizen should.
Speaker #2
But then Hayes’s opposition brief presents a completely inverted reality.
Speaker #1
Right. He doesn’t just say, Oops.
Speaker #2
No. He argues that the concept of him being a quote-unquote rogue trader is a deliberate corporate fiction. He claims he was following official established UBS policy.
Speaker #1
So she’s saying everyone knew.
Speaker #2
Exactly. He says he was acting with the full blessing, knowledge and active encouragement of senior management. He argues that it was an explicit instruction that LIBOR submitters should take the bank’s trading positions into account.
Speaker #1
So he paints a picture not of a guy whispering in dark alleys, but someone literally shouting across the room. trading floor.
Speaker #2
Yeah, exactly. He says these requests were openly discussed at daily end desk meetings. It wasn’t a secret.
Speaker #1
His overarching thesis is basically that when the regulatory heat regarding U.S. dollar LIBOR threatened to engulf the highest echelons of UBS management, the bank needed a containment strategy.
Speaker #2
Right. They needed to protect the top brass.
Speaker #1
Yeah. To save the broader corporate franchise from catastrophic penalties and to protect the executives in Zurich and London, they needed a scapegoat.
Speaker #2
They needed someone far enough away from it. headquarters geographically, but involved enough in the mechanics of the rates to serve as a plausible mastermind.
Speaker #1
They needed a Tommy chocolate to sacrifice.
Speaker #2
That’s his argument in a nutshell. Yeah.
Speaker #1
So they curate the evidence, they hide the corporate policies, they name the investigation after him, and they serve him up on a silver platter to the DOJ to buy their own leniency.
Speaker #2
That is the explosive conflict at the heart of this lawsuit. It’s a rogue trader driven by greed versus a loyal employee. cannibalized by a ruthless corporate machine.
Speaker #1
But this war of narratives isn’t happening in London, where Hayes was tried, or in Zurich, where UBS is headquartered. It is happening in a state courthouse in Stanford, Connecticut.
Speaker #2
And that geography is highly, highly contested.
Speaker #1
Because why Connecticut?
Speaker #2
It is the absolute primary battleground of this current motion. UBS’s first major tactical maneuver to neutralize this lawsuit is invoking a legal doctrine called forum non-convenience.
Speaker #1
Forum non-convenience, the inconvenient forum. So for anyone who isn’t a litigator, this essentially translates to your honor. Forcing us to litigate here is incredibly burdensome, makes zero logistical sense. And we demand this be moved to a more appropriate location.
Speaker #2
That captures the spirit perfectly. Yes. The legal standard basically requires the presiding judge to evaluate whether litigating in the plaintiff’s chosen location is just so overwhelmingly impractical and so disconnected from the actual events in dispute. that it fundamentally prejudices the defendant’s ability to mount a fair defense.
Speaker #1
So UBS is arguing that a Connecticut state court has absolutely zero meaningful connection to the life of Tom Hayes or the actions of UBS in this matter.
Speaker #2
Exactly. And UBS lays out a geographical map that on its face seems pretty ironclad. They point out that Tom Hayes is an English citizen.
Speaker #1
Right.
Speaker #2
He lived in England. He was investigated and arrested by the serious fraud office in England. He was subjected to a highly publicized trial in a London courtroom.
Speaker #1
And he was convicted there. and served his five-year sentence in an English prison.
Speaker #2
Furthermore, when the American authorities indicted him, that federal grand jury was convened in the Southern District of New York, in Manhattan, not Connecticut.
Speaker #1
And UBS is a Swiss entity. And Hayes’s alleged trading misconduct occurred while he was stationed in Japan.
Speaker #2
Right. So UBS asked the Connecticut judge a very pointed question. Why should the taxpayers of Fairfield County fund a massive, complex trial about the inner workings of the British justice system and the Tokyo interbank market?
Speaker #1
Yeah, that makes sense. But beyond just the optics of it. UBS leans heavily into the logistical nightmare of a Connecticut trial.
Speaker #2
Oh, yeah. The logistics are a mess.
Speaker #1
Because in a high stakes civil trial, you need live witnesses to establish credibility, right?
Speaker #2
You absolutely do. But the key players in this drama, the U.K. prosecutors, the DOJ attorneys from Washington, D.C. and New York, the former UBS executives who have scattered across the globe, almost none of them reside in Connecticut.
Speaker #1
And this is a critical structural issue in civil litigation. A Connecticut state court possesses subpoena power. only within its borders, right?
Speaker #2
That’s right. The judge cannot compel a non-party witness living in London or even just across the state line in New York to show up and testify live at a trial in Stanford.
Speaker #1
So if you want testimony from a hostile former executive living in London, you can’t just send them a letter and say, hey, please come over.
Speaker #2
No, no. You have to utilize international legal frameworks. You’re forced into the realm of the Hague Evidence Convention.
Speaker #1
The Hague Convention. That sounds incredibly slow.
Speaker #2
Oh, it is. You have to issue what are called letters rogatory, which is essentially a formal request from the Connecticut court to a British court asking the British judiciary to compel the witness to sit for a deposition. Yeah. It is an excruciatingly slow, expensive, and diplomatically fraught process that can take years. So UBS argues that forcing them to defend a multi-hundred-million-dollar malicious prosecution case relying on videotaped depositions of foreign witnesses. rather than compelling live testimony where a jury can assess their demeanor, is just fundamentally unfair.
Speaker #1
I mean, listening to that, it sounds like a total slam dunk for UBS. They make Connecticut sound like a random state Hayes just picked out of a hat just to annoy them.
Speaker #2
Right. They really do.
Speaker #1
But then you read Hayes’ opposition brief, and he completely flips the narrative. He argues that Connecticut is not some random inconvenience. He claims Connecticut is ground zero for the entire conspiracy against him.
Speaker #2
And this is where Hayes’ legal team. meticulously traces the paper trail.
Speaker #1
What do they find?
Speaker #2
Well, they point out that the very first legal instrument that kicked off this entire global LIBOR saga, an April 2010 subpoena from the Commodity Futures Trading Commission, the CFTC was sent directly to UBS’s U.S. headquarters.
Speaker #1
And where exactly was that massive trading floor and headquarters located?
Speaker #2
Stanford, Connecticut.
Speaker #1
Stanford. Wow. So the inciting incident of the entire decade-long nightmare happened in Stanford.
Speaker #2
Exactly. But Hayes goes much deeper than just the initial subpoena. When UBS ultimately capitulated and struck a deferred prosecution agreement with the U.S. government to settle the LIBOR manipulation charges, a specific entity had to take the fall. Their Japanese subsidiary, UBS Securities Japan Co. Ltd., was forced to plead guilty to criminal wire fraud. And where was that criminal guilty plea formally entered?
Speaker #1
Don’t tell me.
Speaker #2
In the United States District Court for the District of Connecticut.
Speaker #1
That is a massive detail. They essentially utilize the Connecticut judicial system to execute their corporate settlement.
Speaker #2
They absolutely did. And as part of that settlement, UBS agreed to pay an astronomical fine of roughly $500 million to the U.S. Treasury.
Speaker #1
Half a billion dollars.
Speaker #2
Right. And Hayes’ filings highlight financial records showing that this half a billion dollar penalty was routed directly through a Connecticut branch of UBS.
Speaker #1
OK, the ties to Connecticut are getting pretty strong here.
Speaker #2
It gets better.
Speaker #1
Yeah.
Speaker #2
Furthermore, the Department of Justice’s own press release, which loudly announced the criminal charges against Hayes, explicitly thanked two assistant U.S. attorneys from the District of Connecticut for providing, quote, valuable assistance to the investigation.
Speaker #1
So Hayes is looking at the judge and basically saying, let me get this straight. UBS can accept federal subpoenas at their massive Stanford headquarters. They can plead guilty to federal crimes in a Connecticut courthouse. They can wire half a billion dollars in fines through a Connecticut bank. They can utilize Connecticut federal prosecutors to build the case against me. But the second I try to sue them for how they maliciously managed that exact investigation out of those same Stanford offices, suddenly Connecticut has nothing to do with it.
Speaker #2
It is a incredibly potent counterargument. He’s asserting that the tort itself, the wrongful act of maliciously manufacturing a curated deceptive case against him, was conceived, directed and executed, at least in significant part. by executives and compliance lawyers operating out of that exact Stanford building.
Speaker #1
But there is a massive tactical subtext here that we need to talk about. Let’s look past the arguments about witness convenience. Why is Hayes fighting so hard to stay in Connecticut? And why is UBS so desperate to force him into New York or the UK? It’s not just about the cost of plane tickets for witnesses, is it?
Speaker #2
No, not at all. You’re hitting on the brutal reality of forum shopping in corporate litigation.
Speaker #1
What’s the trap?
Speaker #2
Well, if the judge grants the forum non-convenience motion and dismisses the Connecticut case, Hayes isn’t out of options entirely. He has to refile the lawsuit in one of the venues UBS claims is more appropriate, like New York.
Speaker #1
OK.
Speaker #2
But Hayes’ lawyers highlight a massive, potentially fatal trap door waiting for him in New York law. New York has an exceptionally strict one-year statute of limitations for malicious prosecution claims.
Speaker #1
A one-year clock.
Speaker #2
Exactly.
Speaker #1
And malicious prosecution claims are notoriously tricky when it comes to figuring out exactly when that clock starts ticking.
Speaker #2
Precisely. The legal standard is that the clock starts when the underlying prosecution terminates in the plaintiff’s favor. But when did that actually happen for Hayes?
Speaker #1
Right. Because there were two cases.
Speaker #2
Right. Did the one-year clock start in 2023 when the U.S. indictment was dismissed in New York? Or did it start in 2025 when the U.K. Supreme Court finally quashed his British conviction?
Speaker #1
Oh, wow. So if it’s the first one, he’s already out of time.
Speaker #2
Exactly. Hayes argues that if the Connecticut judge forces him into New York, UBS has zero intention of fighting this case on the merits. He claims they will instantly file a motion to dismiss the new lawsuit on a technicality, arguing that the one-year clock started back in 2023 and has already expired.
Speaker #1
So what does this all mean for you, the listener? If you get sued or if you sue a massive company, can they just endlessly argue to move the case until they find a state with laws that favor them? How much deference does a court actually give to a plaintiff’s choice of where to file a lawsuit?
Speaker #2
Well, generally speaking, courts afford significant deference to a plaintiff’s choice of forum. It is their lawsuit. They initiated it. And they have the right to pick the battlefield, provided the court obviously has legal jurisdiction. To override that choice, a defendant like UBS has to carry a really heavy burden. They have to prove that litigating in the chosen forum is genuinely oppressive and vexatious, not just mildly inconvenient.
Speaker #1
Which is a high bar.
Speaker #2
It is. And more importantly, the defendant has to prove there is an unquote adequate alternative form available.
Speaker #1
And Hayes is arguing that New York is fundamentally not an adequate alternative if UBS is just going to ambush him with a statute of limitations defense the second he walks through the courthouse doors.
Speaker #2
Exactly. If a judge suspects a defendant is utilizing forum non-convenience not to secure a fairer trial location, but as a tactical maneuver to funnel a plaintiff into a jurisdiction where the case will be. automatically dismissed on a procedural technicality, the judge is highly unlikely to grant the motion.
Speaker #1
Right. Because courts generally prefer cases to be decided on their actual merits, not on jurisdictional shell games.
Speaker #2
Exactly.
Speaker #1
Well, that jurisdictional chess match alone could consume years of appeals.
Speaker #2
So for sure.
Speaker #1
But UBS doesn’t just want the case moved. They have a second, far more aggressive legal maneuver deployed in these filings.
Speaker #2
Yes, they do.
Speaker #1
They want the Connecticut judge to kill the case entirely. right here, right now. They are claiming that by suing them for malicious prosecution, Tom Hayes is actively violating UBS’s First Amendment rights.
Speaker #2
Which brings us to the fascinating application of the anti-SLAPP defense.
Speaker #1
The anti-SLAPP statute. So SLAPP is an acronym for Strategic Lawsuits Against Public Participation. We really need to define the original intent of these laws based on the history provided in the filings because it’s a brilliant piece of legislation that is being used in a very unexpected way here.
Speaker #2
Definitely. A sell a PP suit is essentially a weaponized lawsuit. It is frivolous litigation filed not with the genuine intent of winning on the legal merits, but to intimidate, harass, bankrupt, and ultimately silence a critic.
Speaker #1
Give me an example of how it’s supposed to work.
Speaker #2
The classic textbook example involves a massive, well-funded real estate developer who wants to bulldoze a protected local wetlands to build a shopping mall. A local citizen goes to a public zoning board meeting, stands up, and speaks out passionately against the developer. In retaliation, the developer’s lawyers sue that citizen for $10 million, claiming defamation.
Speaker #1
And the developer knows they will probably lose the defamation suit eventually, right?
Speaker #2
Right, but that isn’t the point. The point is to force the citizen to hire a lawyer, spend tens of thousands of dollars on discovery, endure depositions, and face financial ruin.
Speaker #1
They want to. Crush the citizens so thoroughly that nobody else in town ever dares to speak out against the developer again.
Speaker #2
Exactly. It is the ultimate chilling effect on free speech. So to combat this predatory tactic, many state legislatures, including Connecticut, passed anti-cell APP laws.
Speaker #1
And how do those help?
Speaker #2
They provide a really powerful shield. They allow a defendant who is being sued. for exercising their First Amendment rights, like speaking at a public meeting or petitioning the government to file a special motion for early dismissal.
Speaker #1
So before discovery even starts.
Speaker #2
Right. If the judge agrees the lawsuit targets protected speech and lacks, quote unquote, minimal merit, the case is thrown out immediately, halting expensive discovery in its tracks. And crucially, the plaintiff who filed the frivolous suit is forced to pay the defendant’s legal bills.
Speaker #1
So it was designed as a shield for the little guy. A way for an average citizen to swat away a bullying corporation. But in this Stanford courtroom, we have a total inversion of that dynamic. UBS, a global financial behemoth with virtually unlimited resources, is utilizing the anti-SLAPP statute against Tom Hayes, an individual plaintiff.
Speaker #2
And UBS’s legal logic is stark. And from a strictly textual interpretation, it’s quite formidable.
Speaker #1
What are they arguing?
Speaker #2
They argue, look, the United States Department of Justice and the UK Serious Fraud Office were investigating the manipulation of global benchmark interest rates. That is undeniably a matter of profound public concern.
Speaker #1
Sure.
Speaker #2
We, the corporate entity, cooperated with that governmental investigation. We gathered documents. We presented findings. We communicated with prosecutors. All of those actions constitute communicating with the government.
Speaker #1
OK, I see where this is going.
Speaker #2
Right. Therefore, they say Hayes is suing us for exercising our fundamental. constitutionally protected right to petition law enforcement. Under the anti-SLAPP statute, this lawsuit is a retaliatory attack on our speech and must be dismissed.
Speaker #1
I was reading through Hayes’ opposition, and he doesn’t just argue against this. He brings in a heavyweight to dismantle the premise.
Speaker #2
Oh, he really does.
Speaker #1
He includes an affidavit from a man named William Lockyer. And Lockyer isn’t just a hired gun litigator. According to his CV in the filings, he is the former attorney general of the state of California.
Speaker #2
That’s a huge deal.
Speaker #1
Right. And even more importantly, during his time in the California state legislature, he was one of the primary architects who drafted and passed some of the country’s very first anti-SELAPP legislation.
Speaker #2
Having the actual legislative architect of the legal concept file, a sworn affidavit on your behalf, is an incredibly rare and powerful tactical move.
Speaker #1
It’s like having the guy who wrote the rulebook say, you’re reading it wrong.
Speaker #2
Exactly. Lockyer’s affidavit is a really compelling read because it bypasses the dry text of the statute and dives directly into the legislative intent and the moral philosophy behind these laws.
Speaker #1
And he argues that applying the anti-cell APP statute to shield a corporation like UBS in this specific scenario would pervert the entire purpose of the legislation. He explicitly states that the law was designed to protect the powerless from being crushed by deep-pocketed corporate litigation. It was absolutely never intended to be an impenetrable shield behind which massive corporate interests could hide from good faith lawsuits brought by individuals whose lives were destroyed by that corporation’s actions.
Speaker #2
But Lockyer’s argument isn’t just about power dynamics. He makes a fundamental legal distinction about the nature of the speech that the First Amendment actually protects.
Speaker #1
Which is what?
Speaker #2
This is the crux of his affidavit. Anti-Cell-App laws protect speech. Even if that speech turns out to be ultimately mistaken or inaccurate.
Speaker #1
Okay.
Speaker #2
For example, if you look out your window, genuinely believe you see your neighbor sealing a car, and report it to the police, you are protected from a defamation lawsuit, even if it turns out it was actually their own car.
Speaker #1
Because it was an honest mistake.
Speaker #2
Right. Good faith errors are protected.
Speaker #1
But, and this is the massive caveat, anti-cell APP laws do not protect knowingly false speech. They do not protect perjury. They do not protect the intentional calculated fabrication or suppression of evidence.
Speaker #2
Precisely. And that distinction is the beating heart of Hayes’ malicious prosecution claim. He is not suing UBS because they reported his conduct in good faith.
Speaker #1
Right.
Speaker #2
He is alleging that UBS did not just report a crime. They actively engineered a false narrative.
Speaker #0
He claims they weaponized their internal investigation to provide a highly curated, deceptively misleading set of documents to prosecutors.
Speaker #1
And their intent, he alleges, was to frame him as a rogue actor, specifically to insulate the bank’s senior executives from criminal liability.
Speaker #0
That is his core argument.
Speaker #1
I want to push back on Hayes’s theory for a second, though, or at least look at it from the macro policy perspective for our listeners. Because UBS is essentially using a shield designed for activists as a sword to block a lawsuit from a former employee. But does UBS actually have a valid point regarding corporate cooperation?
Speaker #0
Well, it’s a complicated question.
Speaker #1
Right. Because think about the incentive structures we want in society. If a company knows that by handing over internal emails to the DOJ and trying to cooperate, they expose themselves to hundreds of millions of dollars in civil liability from disgruntled former employees, won’t every single company just stop cooperating.
Speaker #0
That is a very real fear.
Speaker #1
They will lawyer up, build a fortress, invoke every privilege imaginable and say, we aren’t giving the government a single piece of paper because if we do, our employees will sue us into oblivion for malicious prosecution.
Speaker #0
You have articulated the exact policy concern that keeps appellate judges awake at night. We absolutely rely on corporations to self-report complex financial crimes.
Speaker #1
Because the government can’t do it all.
Speaker #0
Exactly. The government simply does not have the resources to uncover every instance of corporate fraud without internal cooperation. If the threat of civil liability is too high, the justice system’s ability to police corporate America basically grinds to a halt.
Speaker #1
Which is terrible for everyone.
Speaker #0
Right. And this is why the legal threshold to pierce that First Amendment protection is incredibly high. You cannot overcome an anti-SLAPP motion. simply by claiming the company’s internal investigation was negligent, sloppy, or incompetent.
Speaker #1
You have to prove intentional malice.
Speaker #0
Yes, intentional malice and deliberate knowing deception.
Speaker #1
And to survive this early anti-SLEPP dismissal, Hayes doesn’t have to prove his entire case beyond a reasonable doubt right now. But he has to prove to the judge that his lawsuit has, quote, minimal merit.
Speaker #0
Right. He has to show that this isn’t a baseless conspiracy theory.
Speaker #1
He has to put his cards on the table and show the literal receipts the sp… specific evidence he claims UBS deliberately buried.
Speaker #0
Exactly. He has to demonstrate a probability that he will prevail on the merits. He has to prove that his allegation of intentional deception is anchored in factual reality.
Speaker #1
So how does he do that? He does it by ripping the lid off Project Chocolate and detailing three massive glaring omissions.
Speaker #0
Three very specific categories of evidence.
Speaker #1
Right. Three distinct categories of evidence he claims the DOJ never saw because UBS intentionally hit them. But to understand how a company allegedly hides evidence in plain sight during a federal probe, we have to deeply examine the mechanics of modern corporate e-discovery.
Speaker #0
Yeah, this part is fascinating. When the regulatory subpoenas rained down on UBS, they didn’t just ask their IT guy to print out some emails. They hired the elite global law firm Gibson Dunn to conduct Project Chocolate.
Speaker #1
And the sheer volume of data involved is staggering. According to the deposition of Stephen Slutton, a partner at Gibson Dunn who is quoted in the filings, they collected approximately 31 million documents from nearly 100 custodians globally.
Speaker #0
31 million discrete pieces of communication.
Speaker #1
It is an ocean of data. To put that in perspective, no team of human prosecutors, no matter how well-staffed the DOJ is, could ever sit down and read 31 million documents.
Speaker #0
Not a chance. The federal government relies on the target company’s outside counsel to cull that data. So Gibson Dunn utilizes complex software, search terms, predictive coding, and privilege filters.
Speaker #1
And ultimately, out of 31 million documents, they produce roughly 1.2 million to the authorities.
Speaker #0
1.2 million is a massive production, but it means they held back, either as irrelevant or privileged, approximately 29.8 million documents.
Speaker #1
And this is where Hayes alleges the malice occurred. He claims that within that massive, opaque calling process, UBS and their lawyers deliberately cherry-pick the documents that fit their rogue trader narrative.
Speaker #0
Like the chat logs where he asks a submitter to skew the rates.
Speaker #1
Exactly. Conversely, he alleges they systematically buried, ignored, or withheld the documents that would have provided crucial context specifically. Documents showing his actions were dictated by official corporate policy.
Speaker #0
And he outlines three specific smoking guns. First up, the LIBOR policies.
Speaker #1
This cuts directly to the heart of the rogue versus loyal employee debate. Hayes claims that UBS actually maintained formal internal policies directing LIBOR submitters to consider the bank’s trading interests when setting the daily rates.
Speaker #0
Right. He argues that when he was hired, he received zero formal training on the legal or ethical parameters of LIBOR submission. Instead, the culture was one of total integration between the trading desks and the submitters.
Speaker #1
He claims he was specifically instructed by his direct managers to aggressively make requests to the submitters that would financially benefit their Yendesk positions.
Speaker #0
And he emphasizes that this wasn’t some clandestine operation. He says he wasn’t sending encrypted messages or meeting submitters in parking garages.
Speaker #1
He alleges these LIBOR requests were openly discussed, debated, and strategized at daily meetings with the entire Yen desk present.
Speaker #0
But, he argues in his opposition, UBS didn’t brief the DOJ on these unwritten policies or the daily open meetings.
Speaker #1
Right. They just handed over his isolated chat logs, stripped of their institutional context, and said, look at this greedy lone wolf.
Speaker #0
The second major omission Hayes details elevates the alleged conspiracy right to the very top of the corporate ladder.
Speaker #1
This one is huge.
Speaker #0
It is. He points to a man named Karsten Kengitter. And Kengitter was not mid-level management. He was the co-head of UBS’s entire global investment bank and a member of the bank’s overarching Swiss management board.
Speaker #1
He is a titan within the organization.
Speaker #0
Absolute titan. And in a sworn declaration submitted to the Connecticut court. Hayes claims that he personally discussed his LIBOR requests with Kengader on multiple occasions. Yes. He says he explicitly briefed Kengader about his communications with submitters at other banks and interdealer brokers. And according to Hayes, Kengader didn’t recoil in horror. He didn’t say, my God, stop doing that. You’re manipulating a global benchmark.
Speaker #1
Hayes alleges Kengader actively supported and encouraged the strategy.
Speaker #0
Right. And this leads to a piece of circumstantial evidence that Hayes views as highly exculpatory.
Speaker #1
What’s that?
Speaker #0
Hayes alleges that shortly after these explicit discussions about LIBOR strategy, when he was contemplating leaving UBS for a competitor, Kendra personally authorized a $2.5 million enhanced financial retention package to convince Hayes to stay at the bank.
Speaker #1
$2.5 million. That is not a standard annual bonus. That is a massive corporate investment to retain a key asset.
Speaker #0
Exactly. And Hayes poses a logical question to the court. Why would the co-head of the investment bank authorize a multi-million dollar retention bonus for a mid-level trader in Tokyo if that trader was secretly running a rogue, illegal manipulation scheme that blatantly violated bank policy and exposed the entire institution to ruin?
Speaker #1
It doesn’t make any sense.
Speaker #0
Right. Hayes claims UBS never disclosed this interaction, the explicit approval or the retention bonus to the prosecutors. when they were framing him as a lone wolf who deceived management.
Speaker #1
The third omission Hayes points to is incredibly technical, but it was absolutely devastating to his defense during his actual criminal trial in London.
Speaker #0
Yeah, this one is brutal.
Speaker #1
It involves profit and loss data known in the industry as P&L.
Speaker #0
To understand this, we have to look at Hayes’ defense strategy during his UK criminal trial. He wasn’t just arguing about corporate policy. He was trying to prove a mathematical point to the jury.
Speaker #1
What was he trying to prove?
Speaker #0
He wanted to demonstrate that his trading profits The money he made for UBS weren’t solely reliant on manipulating LIBOR.
Speaker #1
Oh, I see.
Speaker #0
He wanted to show the jury a granular day-by-day, trade-by-trade breakdown of his book to prove he was making money through legitimate macroeconomic market movements, sophisticated hedging, and standard trading acumen, not just by rigging the benchmark.
Speaker #1
Because it’s the difference between being a brilliant trader who occasionally pushed the envelope. And a fraudster whose entire book was built on a rigged number.
Speaker #0
Exactly. So to prove this, he begs the U.K. trial judge, Justice Cook, to force UBS to hand over his granular P&L data.
Speaker #1
And the Connecticut civil filings contain the actual written responses that Gibson Dunn sent to the U.K. Serious Fraud Office regarding this request.
Speaker #0
And what did they say?
Speaker #1
UBS formally told the court that their internal IT and risk management systems, quote, have not retained trading data in such a form as to enable it to segregate the profits and losses from trades and products referenced to JPY LIBOR as opposed to other trades.
Speaker #0
So in short, they told a criminal judge that it was technologically impossible to generate the historical report Hayes needed to defend himself.
Speaker #1
Right. And the judge, relying on the sworn representation of this massive financial institution, denied Hayes’ request for the data. He went to trial without it.
Speaker #0
But Hayes’ declaration in this civil suit drops an absolute bombshell regarding that specific letter.
Speaker #1
He says UBS’s statement that the system couldn’t generate the report was a blatant, provable, intentional lie.
Speaker #0
Wait, really? How does he prove that?
Speaker #1
Because when he first joined the Yen desk years prior, he claims he personally sat down with UBS’s IT staff to design and implement the exact capability to generate that specific segregated P&L report.
Speaker #0
Oh, wow.
Speaker #1
Yeah. He swears under oath that he received that granular daily breakdown on his desk every single day he worked there.
Speaker #0
It is a breathtaking allegation. He is accusing a global bank and its elite outside counsel of deliberately lying to a criminal court to deny an accused man exculpatory evidence that could have prevented him from spending five years in prison.
Speaker #1
If I’m understanding this right, if we synthesize all of this. Hayes is saying UBS handed the government a puzzle with half the pieces intentionally removed. They hide the corporate policy, they hide the CEO’s knowledge and the multi-million dollar bonus, and they allegedly lie to a judge about the trading data.
Speaker #0
That’s the argument.
Speaker #1
But how can Hayes prove to a civil jury that UBS did this intentionally and not just accidentally? I mean, we talked about 31 million documents. Even with the best software in the world, things get lost. Search terms miss nuances. An IT guy might genuinely not know how to pull a report from five years ago. How do you prove malice over incompetence?
Speaker #0
That is the Mount Everest Hayes has to climb in this litigation. Proving a specific document was missed in discovery is relatively easy. Proving it was hidden maliciously with the specific intent to frame someone is notoriously difficult.
Speaker #1
So what’s his strategy?
Speaker #0
Well, Hayes’ legal team argues that you have to look at the statistical probability and the pattern of omissions. They argue that when When every single missing document or forgotten policy happens to perfectly exculpate Tom Hayes and simultaneously implicate senior management. And when the entire internal investigation is literally codenamed after the target.
Speaker #1
Project Chocolate.
Speaker #0
Right. The statistical probability of it being a series of innocent accidents approaches zero. They argue the pattern itself is the proof of a coordinated bad faith intent to frame him.
Speaker #1
But UBS has an ultimate trump card to play against. all of these allegations of missing evidence. Their defense is remarkably simple and shifts the blame entirely.
Speaker #0
Yes.
Speaker #1
They look at Hayes and say, we don’t prosecute you, Tom. We aren’t the government. We don’t have the power to convene grand juries or issue indictments. The Department of Justice and the Serious Fraud Office prosecuted you. We just answered their subpoenas.
Speaker #0
Basically, if you are mad about being in prison, sue the government, not us.
Speaker #1
Which transitions us to a critical legal concept in white-collar law, the concept of outsourcing the prosecution. And a vital legal precedent that Hayes relies on heavily, known as the Connolly case.
Speaker #0
Right. Let’s unpack the mechanics of a malicious prosecution claim. To win, Hayes can’t just prove UBS was mean to him or that they fired him unfairly or even that they hid documents. He has to satisfy a very specific, stringent legal element. He has to prove that UBS legally initiated the prosecution.
Speaker #1
And UPS leans heavily on affidavits from the highest levels of law enforcement to prove they did no such thing.
Speaker #0
They submit a sworn statement to the Connecticut court from Daniel Braun.
Speaker #1
Who is Daniel Braun?
Speaker #0
Braun is not a low-level attorney. He was the former deputy chief of litigation for the DOJ’s fraud section. He’s the man who actually signed the criminal complaint against Tom Hayes.
Speaker #1
Okay, that’s a big deal.
Speaker #0
And Braun swears in his affidavit that the DOJ rigidly followed federal principles of prosecution, that they conducted their own review. And that the ultimate decision to charge Hayes was made entirely and independently by the DOJ, uninfluenced by any private party’s desires.
Speaker #1
And they bolster that with a similar affidavit from across the Atlantic. They submit a statement from Sir David Green, the former director of the UK’s Serious Fraud Office.
Speaker #0
Right. And Sir David swears he made the independent decision to charge Hayes in the UK, that UBS applied zero pressure on him to do so. And this is a very carefully worded phrase. that he didn’t rely solely on documents or information obtained from UBS.
Speaker #1
So UBS presents these affidavits to the judge and says, case closed. The prosecutors themselves swear they acted independently. The chain of causation is broken. You cannot sue a private company for the independent, discretionary charging decisions made by sovereign governments.
Speaker #0
But Hayes isn’t the first person to try this argument against a massive bank. I saw in the filings. that his legal team counters UBS’s affidavits by heavily citing the Connolly and Black cases.
Speaker #1
Yeah, they rely on this precedent to prove that a corporation can be held liable for initiating a prosecution. What exactly happened in the Connolly case?
Speaker #0
Matthew Connolly and Gavin Black were traitors at Deutsche Bank, who found themselves caught in the exact same LIBOR manipulation dragnet. Like Hayes, they were prosecuted, and their convictions were eventually overturned on appeal.
Speaker #1
Okay.
Speaker #0
Following their exoneration, They turned around and sued Deutsche Bank for malicious prosecution in federal court in New York. Their allegations were virtually identical to Hayes’. They claimed Deutsche Bank weaponized its internal investigation and threw them under the bus to protect senior executives and secure a deferred prosecution agreement.
Speaker #1
And did Deutsche Bank successfully deploy the we just answered subpoenas, the government did its defense?
Speaker #0
They tried, but they failed. In the Connolly case, a federal judge allowed the malicious prosecution lawsuit to survive a motion to dismiss and proceed to discovery against Deutsche Bank.
Speaker #1
Wow.
Speaker #0
Yeah, the judge issued a landmark ruling finding that the plaintiffs had plausibly alleged that the DOJ had, in the judge’s words, quote, basically outsourced the prosecution to Deutsche Bank.
Speaker #1
Outsource the prosecution. That is a terrifying phrase. Let’s delve into what that actually means in practice, because it completely redefines how we view corporate justice.
Speaker #0
If we connect this to the broader evolution of modern white collar criminal enforcement, we see a systemic shift. The federal government, despite its immense power, often lacks the specialized resources, the manpower and the budget. to independently review 31 million documents stored on foreign servers in multiple languages.
Speaker #1
They simply cannot afford to spend five years digging through a foreign bank’s internal systems.
Speaker #0
So a pragmatic yet highly controversial practice has developed. The government essentially approaches the target corporation and says, you are under federal investigation. Go hire an extraordinarily expensive elite law firm. Investigate yourselves. Find the individual wrongdoers within your ranks. Do all the legwork. And bring us a neatly packaged bowtied presentation of their crimes.
Speaker #1
And if they do that.
Speaker #0
If you do that to our satisfaction, we will grant the corporation leniency, a deferred prosecution agreement and a manageable fine.
Speaker #1
It’s the privatization of the justice system. The target company, terrified of losing its banking charter, becomes the detective, the prosecutor and the jury all rolled into one. And their outside counsel acts as a shadow DOJ.
Speaker #0
Exactly. And Hayes argues that UBS executed this exact outsourced model. He points to discovery documents showing that UBS’s lawyers, Gibson Dunn, didn’t just passively hand over emails.
Speaker #1
They actively created the legal theory of the crime.
Speaker #0
Right. They developed the investigative plan. They unilaterally selected the search terms that would dictate what evidence was found. They interviewed the witnesses, often before the government did.
Speaker #1
And then over the course of dozens of highly orchestrated presentations, they spoon-fed this curated, sterilized narrative to the DOJ.
Speaker #0
and Hayes’ His brief points out an incredible, almost surreal fact. The exact same DOJ lawyer, Daniel Braun, signed both the non-prosecution agreement granting leniency to UBS and the criminal complaint indicting Tom Hayes.
Speaker #1
What’s fascinating here is the exact wording in the affidavit from the UK SFO director, Sir David Green. As a listener, you have to read between the lines these carefully drafted legal documents. Green swears under oath that the evidence to convict Hayes didn’t come solely from UBS. From a strip textual standpoint, if 90 percent of the evidence came from Gibson Dunn’s curated internal investigation and the SFO found 10 percent from other banks, Green’s statement that it wasn’t solely from UBS is technically true. It avoids perjury. But does that constitute a truly independent government investigation?
Speaker #0
Hayes’s lawyers argue it is a distinction without a difference. They use a really powerful analogy. If I hand you a map. where I have intentionally raised all the safe roads and only drawn the path leading off a cliff, and you follow my map and drive off the cliff?
Speaker #1
Can you wash your hands and say, well, I didn’t drive the car. You made the independent decision to turn the wheel.
Speaker #0
Exactly. Hayes argues that when a corporation uses its privileged position and massive resources to feed prosecutors a diet of intentionally poisoned asymmetrical information, the corporation is the true initiator of the prosecution, regardless of whose signature is on the final indictment.
Speaker #1
Think about the massive implications for white collar crime if Hayes’s theory holds up. If the government is routinely relying on the target corporation’s law firm to conduct the actual investigative legwork, who is really running the justice system?
Speaker #0
It’s a scary thought.
Speaker #1
Are federal prosecutors just acting as rubber stamps, validating the investigative work of corporate lawyers whose primary ethical and fiduciary duty is not to the truth, but to protect their client’s stock price and shield their executives?
Speaker #0
It raises profound… existential questions about accountability and the balance of power in corporate enforcement. But, you know, even if Hayes successfully convinces the Connecticut judge that UBS initiated the prosecution by outsourcing the investigation, he is not at the finish line.
Speaker #1
He still has two more massive legal elements to prove to win a malicious prosecution case. He has to prove that UBS acted without, quote unquote, probable cause and that they acted with, quote, malice.
Speaker #0
And this is where the timeline bends back on itself. How on earth do you prove to a civil judge that there was no probable cause to arrest you when two entirely different sovereign nations originally indicted or convicted you based on that exact evidence?
Speaker #1
Yeah, that seems impossible. UBS’s argument on this front is brutally straightforward, they say. Look at the objective historical record. A federal grand jury in New York reviewed the evidence and found probable cause to indict you. A jury of your peers in London sat through a grueling, multi-week trial, listened to all the evidence, and convicted you beyond a reasonable doubt.
Speaker #0
Furthermore, other individuals and banks, including our own Japanese subsidiary, publicly pled guilty to the exact same conduct.
Speaker #1
And UBS relentlessly cites Hayes’ own chat messages again. be any help appreciated to skew a rate. They argue that any reasonable, objective person, including the prosecutors, looking at those chats would conclude that a crime was being committed.
Speaker #0
Therefore, probable cause indisputably existed at the time, and you cannot sue us for reporting it.
Speaker #1
In addition to the probable cause defense, UBS tackles the malice requirement head on. Under the law, malice is not just generalized bad behavior. It generally requires an intent to injure someone without legal justification.
Speaker #0
Right. And UBS argues that. even if you believe Hayes’ most cynical theory, even if you believe UBS deliberately threw him under the bus to secure a lighter sentence for the corporate entity acting out of raw corporate self-preservation, does not meet the legal definition of malice.
Speaker #1
Wait, I need to stop you there. Are they actually arguing that throwing an employee to the wolves to save yourself isn’t malicious? That seems morally incomprehensible.
Speaker #0
They are arguing a strict legal interpretation based on intent. They argue it is simply a cold risk-benefit analysis of corporate cooperation. Their primary intent was to save the bank, not to gratuitously harm Tom Hayes. They argue that if companies are held strictly liable for quote-unquote malice, every time they negotiate a settlement that results in an employee’s prosecution, no company would ever cooperate with regulators again.
Speaker #1
It’s a remarkably ugly reality of corporate survival, but they argue it falls short of the specific legal definition of malice required for this tort.
Speaker #0
But Hayes has a trump card, and it is the ultimate undeniable trump card in this entire saga. The prosecutions, both of them in the U.S. and the U.K., ultimately terminated in his favor. He was fully exonerated.
Speaker #1
Yes. And this is where the legal landscape shifts dramatically, pulling the rug out from under UBS’s entire probable cause argument. Hayes points out that the U.S. case against him was quietly dropped by the DOJ in 2023.
Speaker #0
And the reason why is crucial. It was dropped because of a landmark decision by the Second Circuit Court of Appeals in that very same Connolly case we discussed earlier.
Speaker #1
I want to spend time on this because it completely recontextualizes the whole LIBOR scandal. What exactly did the Second Circuit say that destroyed the government’s theory?
Speaker #0
To understand the ruling, we have to understand the fundamental nature of LIBOR. The government and the lower courts initially prosecuted these cases on the theory that every single day there was only one objective, quote unquote, true interest rate at which a bank could borrow money.
Speaker #1
If a bank submitted a rate even slightly different from that singular truth, they were lying and therefore committing wire fraud.
Speaker #0
But the Second Circuit looked at the actual mechanics of the interbank market and said, no, that is fundamentally not how banking works.
Speaker #1
So they threw out the single true number idea.
Speaker #0
Exactly. The appellate court recognized that LIBOR is not a strict record of a completed transaction. It is an estimate. And because banks have different credit ratings, different funding needs, and access to different counterparties on any given day, there isn’t one true rate.
Speaker #1
There is a hypothetical range of acceptable rates a bank could legitimately borrow at.
Speaker #0
Precisely.
Speaker #1
So if a bank could theoretically borrow money at 0.35% from one source or 0.38% from another, both numbers are technically true estimates.
Speaker #0
Yes. And if a trader asked the submitter to pick the higher number, 0.38% from one source or 0.38% from another, both numbers are technically true estimates. percent because it benefits their derivative position and the submitter does so, they haven’t lied. They just picked the most advantageous truth from within the acceptable hypothetical range.
Speaker #1
Wow. So the Second Circuit ruled that moving a LIBOR submission to benefit a trading position was not wire fraud and was not illegal as long as the submitted rate still fell somewhere within that acceptable, mathematically justifiable range.
Speaker #0
Because the government could not prove that Hayes’s request forced the submitters to submit rates outside that hypothetical range, The very foundation of the prosecution’s theory collapsed. The DOJ realized they couldn’t win, and they dismissed the indictment against Hayes in New York.
Speaker #1
But that was just the U.S. He was already convicted in the U.K. But then the dominoes continued to fall. In 2025, the U.K. Supreme Court reviewed his conviction.
Speaker #0
And they reached a similarly devastating conclusion. They found that the trial judge, Justice Cook, the same judge who denied Hayes his P&L data based on UBS’s representations, had fundamentally and improperly instructed the jury.
Speaker #1
Because the judge had directed the jury based on the false legal premise that it was categorically inherently unlawful for a commercial trader to even make a commercial request to a LIBOR submitter.
Speaker #0
And the U.K. Supreme Court ruled that this interpretation was wrong and they quashed Hayes’ conviction entirely.
Speaker #1
So he is fully legally exonerated in both countries. But how does he use that exoneration to def- defeat UBS’s argument that there was probable cause back when he was initially arrested. UBS says, hey, the grand jury indicted you, the trial jury convicted you, so we were right at the time.
Speaker #0
Hayes employs a legal theory known as the fruit of the poisonous tree applied to civil litigation. He argues that you cannot use a grand jury indictment or a trial conviction as a shield to prove probable cause if those judicial decisions were irredeemably tainted by your own manufactured false evidence.
Speaker #1
So he tells the court, sure, the jury’s convicted me, but they only convicted me because they were fed the heavily curated lies that Gibson Dunn cooked up in Project Chocolate.
Speaker #0
Exactly. He argues that if UBS had told the truth, if they had disclosed the corporate policy, the CEO’s knowledge and provided the P&L data. No grand jury in the world would have ever found probable cause to indict him in the first place.
Speaker #1
He’s saying you can’t rely on a conviction that you fraudulently engineered. But what about UBS’s final argument that everyone thought this was a crime back in 2010, so we were just cooperating in good faith?
Speaker #0
Hayes counters that argument with a devastating logical paradox. He says UBS always knew it wasn’t a rogue crime because it was their own mandated corporate policy. They couldn’t have genuinely in good faith believed he was a rogue criminal mastermind when they were the ones instructing him to do it, observing him do it openly and paying him millions of dollars of retention bonuses to keep doing it.
Speaker #1
Therefore, he argues, their cooperation was never in good faith. It was a malicious, calculated cover up from day one. This entire saga raises an incredibly profound and frankly terrifying question for you, the listener.
Speaker #0
It really does.
Speaker #1
It’s a moral and professional hypothetical that goes far beyond banking. If you are at work and you are doing exactly what your boss tells you to do, you are following your company’s established, albeit unwritten, policy, and you are highly successful at it, and then the federal authorities come knocking.
Speaker #0
Right.
Speaker #1
And your company, terrified of losing everything, hires an elite law firm, hands over your carefully selected emails to the FBI, and publicly declares that you went completely rogue.
Speaker #0
Is the company acting maliciously? Or are they just being ruthlessly pragmatic to survive? Where exactly is the legal line between corporate self-preservation and malicious prosecution?
Speaker #1
That is the existential question at the heart of this lawsuit. And it is the exact question that the superior court judge in Stanford, Connecticut, is going to have to grapple with.
Speaker #0
Does this case get thrown out on a jurisdictional technicality or an anti-SLAPP First Amendment defense?
Speaker #1
Or does Tom Hayes finally get to pry open the black box of Project Chocolate, depose the executives, and present his evidence to a civil jury? OK, let’s bring this all together. We have covered an immense amount of ground today navigating through the intricacies of international finance, the tactics of multi-district corporate litigation and the profound human cost of it all.
Speaker #0
That’s a lot to take in.
Speaker #1
We are looking at a former employee, Tom Hayes, who served five grueling years in a maximum security UK prison, had his career destroyed and became the global scapegoat for a systemic banking failure. He fought for over a decade. finally had his conviction overturned by the highest court in the land and is now going relentlessly after the multi-billion dollar corporate machine he claims put him in that cell.
Speaker #0
And on the other side, UBS fiercely maintains they did absolutely nothing wrong. They argue they did their civic and legal duty by cooperating with a massive, unprecedented global regulatory investigation, handed over millions of documents, and should not be punished in a civil court for the independent, sovereign charging decisions. made by American and British prosecutors.
Speaker #1
It is a clash of two entirely different realities, two completely distinct narratives of how the world works. But I want to leave you with the final thought to mull over.
Speaker #0
Let’s hear it.
Speaker #1
We’ve spent this whole time deep in the weeds, looking at the legal tactics, the Hague Convention, the documents, the affidavits. But let’s zoom out to the macro level. The entire LIBOR scandal, the billions of dollars in fines, the perp walks, the dramatic prosecutions, It was all sold to the public. as a necessary cleansing of the financial system.
Speaker #0
Right. It was supposed to be about restoring the public’s trust in global financial benchmarks.
Speaker #1
Right.
Speaker #0
It was supposed to prove that the system is ultimately fair and holds bad actors accountable.
Speaker #1
But when you look closely at how these massive corporate settlements are actually negotiated behind closed doors, where a global bank can essentially buy immunity from the government by conducting its own curated investigation, picking the search terms, burying the exculpatory evidence. And offering up a Tommy chocolate on a silver platter to ambitious prosecutors who lack the resources to investigate it themselves, does that process actually restore trust in the system?
Speaker #0
It’s a deeply unsettling thought.
Speaker #1
Or does it just prove, beyond a shadow of a doubt, that justice is fundamentally different if you have a big enough legal budget to hire an elite law firm to write the narrative for you?
Speaker #0
Are we witnessing justice being served? Or are we simply watching the gears of a privatized, outsourced enforcement machine grinding up the most convenient targets to protect the institutions deemed too big to fail?
Speaker #1
It goes right back to the idea of clarity and truth. We want the law to be a clean, clear picture of right and wrong. We want an objective X-ray. But when you allow the prime suspect to build the X-ray machine, take the picture, develop the film, and write the radiologist’s report before handing it to the police, well, you shouldn’t be surprised if the final picture looks exactly how they want it to look. We will be watching that Stanford courtroom very closely to see if the judge decides to finally turn the lights on. Thanks for listening.
Speaker #2
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