David Enrich, the current finance editor at the New York Times, talked about his book, “The Spider Network,” as part of the 2018 Savannah Book Festival’s Free Festival Saturday.
In 2008, a group of Wall Street Journal reporters in the London Bureau started looking into something called LIBOR (London InterBank Offer Rate), the number that determines interest rates.
“It turns out that no one was paying attention to [the mechanics] of how this rate was really set,” Enrich said.
Around the mid-1990s, banks realized they could make money by betting on whether LIBOR was going to go up or down and adjusting their rate accordingly. This became common practice by 2000. The WSJ reporters wrote several front page exposés but no one knew or cared about LIBOR.
Enrich moved to London in 2010 and joined the WSJ. He even didn’t care about LIBOR until 2011 when several institutions began an investigation into banks.
WSJ started to aggressively report again. But their stories continued to fail to capture public attention until 2012 when one of the world’s biggest banks, Barkley’s, reached an agreement with prosecutors in which the bank admitted to manipulating LIBOR.
The CEO, Bob Diamond, resigned. “This was one of the first times since the financial crisis that we’d seen an example of an actual human being held accountable for misconduct at his institution,” Enrich said. Suddenly, people started to pay attention.
United States and British authorities arrested and criminally charged a guy named Tom Hayes around the end of 2012. Hardly anything was known about Hayes except that he had sent aggressive messages to bankers, bribing them to move LIBOR higher for him.
He seemed like the “quintessential Wall Street crook right out of Central Casting,” Enrich said.
Enrich was assigned to write the definitive profile of Tom Hayes. He began with a Daily Telegraph article that insinuated that Hayes had sold his small technology company to his wife in an attempt to hide assets from the government.
Enrich discovered that the woman who now owned the company was not his wife, but an old business school classmate who had volunteered to take possession of the company after Haynes got into trouble.
“[She] opened my eyes to this guy in a way which I did not expect,” Enrich said. It turns out that Hayes was a mildly autistic, socially awkward guy who was known for ordering KFC and watching “Seinfeld” reruns.
“She said that Tom Hayes’ defense was that basically everyone was doing this. She said ‘rigging LIBOR was like spanking children in the seventies; everyone was doing it and nobody knew it was wrong.’” She passed Enrich’s number onto Hayes.
Enrich received a text that night from an unknown number that said, “I’m willing to talk to you but I need to make sure I can trust you. This goes much much higher than me. Not even the Justice Department knows the full story.”
Enrich responded, “Can we meet?”
Hayes said, “I’ll meet you tomorrow morning at Victoria Station. I’ll be standing outside of the Burger King wearing a brown leather coat.”
So Enrich left the next morning to meet him. “I’m thinking I have just walked into ‘All the President’s Men’ and I’m Bob Woodward and I can already feel the weight of that Pulitzer Prize in my back pocket.”
Then Enrich got a text that says, “I can’t do it. My wife found my phone and she saw I was about to go meet a journalist and she took my phone away.”
A couple days later Enrich asked a couple fact-checking questions. Hayes responded, “I’d love to help but my wife will literally kill me if I talk to you.”
Enrich took a chance and responded, “I know what it’s like to have a ballbuster wife. Let’s keep this between us.”
Hayes responded, “Okay, fine. What do you want to know?” “It was like I had uncorked something,” Enrich said and so began a secret, year-long friendship. Slowly, Hayes exposed the stories of London’s dirty financial schemes.
While Hayes was awaiting trial, he started working with British authorities to build cases against coconspirators. However, Hayes decided that he couldn’t plead guilty because of his 18-month-old son. “He decided that he couldn’t grow up telling his son that not only was Daddy a criminal but Daddy admitted to being a criminal,” Enrich said.
His trial was set in the summer of 2015. “They agreed in writing after the verdict that I could write their story and use everything they had ever told me,” Enrich said. The trial lasted three months and Enrich went everyday.
Eventually Hayes was convicted on all eight counts of fraud. “Sitting in the court room watching the life drain out of [his wife’s] face and Tom’s face when the verdict was read touched me in a way I had never experienced as a journalist,” Enrich said.
Hayes was sentenced to 14 years in a maximum security prison.
None of his other coconspirators were jailed. “Tom is alone in jail. His best friend is a man who is convicted of murdering his financial advisor, incidentally. It’s a mean prison. It’s not a joke. It’s sad really,” Enrich said. “So I wrote this book about how the system was built up on the backs of people like Tom…these are the guys who get nailed.”