- 2 days ago
Protests have taken place across Ukraine after President Volodymyr Zelensky signed a new law which critics say weakens the independence of Ukraine’s anti-corruption bodies.
Demonstrations in cities across the country became the largest anti-government protests to take place in Ukraine since the Russian invasion in 2022.
Adam is joined by Vitaly Shevchenko, Ukrainecast host, and Orysia Lutsevych, head of the Ukraine forum at Chatham House, to discuss Ukraine’s history with government corruption and why the new law is so controversial.
Plus, two city traders who were found guilty of rigging interest rates have had their convictions overturned. Andy Verity, BBC’s financial investigations correspondent, tells Adam all about the case.
You can listen back to the Old Newscasts about the 2008 financial crash here:
Demonstrations in cities across the country became the largest anti-government protests to take place in Ukraine since the Russian invasion in 2022.
Adam is joined by Vitaly Shevchenko, Ukrainecast host, and Orysia Lutsevych, head of the Ukraine forum at Chatham House, to discuss Ukraine’s history with government corruption and why the new law is so controversial.
Plus, two city traders who were found guilty of rigging interest rates have had their convictions overturned. Andy Verity, BBC’s financial investigations correspondent, tells Adam all about the case.
You can listen back to the Old Newscasts about the 2008 financial crash here:
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NewsTranscript
00:00What's this happening in Ukraine? Could it be something that looks like normal politics,
00:04like a protest by some people outside government buildings? What they're protesting against is some
00:10changes to the organisation of the country's anti-corruption programmes pushed through,
00:15his critics say, by the President Volodymyr Zelensky. What does it mean for his leadership
00:20of Ukraine during the war? We will answer that question and several others on this episode of
00:25BBC's daily news podcast, Newscast. Hello, it's Adam in the Newscast studio. Now,
00:33if you've been watching the news from Ukraine since Russia's invasion or listening to our
00:38sister podcast, Ukrainecast, you would think that actually there hasn't been much kind of normal,
00:43classic politics happening in Ukraine of the type you could imagine happening in a country that
00:48isn't at war. Well, over the last day or so, that has changed because there have been some protests
00:53in Kyiv and elsewhere in Ukraine about some changes the Ukrainian President Volodymyr Zelensky
01:00has, some people would say, forced through or rushed through to the country's anti-corruption
01:06organisations. And quite a few people are not happy about it and they've gone out to protest about it,
01:12which could have potential consequences for Zelensky's presidency and may have its roots in the war and
01:20how it's been fought in Ukraine over the last couple of years. So let's try and unpick all of
01:24this and work out where it might be going. And we'll do that now because we're joined by my
01:28podcasting brother-in-law, Vitaly Shevchenko from Ukrainecast, who is in Turkey. Hello, Vitaly.
01:33Good afternoon.
01:35And also here in the Newscast studio with me is Orissiya Lutsevich from the Chatham House
01:39Think Tank. Hello, Orissiya.
01:41Great to be here for the first time for me.
01:43Yeah, welcome. Welcome anytime. Vitaly, before we dive into this news story, just explain why
01:49you're actually in Turkey today. What's happening there?
01:52Third round of talks between Russia and Ukraine. There was a bit of uncertainty initially about
02:00when exactly they're happening. Is it Wednesday? Is it Thursday? Is it later this week? But a few
02:05hours ago, we finally learned that it is Wednesday. Delegations are up in the air as we speak.
02:13On the way to Istanbul and the talks are happening this evening, which is slightly unusual. Before
02:19that it was during the day, but it's still interesting.
02:24Orissiya, give us a bit of a reality check about this round of talks. Like, should we be
02:28getting our hopes up for a resolution? Or is this all a bit performative? What's just a way of
02:33thinking about it that's smart?
02:35Well, there's a saying, hope dies last. So I think we should always be hoping because the war
02:40has such an enormous toll on Ukrainian society, cities, there's an exhaustion, people are seeking
02:47for this light in the end of the tunnel. But I think there's quite strong realization that
02:54there is a summer military offensive that Russia is trying to mount really hard, making very small
03:01incremental successes on the battlefield in the east, but heavily bombarding the cities. And Ukrainians do
03:09not believe it can stop anytime soon. Unlikely after these talks tonight.
03:15Vitaly, what's the best case scenario for when these talks end then what they'll come up with?
03:20Well, realistically, Adam, I think we're going to get an announcement of more prisoner exchanges.
03:29And well, to be honest, all this time, I've been battling what I think is misplaced optimism about
03:38these talks. In fact, I won a beer from a colleague at the BBC who shall remain unnamed because he was so
03:45excited by the first round. And he said, well, yeah, this is the beginning of the end of the war.
03:49I'm not sure. Russia and Ukraine are still miles apart. There's no chance that they'll suddenly sit
03:59down together and thrash it out. And this will lead to peace anytime soon. Ukraine wants a ceasefire
04:08and a meeting between Zelensky and Putin. Russia is saying, no, no, no, too early for any of that.
04:14Let's talk about our memorandum. And that memorandum they presented to the Ukrainians the last time we
04:23were here on the 2nd of June. And it's essentially a demand for surrender. There's no chance that
04:29Ukraine is going to agree to that. So I think realistically and hopefully prisoner exchanges,
04:37but little hope for anything more fundamental than that.
04:42And prisoner exchanges is something both sides have been able to agree on before.
04:47Right, Arisia, let's talk about what these protests that have been happening in Ukraine
04:50in the last day or so. Before we talk about the criticisms of Zelensky that is leading to the
04:55protests, what is the actual changes that he's making that is getting people annoyed?
04:59So what has happened in the parliament yesterday was a very rushed adoption of the law that curtails
05:07the independence of the National Anti-Corruption Bureau and the Special Anti-Corruption Prosecutor.
05:13So it was very convoluted. It was almost like MPs and Zelensky's team did not want people to know
05:22what they are doing. The bill was not properly reviewed by the MPs. They didn't have time.
05:28You know, normally they have these tables where they compare the amendments. It was done unbelievably
05:35fast from the moment it was voted to the moment it was signed by the speaker to the moment it was
05:40signed by Zelensky. And what triggered protests is the feeling, especially among the Ukrainian young
05:46people, those who are working hard in the home front to maintain economy, that somebody is stealing
05:53the European future. People know that anti-corruption agenda is very prominent on the, you know, Brussels
06:00agenda, and they fear that this may jeopardize Ukraine's membership perspective.
06:07Okay, Vitaly, just then expand on that. So we've talked about why people are angry about the process
06:12and about what it sort of symbolizes. But the actual changes to the anti-corruption organizations,
06:18just spell out for us really clearly what Zelensky has changed there.
06:22Let's rewind 10 years back when these key anti-corruption agencies were set up. At Ukraine's
06:33Western allies' insistence and under their supervision, they were independent. As far as we knew,
06:41they came under no political influence. So the biggest change is that they are effectively
06:49subordinated now to Ukraine's chief prosecutor, prosecutor general. And that prosecutor is a
06:58Zelensky loyalist. And now that prosecutor can reassign anti-corruption cases investigated by those
07:09agencies to potentially more loyal or pliant prosecutors. And he can even close them. So this essentially,
07:21well, undermines their independence and their authority. And as Orisa said, this sounds shockingly
07:30similar to where Ukraine was before the Euro-Maidan revolution. It flies right in the face
07:39of 10 years of efforts to fight corruption and for democracy. At least that's what critics of this
07:49law say. And they say, look, this is where it started more than 10 years ago. We thought this was our
07:57future, democracy, no corruption. And now this happens. And one protester in Kiev yesterday, he was
08:04holding this poster. This is not what my father died for. And that poster is really sticking out in my
08:12memory. I think it symbolises the essence of the situation. This is not what Ukrainians have been
08:18hoping for for the past 10 years.
08:20And Orisa, I mean, help us get perspective here about how big these protests are. I mean, it's an unusual
08:25thing to see when Ukraine's at war. We've not really seen it before, but just help us get it in
08:32perspective. Yes, it's the first protest around the social issue about the institutional reform that is
08:41taking place since the war, since the full-scale war started. And it's taking place not just in Kiev,
08:48but in Lviv, in Dnipro, and even in Sumer, that is under constant shelling of Russian artillery.
08:56I think what is significant also is how young the protest is, how many women are there.
09:04And also, it's a mix of women and veterans, those who already served and are decommissioned for one
09:12or the other reason. They feel like they have a responsibility to ensure that Ukraine remains
09:18on track of that European pathway. And, you know, it doesn't come to me as a big surprise,
09:24to be honest. It was just a drop, the last drop that overflown the patience of Ukrainian citizens,
09:32because we've seen like a chain of events specifically related to the anti-corruption agenda.
09:39I just came back from Ukraine's recovery conference in Rome, and right on the eve of that conference,
09:46there was a very controversial cancellation of an appointment for the Bureau of Economic Security,
09:52which is something that Ukraine also has to reform that is currently part of Ukraine security
09:57services. After an independent commission that appointed the person, the cabinet of minister
10:03canceled this appointment. And Ukrainian civil society, anti-corruption watchdogs were outraged
10:08that this has happened. Just one instance. And it continues. Zelensky seems to be undermining the
10:14anti-corruption agenda.
10:15And not just that, but it seems that some people are accusing Zelensky of using the corruption laws
10:20to basically silence or get rid of his political opponents, and using corruption as a way of making
10:28his life a bit easier politically.
10:30Well, let's also remember that there's a predicament of post-Soviet societies, which is often called a
10:37selective prosecution. There's been a Ukraine's curse since its independence. We may recall a very
10:44controversial trial of Yulia Timoshenko during Yanukovych's president that also jeopardized.
10:51She was the opposition leader.
10:52She was the former prime minister, the opposition leader. She was imprisoned for a political decision
10:59that, you know, should not have been a criminal investigation. And she was an opponent. There was
11:05also, there are many cases against former President Poroshenko that were started by Zelensky when he came to
11:13office. He's even on the sanction list. And this is viewed as a certain political prosecution of the
11:21leader of the major opposition party.
11:23Vitaly, what's it like reporting on what looks like kind of normal politics, but in a country that's at war?
11:30It's strange. I think it's worth mentioning why the Ukrainian government and President Zelensky's
11:40associates are saying why they are doing it. And they say that these anti-corruption agencies have been
11:47infiltrated by Russian agents, to which critics of this law say that it's just an excuse. It's just an
11:57excuse. And possibly these anti-corruption investigators were getting closer to uncovering corruption by
12:07somebody within Zelensky's inner circle. The fact is, Adam, we don't know. There's no evidence to
12:13support any of those claims and counterclaims. What is certain, and this is what we know, and this is
12:22what makes the whole situation so abnormal, is that this controversy, this row, threatens the
12:31social contract, if you like, that we've seen emerge in the wake of the full-scale invasion by Russia,
12:41where society united around Zelensky, even though certain members of that society may not be huge
12:49fans of him, they were perfectly ready to set their differences apart because there's a war on. We need
12:55to unite to fight Russia. And now, as the protests last night showed, now that social contract is under
13:05strain and people are saying, look, you are targeting what we have been fighting for, what our brothers,
13:11sisters, fathers and mothers have been fighting for. This is not okay. And also Ukraine's
13:19allies from the West, such as the EU and ambassadors from the G7 group of nations, they have been
13:27expressing concerns and they've been saying, look, our support for you, the Ukrainian government, our
13:35assistance to you is conditional on progress that you make in fighting corruption. This is what we started
13:4210 years ago. What's going on now? And the threat to Ukraine at this stage is that there will be even
13:53less will on the part of the West to keep supplying money and weapons to Ukraine because of all this
14:02controversy around the key issue of corruption that has blighted Ukraine for many decades.
14:10Okay, Arisia, I mean, does this make it harder for Keir Starmer to say we're going to carry on
14:14sending billions in financial aid to Ukraine and loads of weapons?
14:18Yes. And not only for Keir Starmer, but also for IMF and also for the EU Commission. Let's remember
14:24that Ukraine is heavily, heavily dependent on direct macro financial assistance. Basically, Ukraine needs
14:31to fill in its budget hall, which is roughly 40 billion, you know, a year, depending on how it goes. And
14:37next year, Ukraine still misses about 20 billion in the pipeline.
14:43But aren't those organizations and those governments going to turn a blind eye to the
14:48the rule of the and the technicalities of the law about corruption if actually you've still got Russia
14:54invading the country?
14:55This is a very, very good question. And if you ask me, Ukrainian society would be very disappointed if
15:03Ukraine's Western partners stand a blind eye. Because this is exactly like Vitaliy described,
15:08something that people went protesting back in 2012, 2013. And they knew that what Ukraine needs is a strong
15:19rule of law framework, because impunity is something that is flourishing and corruption kills. This was one of
15:27the slogans before. And right now, literally, if Ukraine doesn't get all these influx of money and
15:34military assistance, a lot more people will die. And it will be a personal responsibility of Zelensky.
15:40I think he has cornered himself with this agenda. Whoever put on the table this plan for him explained,
15:49probably it's a genius plan. But the way it's interpreted in Ukrainian society will have a huge
15:55impact on his own political future. And I think if Ukraine's EU integration is stalled, and if Ukrainian
16:02budget is in deficit, and if Ukrainian economy is spiralling, you know, with inflation and macroeconomic
16:09instability, people will remind him that this is the reason why this is happening.
16:14William, what could the long term consequences of this be for Zelensky's position?
16:18Well, I think if, as I described, if Ukraine's European future is not progressing, if it's
16:25the Brussels stocks are stalled, and moreover, if Ukraine is losing more territory, because people
16:32understand that Ukrainian partners are turning away from Ukraine, simply because it's not, you know,
16:38democracy, and it's not abiding by a clear division of powers between the legislative, executive and
16:45judiciary, then I think it will be very hard, not just for Zelensky, but anybody affiliated with this
16:54invention and this system to have any future in Ukraine.
16:58And Vitaly, not to be overly dramatic, but could this ultimately lead to Zelensky's fall, or maybe less
17:04dramatically, calling elections, which have been delayed because of the war?
17:09Elections-wise, frankly, I don't really see it happening, because for that to happen, so many
17:15things will need to change, such as Ukrainian laws. And also, how do you hold elections when you're being
17:23bombed? How do you take ballot boxes to the trenches? It's going to be really, really difficult. But for
17:31Zelensky, you know, one point of view that I've been hearing a lot about Ukraine is that it's black
17:39and white, it's easy to see who's right and who's wrong, and everything else is kind of a footnote
17:45that will be dealt with once this war is over. And right now, so many people are saying that Zelensky's
17:55legacy is under threat. It's not as black and white as it was before this law was passed. So,
18:06what this means for the war effort, this is really critical, if Zelensky
18:14begins to struggle to mobilise support domestically, to mobilise support globally for the war effort,
18:23who's going to win? Of course, it plays into Russia's hands. And that's one reason why all those
18:30institutions in the West, such as the European Commission and the G7 Group of Nations, who have
18:37voiced concern about what's been happening to Ukraine's anti-corruption infrastructure, they,
18:45I think, will be reluctant to take any immediate sanctions against Ukraine, i.e. reducing aid to
18:55Ukraine right now, because they will know that by punishing Ukraine, they will benefit Russia.
19:03And Orissia, you chaired an event with Zelensky when he was in the UK a few weeks ago. I mean, how did he seem?
19:09Well, at that event, he seemed, you know, very relaxed and engaging. And I was quite impressed
19:16that he agreed to have it under the rule and to speak freely with a group of, you know, media and
19:22experts. Because we should say the Chatham House rule is that you talk very candidly, but the deal is it
19:26doesn't go beyond the four walls. No, actually, that's not the rule. You can spread the information
19:31without attribution. So, I can tell you what we've discussed in the meeting. We've discussed the
19:35enormous increase in drone bombardments, the sheer number of drones that Russia is launching and what
19:43it means for the war. We talked about the role of Iran and North Korea in supporting Russian war
19:48effort. We touched upon China. But also, people asked questions about the kind of red tape for
19:55investors who want to invest in Ukraine's defense tech and industrial base. We talked about the morale
20:03inside Ukraine. You know, I think Zelensky understands that Ukraine is successful because
20:11there was that unity between the political leadership, armed forces, and the home front,
20:18Ukrainian private sector mainly. Not just, you know, employing people paying taxes, but also, let's not
20:25forget, donating, buying equipment for brigades, supporting the frontline effort of the employees who are
20:33mobilized. So, it is a real fusion of all those actors that gave Ukraine strength to keep resisting
20:43such a powerful enemy. And I think that I have a feeling that Zelensky is taking it too much for
20:52granted. When he travels abroad, he's very well received. He's received like a war hero. He's showered
20:59in this veneration, to be honest. But at home, people are much more discerning. And I think what Vitaly
21:06spoke about the breaking of the social contract, it means that right now, there has been a certain
21:12red line that's been crossed. And Ukrainian, both civil society, local community leaders, media will be
21:18much more vocal about problems at home. Yes, this plays into Russian hand, but he's also being honest.
21:27And I think Ukrainian society values that honesty more than risks that it poses of certain fissures
21:36inside Ukraine. I was there at that meeting at Chatham House as well. I don't know if you will agree,
21:42Orisia. But to me, it sounded as though Vladimir Zelensky was the most cheerful person in the room.
21:51Before he entered into that big hall, everyone was like, the mood was somber. We are about to talk to
22:00the leader of a nation that's fighting for its survival. And it was slightly, you know,
22:06a feeling of concern was hanging in the air. But when he entered the room, he was all smiles. He made
22:11jokes. I thought he even flirted with people. He kept talking and answering questions happily,
22:17chirping away. And I thought, what is it that he knows that we don't know that makes him so different?
22:28Or is he still an actor? And I thought towards the end of the evening, his cheerfulness infected,
22:37you know, people in the audience as well. But Vladimir Zelensky, despite the war, I think he is
22:44doing a pretty good job of broadcasting this image of confidence and optimism.
22:52Right. Last question for both of you. Now, if you're not a Ukraine watcher,
22:56this corruption stuff today will maybe come as a bit of a surprise, even though it's very significant.
23:02You too are Ukraine watchers. What's something else that's bubbling away that could become very
23:07significant soon that you'd like to just point out to us? Orisia?
23:11Well, I think what we should be watching carefully is the summer campaign, how well Ukraine can hold the
23:20front line, because, you know, it's being hollowed out by Russia's constant infantry
23:27poking and seeing where they can make an inroads. It's hard to predict how strong or weak it is. But I think
23:41Putin is making a really strong push this summer because he understands his team is also running out
23:46and he wants to take as much territory and pressure as much Ukraine at the negotiating table as possible.
23:52And also, I think what's going to happen next winter, whether Russia will still keep bombarding
23:59Ukrainian energy infrastructure and whether that will that will actually push people to leave more
24:06Ukraine because they are concerned. I mean, Kyiv right now is under strong bombardment and a lot of
24:11people are moving to the west of the country. There is an evacuation taking place parts of Sumy.
24:17There's a lot of disturbance inside Ukraine that is bubbling and that could cause
24:22certain, you know, trouble for Ukraine.
24:25Sure. Vitaly?
24:27Bubbling away. Well, here we are waiting for talks to take place over there about how this war might end or
24:36how many prisoners might be exchanged. But as Orisa says, the reality on the ground is frightening.
24:47People are still dying every day and every night and you don't really get to hear that in the news.
24:53And also, the Russian army's progress is incredibly slow, incredibly costly, but they are advancing.
25:04Just this morning I checked reports and it looks like Russians are, you know, half an hour down
25:09the road from my home city of Zaporizhia. And that's not something you will hear either in
25:17Ukrainian mainstream news or let alone in the west. So, despite this Russian advance being slow,
25:27the fear that you hear sometimes in Ukraine is that it might lead to a breaking point of some sort
25:37and a collapse of the front line, especially as Ukraine's allies or the countries that we were so
25:45used to calling allies, they're still talking about what to supply to Ukraine, how much of it,
25:51when, who's paying for it as people are dying. That's the tragic truth about the situation in Ukraine that we
26:01we must remember.
26:02Vitaly, thank you very much.
26:05And Orisia, thanks to you too.
26:06Thank you for this conversation.
26:08Now, two city traders who were sent to jail 10 years ago for manipulating
26:15a particular interest rates have had their convictions overturned. Now, that's not something
26:21that happens in the UK every day. And also, it feels like the real end of an era that began
26:28with the financial crisis in 2007, 2008, 2009. And this has been a real saga. But one of my colleagues
26:37basically has dedicated the last 15 years of his life to reporting on this saga. And he's here now.
26:43And it's Andy Verity, who's the BBC's financial investigations correspondent. Hi, Andy.
26:47Hiya.
26:47I just had to read your new job title.
26:49Yeah, I know. It's long, isn't it?
26:50Yeah. All those panoramas and the secret papers you've been looking at.
26:55Yeah.
26:55You've turned into a whole job.
26:56Now I've got it officially as my role. So there's no excuse for the BBC not to let me do it.
27:01Yes. Now, you have literally written the book on the LIBOR scandal.
27:05I have.
27:06So I wonder if we should just go back to the start, because the whole saga is kind of just worth
27:10exploring and explains how we got here.
27:12Yeah. So first of all, what was LIBOR?
27:16LIBOR until last year, and for 40 of the last years, was the index that tracked the cost of
27:21borrowing cash. So it's a bit like the FTSE 100 or the Dow Jones tracks the prices of shares.
27:26There's an index which keeps track of how much it's costing banks to borrow cash, which in turn
27:31dictates actually how much it's going to cost for your mortgage. The interest rates on your mortgage
27:36are dictated not so much by the official rates we report every month from the central banks,
27:41but actually by the cost of getting hold of those funds to the banks in the money markets.
27:45The way LIBOR keeps track of that cost is 16 banks every morning for 40 years put in an estimate of
27:51how much they thought it would cost to borrow cash, the interest rate they thought they'd have to pay.
27:55Now, when they're doing that, of course, there's more than one accurate answer to that question.
27:59At what interest rate could you borrow cash? If you think if you were answering that question,
28:02how would you set about it? At what interest rate could you, Adam, go and borrow cash? Well,
28:07you'd go out onto the high street. Maybe Lloyds would have 3.54%.
28:10Maybe Barclays would have 3.56%. And you'd make your choice. But they're all accurate answers to that
28:17question. At what interest rate can you borrow cash? So how do you choose between them? Now,
28:21you could just roll the dice, you could flip a coin, or you could do what the banks did for a long time,
28:26was trying to check out whether they prefer it to be high or low. They had trades on which were linked
28:32to these benchmarks, LIBOR and Euribor. So they'd be facing one way or the other. So every morning just
28:37before 11am, traders who are looking after those trades will get in touch with the boys on the cash
28:42desks, generally boys, I'm afraid, who would put in their estimates and say, we prefer a high LIBOR
28:47today or a low LIBOR today. That was common city practice for 20, 30 years. And they'd nudge it in that
28:52direction. And one of the stunning things about the whole scandal is that everybody was doing it.
28:56No one thought it was bad. There were no laws or rules banning it. And yet years later, it was
29:01retroactively criminalized in order to punish bankers. Now, those prosecutions didn't come
29:07out of victims saying, I've been defrauded, complaining to the police. They came out of
29:11a political firestorm. Right. So that's the bit I hadn't quite joined the dots of. So how did it
29:16emerge then that there was an, air quotes, scandal around LIBOR? Well, it was first in 2007. And
29:23actually, a guy called Peter Johnson at Barclays, who was a cash trader, came back from holiday one
29:28day, August 2007. The credit crunch is on. No banks lending to any other bank. So no one really knows.
29:33Before the big financial crisis in a way. That's right. Yeah. When everyone realized
29:37how much money they'd lost on subprime mortgages, all the banks were staring at each other thinking,
29:41I don't know how much I've lost. I don't know how much you've lost. So I daren't lend to you
29:44in case you can't pay me back in case you're not there next week. That was the credit crunch. And
29:47what it meant was that the cost of buying cash had skyrocketed. But banks were afraid of telling
29:52the truth about that in their LIBOR estimates of the cost of buying cash, which were public, because it
29:57might make them look weak. So they pretty much all started lying. And Peter Johnson came back
30:03from holiday and saw that there was something wrong. Banks were going into the market and borrowing
30:07at one rate up here, and then claiming that they could borrow at a much cheaper rate. It was called
30:12lowballing. And it was way out. It was a proper fraud, misrepresenting the cost of borrowing cash.
30:17Then, in spite of his protests, he was ordered to lowball himself by his bosses at Barclays,
30:24and then by the Bank of England and the UK government. Now, that information was suppressed
30:29throughout these criminal trials. But a few years ago, for Panorama, I got hold of a secret audio
30:34recording that implicated the Bank of England of his boss telling him the Bank of England and the UK
30:40government had ordered him to put his LIBORs down, even though it would be lying, and he better get
30:44on and do it anyway. Because they thought that would be the best thing for the economy and the
30:47government's finances and society overall. Yes. Paul Tucker got in touch with Bob Diamond,
30:53who was the deputy governor of the Bank of England at that point. Paul Tucker was the
30:55deputy governor of the Bank of England. He'd been talking to Downing Street, including a guy
31:00called Jeremy Hayward and someone at the Treasury, Tom Scholar, who was the second permanent secretary,
31:05who'd all been worried that Barclays' LIBOR rates seemed high. Was this an indication that they were
31:09in trouble? Were they having to bid up the market and pay more in interest because they were about to
31:14go under, just like Northern Rock? Should they have nationalized him? You may remember a couple of weeks
31:19before that, October 2008, RBS and Lloyds were nationalized, but not Barclays. Whitehall was
31:24worried maybe they should have done. When they saw the rates being high, they thought, oh, maybe they're
31:28weak. So Paul Tucker, sensing this, gets in touch with Bob Diamond, the boss of Barclays at the time,
31:33and says, you better get your LIBOR rates down. Bob Diamond, desperate to avoid nationalization,
31:38passes the message down the chain to Mark Dearlove, the boss of Peter Johnson, who then orders him to
31:44lowball. Now, Peter Johnson told the FBI this in 2010. I've got the transcript of his interview,
31:51but the FBI chose to keep it quiet. And instead of going after the LIBOR rigging audit from the top,
31:58which is on a much greater scale, they decided to go after the traders instead. And what both the US
32:04courts and the UK courts have now ruled is that those prosecutions were completely misconceived. The
32:09evidence against the traders, unlike the real scandal, lowballing, was actually just normal
32:14commercial quoting. Right, right. So that's kind of like the meta-narrative of what was really going
32:19on here. But in the meantime, you had these two guys, Tom Hayes and Carl Palumbo, who were jailed
32:24in the UK after being found guilty of this. They're the guys that were challenging their convictions.
32:30That's right. That's right. So I skipped a bit of the timeline, actually. After the 2008 crisis and
32:35all the fury with the banks and no banker being punished, when Barclays was fined in 2012 for
32:40rigging LIBOR in Europe or not only did Bob Diamond have to resign, but there was a huge public
32:45outcry and MPs started demanding bankers be jailed. Some of our colleagues were on the TV saying the
32:50public want to see bankers in like perps in the purple with the handcuffs on their wrists. Such was
32:56the public anger at the time towards the banks, suppressed from the financial crisis and deflected
33:01from the top of the system down onto these traders' heads. So Tom Hayes, who has severe ASD,
33:08Asperger's, it was called at the time, was the first to be tried in 2015. Someone who couldn't
33:13communicate very well and who wound up the jury because he kept on repeating that he wanted to see
33:17his trading books so he could confirm that it was not greed that made him do this. He couldn't have
33:23made any money out of it. And he wasn't allowed to do that. And the judge told the jury that what
33:28he did was unlawful as a matter of law, rather than leaving it as a matter of fact for the jury to
33:34decide. And it's that that the Supreme Court has now decided. Oh, so it's called the direction,
33:39isn't it? Yes. The judge gives to the jury before they go to the jury room and do their
33:42deliberations about guilty or not guilty. Yes. So the court today said that that direction from
33:49the original judge was not right. Yes. Exactly. So the judge usurped the role of the jury because
33:55the jury should be the one who decides about matters of fact. By deciding matters of fact as matters
33:59of law. Oh, all these emails, if you've done them are unlawful. The trial felt like a bit
34:04preordained. And then all that was left for the jury to for the jury to be convinced of was that Tom
34:09Hayes had behaved dishonestly. And for various reasons, he'd made confessions of dishonesty to
34:14avoid extradition to the United States confessions, which he didn't really believe. Like all of life,
34:19it's complicated. But 37 traders were prosecuted for this. Now the US courts and the UK courts have said
34:26basically it wasn't a crime. Amazing. I mean, and I mean, the two guys we're talking about today,
34:33they were in jail for half a decade. Yeah. Tom Hayes was initially given a sentence of 14 years,
34:39which is more than some people get for killing someone. And that was reduced on appeal to 11.
34:43That was the longest sentence in this country. When you're halfway through your sentence,
34:47if you're a good boy, you can be released on license, which he was. So he emerged from jail in 2021.
34:52The others had sentences, some of years, some of shorter times, but they also have time in jail.
34:59And in a way, in terms of the length of their sentences, it's worse than the post office,
35:03for example. Not as wide as the post office. And of course, the characters aren't as sympathetic.
35:07They were overpaid bankers. They've had their lives destroyed now and they don't have money now,
35:10but they were overpaid at the time. Part of the calculation may have been, if we prosecute these
35:15guys, who's going to be on their side? And anyway, they'd all been roundly condemned in public by
35:19politicians without being named as these greedy rogue traders. So it's partly as an interest in
35:25that. I thought, well, no one's heard their side of the story. I suppose, though, for like real justice
35:30here, you would need to have the people who are making the big calls and the organizations that
35:35were sort of retrospectively making something a crime when it originally wasn't held to account.
35:40Yes. And is that going to happen?
35:42You have some measure of that today in the Supreme Court's criticism of the judges in the lower courts
35:46who've been quite severely critical of them. There was less criticism of the serious fraud
35:51office who had all this evidence of lowballing ordered from the top and ignored it to prosecute
35:55the traders or the Department of Justice in the United States. But I think one thing that MPs like
36:00David Davis and John McDonnell, who've made common cause over this, will be asking is,
36:05why was all this evidence covered up throughout their trials? And also, there's a more profound
36:09question here. In the United States, a judge ruled that actually what the banks had done here is
36:13outsourced their investigation to the targets of their investigation. So rather than actually
36:19investigating the banks themselves, they said to the banks, hey, we're going to investigate you.
36:22Could you pay for lawyers to look into it yourself? Surprise, surprise, those lawyers don't end up
36:26implicating the banks' bosses who are paying them, but instead some traders down the ranks. And that
36:31outsourcing, or if you like, privatizing of the investigative process is fraught with legal difficulty.
36:37Yeah. I mean, has this got kind of long-term consequences for how our financial institutions
36:42work now? I think it should have some of those consequences. And certainly, there are MPs,
36:49the traders, their lawyers feel that something big has to change about that. That not only has the
36:55justice system not worked very well here, but also the way in which those prosecutions were
36:59outsourced and privatized has led to what they regard as an awful stitch-up over 10 years.
37:08And another thing the Supreme Court said was the Court of Appeal had blocked this path to the
37:13Supreme Court. So the traders first appealed in 2015. Each time they appealed five times,
37:18the Court of Appeal said, no, we're not letting it go out to the Supreme Court because we don't think
37:22there's a point of law of public importance at stake. Well, now we know there clearly was.
37:25Why is it that the Court of Appeal can mark its own homework rather than it being pushed up to the
37:30Supreme Court? Yeah. How you end up reforming how the Court of Appeal works, I'm not really sure how
37:36you even do that because the judiciary is not subject to... The government can't instruct the
37:41judiciary what to do. No, I suppose. But if it was once formed, maybe it can sometime be reformed.
37:48Yeah. Interesting. When you chat to people in the city now, has there been a sort of long-term
37:53effect of all of this on how people behave in the city? And I use the city as a sort of metaphor
37:59for everyone who works in financial services. It's all over the place.
38:01Well, the weird thing is that now almost all the scandals that were prosecuted,
38:06the bankers were prosecuted for, one is manipulating interest rates, LIBOR and EUROBOR,
38:11another is manipulating foreign exchange rates. All of those convictions have now been thrown out.
38:16So the things that people were prosecuted for turn out to be normal commercial practice. The
38:21prosecutions have been misconceived. The real skullduggery, which is out there, of course,
38:27remains unprosecuted. So unfortunately, the message might be, even if you keep your nose
38:33clean, even if you do what your boss tells you, even if you only do normal commercial practice,
38:37in fact, you and I, the things that we do at the workplace, anyone listening, what they do at the
38:43workplace, something they regard as ordinary and routine like these traders did, years from now,
38:47someone could turn around and say, we think that was bad. We're going to retrospectively criminalize
38:52it. And you could be hauled up before a court. That is the most unsettling thing the traders say
38:58about what's happened to them in what they regard as a Kafkaesque nightmare.
39:03And just to take it back to the very human level, like Tom and Carlo, the two guys we're talking
39:08about today, what are their lives like now? Just give me a sense of what they've lost,
39:13what they've given up, what they've had to live through. Well, I mean, Tom was funny about this.
39:18He just said, I don't know how I feel. I feel like I did when I was convicted. I don't really feel like
39:23it's me it's happening to. So it's that kind of, it'll take a while to digest. He said he wanted to
39:27go into a dark room and just think about what happened to him or be by a body of water. Being in
39:32prison has had that effect that he loves nature and really treasures it now. Carlo Palumbo, I mean,
39:37he's just said it destroyed his relationship with the world. The experience of having a young jury,
39:43condemn him and seem to enjoy doing so at the urging of authority when he knew he was innocent,
39:50has been so shattering for him. And he said things like, as with the post office, people's families
39:55sometimes don't believe them. How do you deal with it when people think there's no smoke without fire?
40:01You can rant about your innocence as much as you like, but it's quite crushing for people if they
40:05don't believe it. And that's why the official recognition that their trials were unfair
40:09is so valuable to them. Now, some quite scathing things have been said by various people
40:14about various institutions and all of this. What do they say, like the Serious Fraud Office,
40:19the Bank of England? Well, the Bank of England, funnily enough, say, well, LIBOR wasn't regulated at
40:23the time. They don't deny involvement. They just say LIBOR wasn't regulated. The Serious Fraud Office
40:30say, well, look, we had all these appeals. We went through all the right processes and actually
40:35two people pleaded guilty and the convictions were upheld until now. So they're defending their
40:42role that way. The US Department of Justice has said long ago that it's letting all of these
40:48convictions go and overturning all of them, including that of the indictment against Tom Hayes.
40:53The UK Treasury has said it didn't try to make banks post false LIBOR rates. And the other players
41:02in the scandal, like Barclays, have typically just declined to comment. Andy, thank you very much.
41:08Thank you. And we did an episode of Old Newscast recently, looking back at the collapse of Lehman
41:14Brothers, which was one of the key moments in the financial crisis. And if you would like to go back
41:19and listen to that, we will put a link in the show notes so that you can find it nice and easily.
41:25And if you like the concept of Old Newscast, well, I've got new news for you. Throughout the summer,
41:30over the weekends, we are going to be putting new episodes of Old Newscast in the feed. So you will
41:37hear about the release of Nelson Mandela from prison. You will hear about the MPs expenses scandal
41:44and many other momentous moments from our recent history, but done in the style of Newscast. So
41:52that will be heading your way very soon. But heading your way before that will be another classic
41:56episode of Newscast, which we will do, well, tomorrow. Bye!
42:14You're listening to the episode of The Old Newscast.
42:22Bye!
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