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By Kirstin Ridley
LONDON, July 4 (Reuters) - When David Green was appointedhead of Britain's Serious Fraud Office (SFO) in 2012 hepredicted he would be judged by how he fared prosecutingallegations of global interest rate rigging, a symbol of bankergreed during the financial crisis.
Six months ago, he had just one conviction under his beltafter six former brokers were acquitted of manipulating thebenchmark Libor rate.
But the convictions of three former Barclays traders and a guilty plea from another in London's third Libortrial, after a bitterly-fought case, will help to silencecritics ahead of the agency's next benchmark rate rigging trial,scheduled for 2017.
The SFO, set up to deal with the most serious and complexfraud cases, has had a chequered record in securing white collarconvictions over its 28-year history.
"These results will buoy up the SFO, but they weredesperately needed to save its reputation after the not guiltyverdicts in the second Libor trial," David Corker, a partner atlaw firm Corker Binning, said.
In January, an English jury swiftly acquitted six formerbrokers of conspiring with convicted trader Tom Hayes tomanipulate Libor. Hayes, a former star trader, had beenunanimously convicted on much the same evidence in the world'sfirst Libor rigging trial last August.
Two months after the six brokers walked free, the SFOsurprised the financial services industry by dropping aninvestigation into allegations of rigging in the $5.3 trillionper day foreign exchange market.
But it robustly dismissed suggestions at the time that thisshowed it had lost its appetite for risk.
CRIMINAL INTENT
The convictions of two former Barclays derivatives traders,Indian-born Jay Merchant and American Alex Pabon, and twoBritish former Libor submitters Jonathan Mathew and PeterJohnson, bring to five the number of convictions delivered inthe London arm of a global investigation.
The jury was unable to reach a verdict on two other Barclays traders, who now face the prospect of a re-trial.
Proving financial crime beyond reasonable doubt is difficultand some lawyers question whether the rigging of Libor, abenchmark for $450 trillion of financial contracts and loansworldwide, should be treated as a criminal offence or if theright people are being prosecuted.
The former Barclays traders were relatively junior, theBritish financial regulator dropped similar cases against othersinvolved in interest rate benchmarks and prosecutors produced novictims and did not quantify losses.
Corker said the Libor cases revolved around conduct widelycondoned or encouraged in a broken, poorly regulated system.
Frankfurt prosecutors brought this problem into sharp reliefwhen they ruled earlier this year that alleged rigging Euribor,Libor's Brussels-based equivalent, did not constitute a criminaloffence under German law at the time.
SUBJECTIVE DISHONESTY
Defendants in the Libor trials have focused arguments on thesecond of a two-stage test of dishonesty in English law. Underthe test, a jury has to decide that defendants realised theywere dishonest by the ordinary standards of reasonable andhonest people - the so-called subjective dishonesty test.
Mathew, Merchant and Pabon, charged with skewing Libor forjust over two years to September 2007, admitted they tried toinfluence rates but denied they knew it was wrong. The jury wastold Libor rules were only clarified in 2013.
That line of defence has echoed across courtrooms sinceHayes, a former UBS and Citigroup traderconvicted last August, first told a London court that he hadbeen "thrown under the bus" by two $50 billion banks and a posseof authorities for just doing his job really well.
But Hayes confessed to dishonesty during 82 hours of SFOinterviews in 2013 in which, he said later in court, he had beenso desperate to be charged in Britain and avoid extradition tothe United States, where he was wanted on similar charges, hewould have admitted to anything.
Hayes has, to date, appealed unsuccessfully against hisconviction.
The SFO's Barclays case was given a fillip by the guiltyplea of Johnson, a 61-year-old senior Libor submitterresponsible for choosing and sending the bank's daily rate to aLondon administrator.
The SFO can bask in its latest success for now. But InteriorMinister Theresa May has been tipped by the Financial Times askeen to bring the agency under the remit of Britain's NationalCrime Agency, dubbed Britain's FBI.
She is a favourite to succeed David Cameron as primeminister as Britain reels from its vote to leave the EuropeanUnion.
"Whilst historically there have been questions raised aboutthe effectiveness of the SFO, I doubt that any politician, leastof all Theresa May, will have the future of the SFO on theirmind at the moment," Sarah Wallace, a partner at British lawfirm Irwin Mitchell, said.
"If the new corporate criminal liability offences (such asfailure to prevent economic crime) currently under governmentconsultation make it into our law then the SFO could be busy -assuming their prosecution budget is not reduced through postBrexit public spending cuts."
May did not respond to an email and the Home Office declinedto comment. The SFO did not comment beyond a statement issuedafter the outcome of the Barclays' trial.
(Reporting by Kirstin Ridley. Editing by Jane Merriman)
