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* ICAP is first broker to be sanctioned in global scandal
* US lands criminal charges against three former ICAPemployees
* ICAP calls former staff "rotten apples"
By Kirstin Ridley and Clare Hutchison
LONDON, Sept 25 (Reuters) - U.S. and British authorities onWednesday fined ICAP, the world's biggest interdealerbroker, $87 million and laid criminal charges against threeformer employees over the Libor interest rate rigging scandal.
The scandal, which has laid bare failings by regulators andbank bosses over several years, has triggered a sprawling globalinvestigation that has already seen three banks fined a total of$2.6 billion, four other people charged, scores of institutionsand traders interrogated and a spate of lawsuits launched.
The U.S. Department of Justice (DoJ) charged New Zealandresident Darrell Read and Daniel Wilkinson and Colin Goodmanfrom England with conspiracy to commit wire fraud and two countsof wire fraud - offences carrying sentences of up to 30 years.
Simultaneously, the U.S. Commodity Futures TradingCommission (CFTC) and Britain's Financial Conduct Authority(FCA) ordered ICAP's ICAP Europe Ltd unit to pay $65 million and14 million pounds ($22 million) respectively.
"These three men are accused of repeatedly and deliberatelyspreading false information to banks and investors around theworld in order to fraudulently move the market and help theirclient fleece his counterparties," said Acting AssistantAttorney General Mythili Raman of the DoJ's criminal division.
ICAP called its former staff "rotten apples" and said itwould improve systems to ensure compliance with regulations.
A central cog in the global financial system, the Londoninterbank offered rate (Libor) is used as a benchmark againstwhich hundreds of trillions of dollars worth of products fromcomplex derivatives to personal mortgages are priced worldwide.
Based on a survey of what banks would charge each other forloans, traders colluded on answers that could nudge the reportedrates by amounts that were tiny but translated into big profits.
"LORD LIBOR"
ICAP, run by London businessman and former ConservativeParty treasurer Michael Spencer, is the first interdealer brokersanctioned in the affair. Firms like ICAP match buyers andsellers of bonds, currencies and derivative financialinstruments, such as swaps.
"ICAP and other interdealer brokers are expected to behonest middlemen," David Meister, the CFTC's Director ofEnforcement, said in a statement. "Here, certain ICAP brokerswere anything but honest. They repeatedly abused their trustedrole when they infected the financial markets with falseinformation to aid their top client's manipulation of Libor."
The FCA said ICAP unit's yen derivatives desk routinelytried to manipulate Libor and that at least 10 individuals,including two managers, on three desks took part.
Traders promised derivatives brokers anything from curriesto Ferraris in kickbacks for helping rig rates, according tocomputer messages published by regulators and prosecutors.
Daniel Wilkinson, once employed in the London office ofICAP, supervised a group of derivatives brokers, includingDarrell Read, who specialised in yen-based products.
According to the charges, the desk's biggest client between2006 and 2009 was Tom Hayes, a former UBS andCitigroup trader who is also facing criminal charges inBritain and the United States for alleged Libor manipulation.
Read talked to Hayes almost daily, prosecutors said, and asizeable chunk of what the ICAP traders earned was tied to thebusiness from him. Read passed Hayes's requests for what to tellthe Libor compilers on to Colin Goodman, according to the DoJ.
Goodman, a cash broker in ICAP's London office nicknamed"Lord Libor", was in contact with derivatives traders at otherinstitutions and sent out to them a daily email with "SUGGESTEDLIBORS" which, according to the CFTC, reflected biased rates.
While purporting to offer predictions of where yen Liborwould fix later in the day, the DoJ said, Read, Wilkinson andGoodwin used the email to misinform banks and so skew Libor.
The CFTC said the broker demanded compensation for "LIBORservices" or, he warned, there would be "no more mr libor." Thisgrew from dinners and champagne, to additionalcommission-generating trades, to "kickbacks" totalling $72,000.
The conduct stretched into 2010, well after allegations ofLibor manipulation had surfaced in public.
Wilkinson - who now writes fiction for young adults,according to a LinkedIn profile in his name - and Goodman didnot respond to requests for comment sent via the social mediasite. Read could not immediately be reached. Hayes's lawyer,Lydia Jonson, did not respond to a request for comment.
"ROTTEN APPLE SITUATION"
Michael Spencer, who founded one of the firms that make uptoday's ICAP in 1986 and has become one of the richest men inBritain, said all individuals linked to the wrongdoing hadeither left the company or were being disciplined.
"We deeply regret and strongly condemn the inexcusableactions of the brokers who sought to assist certain bank tradersin their efforts to manipulate yen Libor," he said.
But he denied the problems were cultural. "It is very sadlya rotten apple situation here," he said.
Three banks - Britain's Barclays and RBS and Switzerland's UBS - have already paid around $2.6billion to secure civil settlements for rate-rigging withBritish and U.S. regulators.
Britain's Serious Fraud Office (SFO) has brought criminalcharges against three people and U.S. prosecutors have nowcharged five. Prosecutors on both sides of the Atlantic havecharged Hayes, who once complained in a text message to the WallStreet Journal: "This goes much higher than me."
The SFO has said it hopes to charge more people over Liborin the coming months and that will not hesitate to also pursuesenior industry figures or institutions.
