Who is responsible for the ethical integrity of such institutional practices as the LIBOR? Is anyone at fault for this fraud other than the individuals involved in reporting false information?

The LIBOR Scandal

The scandal even spread to the British government. Barclays CEO Bob Diamond testifi ed that at the height of the fi nancial collapse in fall 2008, he received a call from Paul Tucker, deputy governor of the Bank of England.

According to Diamond, Tucker called on behalf of “senior Whitehall” fi gures and put pressure on Mr. Diamond to lower his reported LIBOR rates. The allegation is that the higher rates would undermine confi dence in Barclays at a time that fi nancial markets needed boosting, and it increased the likelihood that the British government would need to bail out Barclays as it already had done for other failing banks. Mr. Tucker claims that he was misunderstood by Mr. Diamond.
des38324_ch01_001-019.indd 3des38324_ch01_001-019.indd 3 1/16/13 12:32 PM1/16/13 12:32 PM

DISCUSSION QUESTIONS

1. What ethical issues are involved in this case?

2. Who are the stakeholders in this case? Who would be hurt by rate fixing?

3. What responsibilities did senior executives at Barclays have to prevent fraud in circumstances that, in Timothy Geithner’s words, “created not just the incentive to underreport, but also the opportunity to underreport”?

4. If the LIBOR scandal is as widespread as ongoing investigations suggest,are there ethical issues involved in this case that are different from those that would be involved if only Barclays was guilty? What are they?

5. Who is responsible for the ethical integrity of such institutional practices as the LIBOR? Is anyone at fault for this fraud other than the individuals involved in reporting false information?