Scripting the mechanics of the benchmark manipulation corporate scandals: The ‘guardian’ paradox
| Published date | 01 January 2020 |
| DOI | 10.1177/1477370819850124 |
| Date | 01 January 2020 |
| Author | Aleksandra Jordanoska,Nicholas Lord |
| Subject Matter | Articles |
https://doi.org/10.1177/1477370819850124
European Journal of Criminology
2020, Vol. 17(1) 9 –30
© The Author(s) 2019
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DOI: 10.1177/1477370819850124
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Scripting the mechanics of
the benchmark manipulation
corporate scandals: The
‘guardian’ paradox
Aleksandra Jordanoska
King’s College London, UK
Nicholas Lord
University of Manchester, UK
Abstract
This article implements a crime script analysis to understand the procedural dynamics of
corporate benchmark-rigging in the financial services industry. In 2012 several global banks
were implicated in the manipulation of various trading benchmarks, portraying the industry as
affected by serious, pervasive and ‘organized’ corporate crimes. Yet their dynamics have been
relatively little studied by criminologists. To address this gap, we analyse official enforcement
documentation, supplemented with data from interviews with key informants in the UK financial
markets. We analyse the range of interactions between the relevant actors, their actions and the
resources essential to the manipulations, and deconstruct the benchmark manipulations into four
scenes (calculated positioning and identification of co-collaborators; recruitment; (ephemeral)
manipulation; recompense and solicitation). The analysis reveals that regulatory and organizational
systems play a paradoxical role of both ‘capable guardians’ and ‘facilitators of misconduct’; this has
implications for criminological theory.
Keywords
Capable guardianship, corporate crime, financial markets, market manipulation, script analysis
Introduction
This article implements a crime script analysis to understand the procedural dynamics of
corporate benchmark-rigging and market manipulation in the financial services industry
Corresponding author:
Aleksandra Jordanoska, Dickson Poon School of Law, King’s College London, Strand, London WC2R 2LS, UK.
Email: aleksandra.jordanoska@kcl.ac.uk
850124EUC0010.1177/1477370819850124European Journal of CriminologyJordanoska and Lord
research-article2019
Article
10 European Journal of Criminology 17(1)
and their interrelationships with regulatory and organizational conditions. Despite
increased scrutiny of the financial markets following the global financial crisis and the
mobilization of law enforcement efforts, scandals such as the rigging of the LIBOR
(London InterBank Offered Rate) (Wheatley, 2012) and Forex (foreign exchange)
(Tillman et al., 2018), trading benchmarks by global investment banks indicate that the
financial services industry was still affected by serious, pervasive and networked corpo-
rate crimes. The LIBOR came under public scrutiny at the height of the financial crisis
with allegations that banks had deliberately misstated their LIBOR submissions to pro-
ject financial soundness during market turbulence (Hou and Skeie, 2014). The ensuing
investigations revealed that the manipulations had preceded the crisis and uncovered a
range of rigging activities undertaken by multiple, systemically important participants in
the financial markets.
These benchmark-rigging offences caused significant and, as of yet, not fully calcu-
lated costs and harms (financial and social), yet the mechanics of such manipulations
have been relatively little studied by criminologists. We address this gap with a detailed
and systematic analysis of the nature, organization and facilitative conditions of the
LIBOR scandal to provide insight into how these behaviours and conditions were able to
take place.1 We analyse official enforcement documentation alongside supplementary
information from interviews with key informants in the UK financial services industry
(former regulators, regulatory and white-collar crime lawyers). Drawing on these data,
we examine the range of interactions between the relevant actors, their actions and the
resources essential to the manipulations.
First, we discuss the functioning of the LIBOR and how it was fixed. Second, we
outline our theoretical framing before expanding on our method and modified ‘script’
analytical approach. Third, we map out the organization of the network of actors and
their roles as well as the associated ‘scripts’ of the manipulation process. Our analysis
deconstructs the benchmark manipulations into four scenes (calculated positioning and
identification of co-collaborators; recruitment; (ephemeral) manipulation; recompense
and solicitation) underpinned by four core processes (communication, collaboration,
transaction, interpretation). The analysis reveals that regulatory and organizational sys-
tems and requirements play a paradoxical role as both ‘capable guardians’ and ‘facilita-
tors of misconduct’; this has implications for criminological theory.
Unpacking the benchmarks: The functioning and fixing of
the LIBOR
The LIBOR is a benchmark rate, or rather a set of rates, that indicates how much interest
would be paid by large banks when they borrow short-term funds from other banks on
the money markets, for a given period, in a given currency. At the time of the financial
crisis, the LIBOR was the most closely watched number on the planet because it serves
two crucial functions in the financial markets: (1) it is a reference rate for a range of
financial contracts, and (2) it is an indicator of the financial ‘health’ of systemically
important banks (Hou and Skeie, 2014; Koblenz et al., 2013). First, as a reference rate,
the LIBOR is used in many financial contracts, including various retail loan and
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