LIBOR Trial

British defendant Anthony Allen, who worked at Rabobank in London as the global head of liquidity and finance, arrives at a Manhattan court for his trial. He was sentenced to two years for manipulating short-term interest rates. (Associated Press)

A New York judge Thursday sentenced two British ex-bankers to prison for their roles in manipulating the primary benchmark for global short-term interest rates.

U.S. District Judge Jed Rakoff in Manhattan sentenced Anthony Allen to two years in prison and Anthony Conti to a year and a day. The former Dutch bank Rabobank employees were convicted in November of conspiracy and other charges for their roles in manipulating the London interbank offered rate, known as LIBOR. LIBOR is used by banks to borrow from each other and affects trillions of dollars in contracts around the world, including mortgages, bonds and consumer loans.

While announcing the sentences, Rakoff criticized the U.S. government's failure to prosecute individuals from large financial institutions in connection with the 2008 financial crisis.

Rakoff said he was "mystified" that prosecutors only went after institutions since punishing individuals has a deterrent effect on others in a profession where stepping over boundaries can be tempting if there is seemingly no penalty for doing so.

He said the United States, breaking a tradition of going after individuals when widespread financial crimes occur, had decided after the most recent financial crisis that it was best "extracting money from corporate parents, usually at the cost to their innocent shareholders."

Critical of 'mass incarceration'

The judge also decried what he called "mass incarceration" in America that falls particularly harshly on black communities.

He noted there are more than two million people in U.S. prisons and about 40 per cent of the population is black men, who are disproportionally incarcerated. He said it is "mass incarceration to which this country suffers to its total shame."

Rakoff said the crimes of Allen and Conti, both of whom are white, called for prison sentences, but nothing near the decades in prison that the charges could bring.

Both were convicted last year by a jury that spent weeks hearing evidence compiled in a Justice Department probe of what was described as a global fraud scheme.

Scheme from 2005 to 2011

The investigation into the manipulation of a composite of the interest rate used by London banks when they borrow money from one another also resulted in the conviction in London of Tom Hayes, a former bank executive in the United Kingdom. He is serving an 11-year sentence, though Rakoff noted that he is unlikely to serve more than 5 1/2 years.

Conti, of Essex, England, was a senior banker who handled U.S. dollars while Allen, of Hertsfordshire, England, was the global head of cash at the Dutch bank Rabobank when prosecutors said the scheme was carried out from 2005 to 2011.

Before the sentencing was announced, Allen told the judge he wished he had rejected the requests by others to influence the interest rate.

He said he wished his "radar was more tuned in" and now feared for his two young daughters who are "no longer happy-go-luck bubbly girls."

Conti asked the judge for compassion, saying he worried about the effect on his family.