Rate-rigging case: Westpac trader grilled over his swear words

The fate of a rate-rigging lawsuit against Westpac rests in part on the meaning of the word ‘f..k’.

Westpac says it is fighting the ASIC rate-rigging case because it has done nothing wrong.

The fate of a rate-rigging lawsuit the corporate regulator has brought against Australia’s second-biggest bank, Westpac, rests in part on the meaning of the word “f..k”.

During a day-long grilling under oath yesterday in the Federal Court, the bank’s star trader, Col “The Rat” Roden, was repeatedly confronted with the question of what he meant when he told colleagues he was going to “f..k the rate set”, in reference to the bank bill swap rate, or BBSW.

A clearly frustrated Mr Roden repeatedly denied that when he used the phrase he meant it was his plan to rig the rate, or that he ever did rig it.

Justice Jonathan Beach, who is hearing the case, was moved to mull the meaning of the F word.

“It’s a verb, it’s an active verb, and you’re going to achieve it?” he asked Mr Roden.

The Australian Securities & Investments Commission accuses Westpac of rigging, or trying to rig, the rate 16 times between 2010 and 2012.

Over the past two weeks, the trial has brought to public light the obscure yet vital setting of the Australian bank bill market, where billions of dollars change hands every day — at the time, mostly during a five-minute auction just before 10am.

It has also cast a light on the high-pressure culture inside Westpac’s treasury trading room, where Mr Roden was the top trader — although yesterday he objected to being called its “star”.

Under cross-examination by Phillip Crutchfield, QC, representing ASIC, Mr Roden explained that saying he was “going to f..k the rate set on the 10th (of June, 2010)” reflected his concerns someone else was going to manipulate the benchmark.

“It is my suspicion that the person on the other side of the transaction — it’s an uneconomic transaction, and they’re going to do something with them (the bank bills),” he said.

“I formally put it to you that that explanation is implausible,” Mr Crutchfield said. Mr Roden denied it was implausible, pointing out that at on June 9 he talked about anomalous trading he was seeing with RBA official Matthew Boge.

Mr Roden also said the idea bank bills were stockpiled to use as “ammo” to move the rate was “ludicrous”, reasons why billions of dollars worth of bank bills were “complex”, and an apparently incriminating phone call with junior trader Sophie “The Perfumed Steamroller” Johnston was “just a general end-of-day social conversation”.

It was a tough day for Mr Roden, who at times appeared rattled by Mr Crutchfield’s vigorous questioning.

Legal observers have questioned why Westpac is exposing some of its most important employees, including Mr Roden, who is now in a strategic role, and his boss, treasurer Curt Zuber, to the perils of the witness stand.

Westpac insists it is fighting the case because it has done nothing wrong.

This week, both Mr Roden and Mr Zuber made an important concession to ASIC, admitting that there had been breaches of the Chinese wall designed to stop market-sensitive information flowing between their department and the financial markets team, which deals with bank customers.

This may help ASIC prove one leg of its case, which is that Westpac breached its financial services licence. However, it is a contravention that would carry no financial penalty, unlike ASIC’s other two allegations that the bank engaged in unconscionable conduct and market manipulation — both of which are harder to prove.

Much time was taken up yesterday when Mr Roden objected to the word “knew” in a transcript of a phone call where he said: “I knew it was completely wrong but f..k it I may as well, I thought f..k it.

“We’ve got so much money on it, we just had to do it, right.”

Mr Roden initially felt “knew” should be “feel”, but after the audio was again played in court changed his mind and accepted it was “knew”. He denied the phrase was an admission he’d done the wrong thing by fixing the rate.

“What I’m referring to is the rate, and I’m not sure whether it’s the closing rate or the rate this morning with the benefit of hindsight,” Mr Roden told the court.

“I do know I would not say I did the wrong thing because that is not how we operate and it is not what we would do.”

Unless the case settles over the weekend, Mr Roden will return to the witness stand on Monday. He is to be followed by Ms Johnston and about half a dozen other Westpac employees.