Before I interviewed for my investment-banking job at Citigroup, I called an acquaintance in the finance industry for advice. I had gained the interview by way of nepotism and was given little time to prepare. And that brief interval had been spent either prepping for college finals or researching the acting schools I hoped to attend once, presumably, I failed to get the position. Though I was interviewing just to make my parents happy, I at least wanted to put up a good showing.

His suggestions were banal: Your shirt should be white, not blue; they love brain-teasers; ask questions to cover up for your lack of knowledge; appear interested in learning from your interviewers. Only one item stood out. “Do you know what LIBOR is?” he asked. I did not. “You should know what that morning’s LIBOR is. They’ll ask you about that.” Sure enough, they did.

“What is LIBOR?”

“The London Interbank Offered Rate.”

“What does that mean?”

“It is the interest rate at which British banks will lend to each other.”

“Lend what?”

“Dollars?”

“If it is USD LIBOR then yes. When is it set?”

“11 a.m. every business day.”

“11 a.m. London time and only every London business day. What is it today [May 5, 2000]?”

“6.67 percent.”

“Yes but it’s precise out to five decimal places. For what tenor is that?”

“Tenor?”

“Yes, tenor: is that one-month LIBOR? Three-month LIBOR? Six-month LIBOR? There are many LIBORs.”

Thus I was introduced to one of the fundamental numbers of finance, brought to us each London business day, like manna from the heavens. Although LIBOR is as integral to the financial world as the Federal Funds target rate and as ubiquitous as Treasury bonds, it is little known to the public at large. And yet hundreds of trillions of dollars in loans, interest-rate swaps, and countless other financial products depend on the LIBOR benchmark.

For something so consequential, LIBOR was remarkably free of controversy during my time in finance. I never heard anyone say: “I can’t believe LIBOR today! What were they thinking?” Unlike the Fed Funds target rate, no eagerly anticipated announcement marked LIBOR’s release. Unlike Treasury bonds, no Reuters terminal constantly flashed a new LIBOR value. It simply appeared on a screen and was—as unquestioned and taken for granted as the second or the meter.

So imagine finding out that the meter was, in fact, longer than we were told it was and that a cabal was profiting off the difference. What would that mean? How would we comprehend all the implications, all the new calculations that would follow from that revelation? The brain, as if hearing of a tragedy with countless victims, might just glaze over.

But the meter was malleable—LIBOR, it now appears, has for years been manipulated by bankers working at the most important global financial institutions (though currently only Barclays has admitted any wrongdoing). When I first heard of the scandal, it took a moment for me to believe that it was actually possible to rig LIBOR, to remember that it is set by men and not gods or their algorithmic equivalent, and that the financial world operates on an alternate plane where anything is possible. The scandal brought to mind an accounting teacher Citigroup brought in who was skeptical of the dominant method in his profession for describing the financial states of companies. After running through an example that proved his point, he would issue, in singsong fashion, his standard refrain: “Does this make sense? No. Because what is this? Accounting. And what is it not? Reeaaaaality . . . reeeeaaaaality . . .”

I say ‘making up future LIBORs,’ rather than ‘forecasting,’ because I was not really trying to forecast anything.

And yet, after finally accepting the scandal’s plausibility, I was still left with naïve, disbelieving questions. “How could they do this?” I asked myself, as if I had never acted unethically during my time in finance. “And how so matter-of-factly?” I told myself that I would never have done anything as brazen as the Barclays banker who emailed, “We have another big fixing tom[orrow] and with the market move I was hoping we could set the 1M and 3M Libors as high as possible.”

Then I recalled the scandals of these past few years and beyond. I thought back to all the shady dealings that were a part of my and my coworkers’ daily lives, back to all the rationalizations, the willful and actual obliviousness, the hypocrisies, the boss complaining righteously about how sleazy “the banks” were for not letting money from his deposited checks clear for a few business days so that they could profit—while he was busy cheating our clients without self-reproach. And then I realized that I, too, in my own small way, had adulterated holy LIBOR.

• • •

The occasion of my transgression was a client’s request for an unusual (to my eyes) custom financial structure. “This trade has been around forever,” the client said about the proposal, a tax trade. “The government keeps shutting it down and people keep figuring out ways to make it work again.” And the client thought that it could be made to work yet again if we—Citigroup—could figure out how to structure the transaction to fulfill their litany of requirements.

Based on our discussions, I set about working on a presentation that I christened “Tax Transaction.” This draft was met with horror by my managing director since, he informed me, “Tax transactions are illegal.” So the presentation was rechristened “Alternative Financing Discussion,” the structure was given a purely economic justification, and taxes, when referenced, were discussed in a deliberately offhand manner signifying tertiary concern (e.g. “This method of financing is also more tax efficient than other methods of financing”)—all done with the goal of passing IRS scrutiny.

In this alternative financing method, the client would effectively borrow money at a fixed rate. To justify using a fixed rate we needed to show it could be cheaper for the client than borrowing at a floating rate. This justification was part of the economic purpose we had given the deal. It did not matter that this transaction’s fixed rate was higher than the fixed rate the company could actually get on the open market (a loss the company didn’t care about since it would be dwarfed by the expected tax savings the deal would bring). The only thing that mattered was whether we could somehow create a scenario where borrowing at floating rates, i.e. rates pegged to LIBOR that reset every few months, would end up being more expensive than borrowing at the fixed rate built into our “Alternative Financing Transaction.”

So as I set about figuring out how the bank could structure the transaction in a way that satisfied both the client’s criteria and our internal bank policies, I also began making up future LIBORs. I say “making up,” rather than “forecasting,” because I was not really trying to forecast anything. Every few days or weeks I’d look at interest rates, figure out what the fixed rate in the transaction would end up being, and then see if, without being completely outlandish, I could come up with different combinations of future LIBORs that would make it possible for the fixed rate to theoretically save the client money over the course of several years. These future LIBORs were not based on what anyone thought LIBOR would be or could be or should be, nor on any simulations. Rather, they were based just on what we needed them to be (sound familiar?) in order for the company to be able to pretend to justify the transaction to themselves and their tax people from a financial point of view (and not from a taxation point of view, since that, you know, might be illegal—or perhaps just tax-abusive, to use proper IRS jargon).

To be clear, I was not setting the official LIBOR—no one would borrow money or otherwise make or receive payments based on my LIBORs. However, for the purposes of this particular deal, I was ‘setting’ LIBOR. I was setting LIBOR in a way that would allow the client to justify the deal on economic grounds (i.e. pretend it was not a tax dodge). In so doing, they would hope to save millions of dollars (and so cost the U.S. government millions of dollars). We at Citigroup just hoped to net a seven-figure fee.

To that end, I played with the numbers. With LIBOR starting out well below the transaction’s above-market fixed rate, I needed to assume it would go up and eventually surpass the fixed rate for a long enough period of time to make up for its early deficit. So I set to work. How exactly would I manipulate the numbers upward? Should I create large LIBOR increases from the get-go—an unlikely scenario at the time, but one that would give me more bang for my buck, since LIBOR would begin to make up its deficit sooner? Or should I dream up LIBOR increases farther in the future—since hey, anything can happen a year from now—but then get stuck assuming even larger increases than in the first scenario, since there would be less time for LIBOR to make up ground already lost?

I messed around with different LIBORs until I came up with something that struck the right balance and looked kosher, updated the “Alternative Financing Discussion” presentation with the newly minted future-LIBOR scenarios, and sent it off to the client as if I had just conducted a new analysis on their behalf. After many months of playing with LIBORs (and overcoming the other numerous structuring obstacles that involved myriad bank departments) the transaction was executed.

• • •

After my first reflection on my time at Citigroup was published, the company issued the following statement:

The allegations of this former employee, who last worked at Citi seven years ago, are unfounded and any implication that unethical behavior is accepted or rewarded by the firm is completely without merit. Citi strives to create the best outcome for its clients through conduct that is transparent, prudent and dependable.

For a bank to say this in the wake of the financial crisis seemed disingenuous at best. Now it just sounds laughable.