Financial authorities in Britain have uncovered that a major financial supporter of the U.K. government, Michael Spencer, is closely tied to the LIBOR rate rigging scandal. U.S. and U.K. authorities late last month fined Spencer's company, ICAP, $90 million, describing it as a “linchpin” in the global LIBOR fraud worth some $360 trillion.

Michael Spencer has donated $7.7 million to the Conservatives in British government. From 2006 to 2010, he was also the party's treasurer. The government meanwhile has a track record of ignoring misdeeds carried out by Spencer's company, which have cost U.K. taxpayers millions.

At the same time, the government has approved policy decisions in line with prior public calls made by Spencer, including weakening plans for greater separation of investment and High Street banking, and rejecting an E.U.-wide Tobin Tax. Both are measures aimed at rebalancing some of the inequalities brought about by the current era of under-regulated financial speculation.

In late September, three ICAP employees were judged guilty of wire fraud and conspiracy as part of the LIBOR-rigging scandal, which took place between 2006 and 2011. In theory, banks are supposed to daily report the rate at which they will lend money, and it is based on this information that LIBOR is calculated.

The benchmark London rate affects interest rates across a vast financial market worth $360 trillion. It was only in 2012 when it was revealed that the rate had been rigged to favor speculators. Reuters pointed out specifically the way LIBOR holds a monopoly over those market interest rates, which affect financial products ranging from student loans to mortgages to bank rates, investments and even the government bank bailouts.

By manipulating the market, traders made enormous sums while knowingly manipulating the interest rate outcome. Every time a trader made massive gains by rigging the LIBOR rate, another buyer of financial products lost reciprocally. U.S. mortgage lenders Fannie Mae and Freddie Mac are suing 15 banks that rigged the LIBOR rates, alleging that the fraud cost them up to $3 billion.

Likewise, city councils in America – including Houston, Philadelphia and Sacramento – are suing banks for their losses due to the LIBOR manipulation.

Michael Spencer has meanwhile suggested he was unaware of the LIBOR crimes within the company he manages. Reuters quoted his retort, “It was a rotten apple situation." Yet, few people have made so much money from rotten apples. The fraud, which occurred between 2006 and 2011 while ICAP’s profits were booming, was followed by a 26% slump for the company in 2012.

Additionally, Spencer’s own earnings have taken a dive since ICAP stopped rigging the LIBOR rates. Ranked 162 among the Sunday Times Rich 2012, the Huffington Post suggested that Spencer earned just £9.4 million in 2012 — a drop from £13.4 million the year before, as quoted in the Daily Telegraph.

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Furthermore, graphs show what LIBOR interest rates should have been compared with how the rigged rates ended up, revealing the degree to which the fraud caused market fluctuations. Spencer spelled out his appreciation for this "difference" during the second year ICAP was rigging LIBOR, when he boasted that “volatility is good for business." In essence, by creating volatility through the rate rigging, ICAP created more demand for its services.

Backing Spencer's line, the government that he sponsors suggested it only discovered the LIBOR fraud once the news broke. It continues to deny any cover-up. But the facts undermines its own assertions.

Chancellor George Osborne has blocked a freedom of information request sent by opposition MP John Mann. The questions probe whether Osborne neglected to deal with state-owned Royal Bank of Scotland and its role in the LIBOR scandal. The government has a statutory duty to reply to Mann's request. Instead, so far the Treasury has refused to deny or confirm anything related to the request.

On the contrary, investigations into possible complicity or a cover-up by the U.K. government concerning its involvement with the LIBOR scandal deserves further investigation — not least because of its close connections with ICAP and Spencer’s own personal donations to the Conservatives in power. In just one instance of Spencer's blatant fault, local councils across Britain lost $752 million in investments in Iceland's Icesave accounts, which The Independent reported were advised investments by Butlers, a subsidiary of ICAP that Spencer also managed.

Butlers' independent treasury advised people to invest in products they knew were toxic. The Independent article goes on to explain how a Parliamentary Committee called for an investigation into Butlers and ICAP, but government never followed up. A further freedom of information request was sent to ask why government failed to pursue the investigation, and as yet it has received no response.

After the financial crisis, the Tobin Tax was put back on the public agenda. France and Germany have been pushing the tax on the European level; it would charge a small rate on financial sector transactions, and could generate billions to fight poverty and climate change.

On August 21, 2011, The Independent reported on Spencer asserting that if the tax was ushered in, he would relocate investments outside of Europe – a threat that British media widely interpreted as ICAP leaving the U.K. economy.

On September 10 of that year, three weeks after Spencer's threat, U.K. Chancellor George Osborne announced the government's opposition to the European tax plan. Early in 2012, Spencer was again quoted on the issue, this time after being entertained at a private dinner with the Prime Minister. After the evening, Spencer reportedly boasted that a very senior politician told him the U.K. would veto any European plans to push forward with Tobin.

Since then, a Parliamentary Committee has made further suggestions to the government on how to deal with the banking industry and the LIBOR rigging in particular. But government has watered down those proposals; a Conservative from the same committee even commented that government's actions have made the proposals “so weak as to be virtually useless.”

Michael Spencer is behind other efforts to scuttle European progressive reforms, such as plans to cap banker bonuses. Spencer is a key member behind the anti-bonus cap lobby group, Open Europe, and The Wall Street Journal has reported how the British government is pursing Open Europe's agenda by taking the European Parliament to court over its proposed legislation to curb banker bonuses.

In broader terms, the British government's policy decisions following Spencer's threats and public demands are explainable as decisions favoring much of the government, not just the CEO of ICAP. In 2011, the Guardian reported that the U.K.'s Conservative Party received half its funding from City bankers and traders in the election year of 2010. Such a blend of money and politics only leads to further questions about what the City of London has received for its investment in finance-skewed government — and how much this investment has cost British democracy and the global economy.

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