Shareholders Can Sue Barclays Over Libor Rigging, Rules Judge

A U.S. Judge says that the shareholder lawsuit suing Barclays PLC (BCS) for inflating its stock price by manipulating the London Interbank Offered Rate can proceed. According to lead plaintiffs, the St. Clair Shores Police & Fire Retirement System in Michigan and the Carpenters Pension Trust Fund of St. Louis, Barclays and several of its ex-officers purposely misrepresented and understated how much it costs to borrow funds by submitting false information about LIBOR during the period running from August 2007 to January 2009. The rigging of LIBOR by Barclays was disclosed in a 2012 settlement with global regulators in which the financial institution agreed to pay a $450 million fine.

LIBOR is the benchmark used by financial institutions to establish interest rates for lending purposes on different kinds of financial transactions. It is also used to set interest rates in trillions of dollars of investments and loans. The benchmark is calculated for ten currencies. Member banks turn in a figure according to an estimate of what rate they would be charged for borrowing money from other banks.

The shareholder plaintiffs claim that during a conference call in 2008, ex-Barclays president Robert Diamond made a misguided statement about LIBOR when he said that the bank was not paying rates that were higher in any currency. They also believe that Barclays misrepresented its financial health during the period at issue while artificially inflating its share price.

In 2013, U.S. District Judge Shira Scheindlin dismissed the Libor rigging case against Barclays, finding that the shareholders did not offer enough evidence about the alleged LIBOR rigging that they said caused them to lose money. An appeals court went on to overturn her ruling noting that the claims were similar enough to justify a shareholder class action lawsuit.

In other Libor rigging news, two ex- Rabobank traders are asking a U.S. judge to throw out an indictment accusing them of manipulating the benchmark. The two men are pleading not guilty to criminal charges accusing them of manipulating rates for the US dollar and yen Libor.

The attorneys for Anthony Conti and Anthony Allen said that prosecutors could not show that their clients’ compelled testimony to a U.K. regulator hadn’t been used against them. Allen’s attorney said that case was tainted because Paul Robson, another ex-Rabobank trader who turned cooperating witness, had looked at the two defendants’ compelled testimony to the Financial Conduct Authority.

Because of this, said the lawyer, any information offered up by Robson may have been influenced by his review of Allen and Conti’s testimony, causing their words to be used against them. The attorney said this violated the U.S. Constitution. The prosecutor, however, argued that the Fifth Amendment right against self-incrimination is not implicated when another government besides the U.S. government compels the testimony.

In 2013, Rabobank consented to pay $1 billion to European and U.S. regulators for their Libor-related investigations. Overall, probes into Libor manipulation have led to $9 billion in settlements with brokerage firms and banks.

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Barclays must face U.S. class action over Libor, Reuters, August 20, 2015