BY Fraser Tennant
Following four years of complex private litigation, global claimants’ law firm Hausfeld has announced a $120m settlement with Barclays Bank plc regarding Libor (London Interbank Offered Rate) fraud claims made by Over-The-Counter (OTC) investors.
Barclays, along with 15 other global financial institutions, had been accused of manipulating Libor – the mechanism used to set the cost of borrowing on mortgages, credit cards, loans and derivatives worth more than $450 trillion (£288 trillion) globally – so that its traders could make big profits on derivatives pegged to the base rate.
It is believed that Barclays first manipulated Libor during the global economic upswing of 2005–2007 before coming under suspicion from a number of regulatory authorities (based in the US, Canada, Japan, Switzerland, and the UK, among others). This particular litigation stretches back to 2011 when the City of Baltimore and other purchasers filed lawsuits against Barclays and other international banks alleging that they conspired to artificially suppress the US dollar LIBOR rate during the financial crisis.
Barclays previously admitted to manipulating LIBOR (in the run up to the financial crisis and in its aftermath) during settlements with US and UK regulators - the US Commodity Futures and Trading Commission and the FSA, respectively - in June 2012. In this instance, the bank was fined £290m and chief executive Bob Diamond resigned amid the fallout.
In addition to the monetary compensation agreed this week, Barclays, which only last month agreed to pay $94m in a separate litigation involving manipulation of Libor's euro-denominated equivalent, Euribor, has also committed to assisting the OTC plaintiffs in their continuing litigation against the other bank defendants .
The settlement with the OTC plaintiffs was achieved shortly before the Second Circuit Court of Appeals heard arguments on whether the plaintiffs’ antitrust claims should be reinstated after they were dismissed by the trial court.
“The settlement with Barclays, which comes over four years after the case was first filed, not only represents an important breakthrough in resolving this long-running litigation, it also provides significant monetary recovery and cooperation that will benefit the victims of the banks’ conduct," said Michael D. Hausfeld, chairman of Hausfeld.
Hilary Scherrer, a partner at Hausfeld LLP, called the settlement with Barclays an “icebreaker that could open up this litigation to future settlements".