CPM Files Complaints for LIBOR Interest Rate Manipulation for UC Regents, City of Houston & Other Public Entities
Lawsuits were filed today by California cities, counties, and related public entities that suffered financial damages from the manipulation of the interest rates on their investments by the banks that set the benchmark rate known as the London Interbank Offered Rate, or “LIBOR.” The lawsuits were filed in Federal Courts in the Northern District (San Francisco), Central District (Los Angeles), and Southern District of California (San Diego) by Cotchett, Pitre & McCarthy, LLP against more than twenty current and former financial institutions that set LIBOR, including Barclays, UBS, Bank of America, JP Morgan, and Citigroup
LIBOR is a Global Benchmark Interest Rate
CP&M represents numerous cities, counties, and public entities in the LIBOR Litigation, an antitrust action against more than twenty major financial institutions that are current or former members of the British Bankers Association (BBA) that participate in setting the London Interbank Offered Rate (“LIBOR”). “LIBOR” refers generically to the interest rate at which these LIBOR member banks are able to borrow funds from other member banks in the London interbank market. In other words, LIBOR represents the rate at which the world’s most preferred borrowers are able to borrow money. For the rest of the world, LIBOR is the world’s most widely used base or benchmark rate used for setting short-term interest rates on a wide range of financial instruments and investments.
Global Manipulation of LIBOR
LIBOR rates are set daily after each LIBOR member bank reports to the BBA the interest rate it might pay to borrow funds from other member banks. The BBA issues a daily LIBOR rate derived from a filtered average of these reported rates. An alternative benchmark rate includes U.S. Treasury rates. The complaint alleges that the LIBOR member banks violated federal and state antitrust laws by engaging in a conspiracy to manipulate LIBOR interest rates upon which a multitude of municipal financial instruments are set. Because the rate reported by a LIBOR member bank is also indicative of the bank’s credit worthiness (i.e., the lower the reported borrowing rate, the higher the perceived credit worthiness), LIBOR member banks had an incentive to coordinate their respective reported borrowing rates with each other. As a result of the member banks’ conduct, the complaint alleges that public entities paid artificially high rates and/or received artificially depressed rates of returns on their financial instruments or investments, and also incurred unreasonable and excessive fees and costs for these transactions.
The Defendant LIBOR member banks include Bank of America, Barclays, Rabobank, Credit Suisse, UBS, JP Morgan Chase, Citibank, and Royal Bank of Canada. According to Barclays, LIBOR was manipulated high and low between 2005 and 2010, but the rampant suppression of LIBOR occurred in 2008.