LIBOR manipulation hurt government entities and not-for-profit organizations
in Utah and across the country
SALT LAKE CITY August 8, 2016 – Attorney General Sean D. Reyes today announced a $100 million settlement with Barclays Bank PLC and Barclays Capital Inc. for fraudulent and anticompetitive conduct involving the manipulation of LIBOR. This is a benchmark interest rate that affects financial instruments worth trillions of dollars and has a widespread impact on global markets and consumers.
“It is important for a successful free market that financial institutions play by the rules, especially those that help set rates upon which the market relies. Companies that break the rules, cheat or otherwise manipulate positions of trust should be held accountable for their mistakes,” said Attorney General Reyes. “Our congratulations to the entire Anti-Trust Section of the Attorney General’s Office for their team work in seeing this difficult settlement through.”
The investigation, conducted by a multistate working group of 44 State Attorneys General, led by the Attorneys General of New York and Connecticut, revealed that Barclays manipulated LIBOR through two different kinds of fraudulent and anticompetitive conduct. First, during the financial crisis period of roughly 2007-2009, Barclays’ managers frequently told LIBOR submitters to lower their LIBOR settings in order to avoid the appearance that Barclays was in financial difficulty and needed to pay a higher rate than some of its peers to borrow money. The LIBOR submitters complied with the instructions and suppressed their LIBOR submissions during that period. Second, at various times from 2005 to 2007 and continuing at least into 2009, Barclays’ traders asked Barclays’ LIBOR submitters to change their LIBOR settings in order to benefit their trading positions, and the submitters often agreed to the requests. At times, those requests came from traders outside the bank, and Barclays traders agreed to pass them along to Barclays’ submitters, thus colluding with other banks. Barclays also believed that other banks’ LIBOR submissions likewise did not reflect their true borrowing rates and that therefore, published LIBOR did not reflect the cost of borrowing funds in the market, as it was supposed to do.
Government entities and not-for-profit organizations in Utah and throughout the U.S., among others, were defrauded of millions of dollars when they entered into swaps and other investment instruments with Barclays without knowing that Barclays and other banks on the U.S. dollar (USD)-LIBOR-setting panel were manipulating LIBOR and colluding with other banks to do so.
Governmental and not-for-profit entities with LIBOR-linked swaps and other investment contracts with Barclays will be notified if they are eligible to receive restitution from a settlement fund of $93.35 million. The balance of the settlement fund will be used to pay costs and expenses of the investigation and for other uses consistent with state law.
Barclays is the first of several USD-LIBOR-setting panel banks under investigation by the State Attorneys General to resolve the claims against it, and Barclays has cooperated fully from the outset. The State Attorneys General will benefit from the information and evidence provided by corporations that elect to cooperate with the investigations. Such cooperation can facilitate civil enforcement efforts, including restitution for victims of the offense.
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