Libor Rate Conspiracy Seen in Home-Loan Borrowers’ Suit

Photographer: Peter Foley/Bloomberg

A man talks on his phone at JPMorgan & Chase Co. headquarters in New York. The homeowners’ complaint, filed in federal court in Manhattan earlier this month, is one of several class action, or group, lawsuits seeking to hold banks responsible for the alleged manipulation of the rate used as a borrowing-cost benchmark. Close

A man talks on his phone at JPMorgan & Chase Co. headquarters in New York. The... Read More

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Photographer: Peter Foley/Bloomberg

A man talks on his phone at JPMorgan & Chase Co. headquarters in New York. The homeowners’ complaint, filed in federal court in Manhattan earlier this month, is one of several class action, or group, lawsuits seeking to hold banks responsible for the alleged manipulation of the rate used as a borrowing-cost benchmark.

JPMorgan Chase & Co. (JPM), Bank of America Corp. and 10 other lenders were sued by a group of U.S. homeowners who claim the banks conspired to manipulate the benchmark Libor rate, driving up the cost of mortgage loans.

Libor, or the London interbank offered rate, is based on a British Bankers’ Association-commissioned daily survey that asks lenders to estimate how much it would cost to borrow money from each other for various periods in 10 different currencies. The figures are used to set interest rates for more than $300 trillion of securities and loans worldwide.

The homeowners’ complaint, filed in federal court in Manhattan earlier this month, is one of several class action, or group, lawsuits seeking to hold banks responsible for the alleged manipulation of the rate used as a borrowing-cost benchmark.

“Defendants’ anticompetitive conduct had severe adverse consequences on the plaintiffs by increasing the interest rate charged on their LIBOR-based loans and causing them to suffer financial losses,” the borrowers said in the Oct. 4 complaint.

The lenders’ alleged conspiracy from January 2000 to February 2009 violated U.S. racketeering laws, the homeowners said.

Bank of America and co-defendants Citigroup Inc. (C) and Royal Bank of Scotland are among the banks under investigation for Libor-rate tampering. Another named defendant in the lawsuit, Barclays Plc. (BARC), was fined $450 million in June by U.S. and U.K. regulators for submitting false answers to the daily canvass. Chief Executive Officer Robert Diamond and Chairman Marcus Agius resigned in the aftermath.

Shannon Bell, a spokeswoman for New York-based Citigroup, Jennifer Zuccarelli, a spokeswoman for JPMorgan Chase and Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, declined to comment on the homeowners’ allegations.

Preparing Charges

U.S. prosecutors are preparing to file charges later this year against traders from several banks involved in a bid-rigging scheme to manipulate Libor rates, a person familiar with the case, who asked not to be identified because the matter is confidential, told Bloomberg News in July.

New York Attorney General Eric Schneiderman and Connecticut Attorney General George Jepsen are jointly investigating the allegations and have issued subpoenas to New York-based JPMorgan Chase as well as to USB AG and Deutsche Bank AG.

The latter two lenders are also defendants in the borrower lawsuit, which seeks unspecified money damages together with an order permanently barring the bank from rigging the Libor rate.

Consolidated Cases

U.S. District Judge Naomi Reice Buchwald in Manhattan is presiding over consolidated pre-trial proceedings in almost 30 lawsuits alleging antitrust violations related to Libor. The borrowers’ case hasn’t yet been assigned to a judge.

The plaintiffs, all from Alabama, are represented by Mobile, Alabama, lawyer John W. Sharbrough and Mill Neck, New York attorney Stephen Stim. While they are suing in part for alleged violations of New York state law, they seek to represent residents of all 50 U.S. states.

The case is Adams v. Bank of America Corp. (BAC), 12-cv-07461, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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