Barclays Executives Knew of Libor Lowballing, Guardian Claims

Current and former executives at Barclays Plc (BARC) knew that the bank submitted lower-than-accurate Libor rates as early as 2007, according to transcripts of conversations between executives cited in a U.K. court case.

Mark Dearlove, head of Barclays’s money-market desk, told another executive, Jonathan Stone, he’d received complaints about the bank’s submissions from an employee of JPMorgan Chase & Co., according to a transcript dated December 2007 and handed down in court. The document is being used as evidence in a lawsuit in London against Barclays over an interest-rate swap.

“I don’t know what you guys are playing at,” Dearlove said. “We know you’re paying 540m, why are you setting Libor rates at 530?”

Companies in the Guardian Care Homes group are suing Barclays to cancel an interest-rate swap deal linked to the London interbank offered rate, saying they wouldn’t have agreed if they knew the benchmark was being rigged. An appeal by Barclays against the Libor claims is being heard alongside a similar swap case against Deutsche Bank AG brought by Indian property developer Unitech Ltd. (UT)

While Barclays hasn’t objected to the material being produced, “the bank does not consider any of the new evidence to be relevant to the issues in front of the Court of Appeal,” Jon Laycock, a spokesman for the lender, said in an e-mail.

Photographer: Simon Dawson/Bloomberg

Clouds gather in the sky above the headquarters of Barclays Plc in the Canary Wharf business district of in London. Close

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Photographer: Simon Dawson/Bloomberg

Clouds gather in the sky above the headquarters of Barclays Plc in the Canary Wharf business district of in London.

Regulatory investigations in the U.S., U.K. and Asia found evidence traders and brokers tried to influence Libor for profit, leading to fines and settlements totaling about $2.6 billion for Barclays, Royal Bank of Scotland Group Plc, UBS AG (UBSN) and ICAP Plc. (IAP)

‘All Wrong’

Robert Diamond, who resigned as chief executive officer of Barclays in the wake of the scandal, told U.K. lawmakers in July 2012 testimony that all the panel banks lowered their submissions. He denied knowing anything about it until a week before the regulators published their findings that month.

Dearlove told Stone the bank’s submissions were “all wrong” and wanted to escalate the complaint. “I guess the quesions[sic] is, is everybody else, what’s happening with everybody else?” Stone replied, according to the transcript.

In other evidence from the Guardian documents, a Barclays employee in Singapore asked its Libor submitters to enter lower rates in order to earn profit for an investment fund run by the bank.

Quan Hui Lee e-mailed colleagues in London instructing them to “go get Libor down” and go “LOWER! Go for 3 percent,” according to e-mail evidence. The e-mails come from a letter written by Barclays’ lawyers, Clifford Chance LLP, that was sent to Singapore regulators in May 2013 detailing an internal investigation.

New Material

Ian Pike, a Barclays employee in London who submitted rates, wrote back to Lee saying: “I’ll do my best boss!” according to the letter. The purpose of the changes was to make a profit or avoid losses at the fund, according to Guardian.

Evidence provided in the case shows Barclays’ “misconduct goes further and wider than the regulatory findings,” Guardian’s lawyers said in the documents. They said they couldn’t yet provide the court with all the new material.

“My swaps have cost me 12 million pounds ($19 million), so the suggestion that these allegations are irrelevant are fanciful,” Gary Hartland, Guardian Care Homes CEO, said in an e-mailed statement.

Open Doors

The Court of Appeal will rule on whether Unitech and Guardian can seek to tear up the swap deals, or whether they must prove a loss and seek damages.

Its decision may “open the doors for many more such claims,” said Stewart Burrows, a lawyer not involved in the hearing.

Barclays has argued Guardian owes 70 million pounds and said the Libor claims have no merit. Guardian had advisers and enough experience and understanding to exercise its own judgment about the suitability of the swap, Laycock said.

The appeal “isn’t concerned with the extent to which Barclays manipulated Libor or with the regulators’ reports,” the bank’s lawyer, Robin Dicker, told the court this morning. It is to decide whether Guardian “can rely on such content to avoid or reduce its obligations.”

Unitech presented e-mail evidence that Deutsche Bank employees had discussed clients being “screwed” in swap deals. Both cases started out as mis-selling claims and later sought to add Libor accusations.

The cases are: Graiseley Properties Ltd & Ors. v. Barclays Bank Plc, case no. 12-1259, High Court of Justice, Queen’s Bench Division; and Deutsche Bank AG (DBK) & Ors v. Unitech Global Limited & Anr, case no. 11-1199, High Court of Justice, Queen’s Bench Division.

To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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