Ex-Barclays Plc (BARC) Chief Executive Officer Bob Diamond received an e-mail in 2007 describing Libor rates as a “fantasy,” according to documents in the first U.K. lawsuit over manipulation of the benchmark.
Jerry Del Missier, former chief operating officer of Barclays, sent the message to Diamond and ex-head of investment banking Rich Ricci, according to Stephen Davies, a lawyer for Guardian Care Homes, the company suing the bank, the U.K.’s second-biggest by assets.
Referring to “the whole Libor curve,” Del Missier said “the real story is that these are all fantasy rates,” said Davies, reading the August 2007 e-mail out at a hearing in London today where the bank was ordered to give Guardian additional evidence.
Banks including Barclays, UBS AG (UBSN) and Royal Bank of Scotland Group Plc have been fined a total of about $6 billion for manipulating the London interbank offered rate, or Libor, and related benchmarks that underpinned about $300 trillion worth of transactions worldwide. Del Missier’s comments may refer to misleading submissions by other lenders in the run up to the near collapse of the financial system in 2008, Davies said.
Guardian, which is suing Barclays to rescind an interest-rate swap linked to Libor, asked Barclays to release more information about who might have manipulated Libor, and when the improper rates were submitted. A trial is scheduled to start in May.
Barclays lawyer Robin Dicker said the bank doesn’t know of any Sterling Libor submissions improperly lowered apart from at the height of the financial crisis in October 2008. While the bank admitted to “occasional” inaccurate submissions in letters to Guardian, it said it doesn’t know exactly when they were.
“It seems to me this is a very unsatisfactory state of affairs,” said Judge Julian Flaux, who ordered Barclays to release more information about its knowledge of the fixing. Somebody, somewhere “must know,” Flaux said.
Guardian, which operates nursing homes, owes the London-based bank about 70 million pounds ($115 million) and had enough financial experience to understand the swap, said Jon Laycock, a Barclays spokesman. Interest-rate swaps, designed to protect clients from increases, left many customers with big losses when rates dipped dramatically following the financial crisis.
Current and former Barclays employees will testify at the trial and “the court will consider all of their evidence in its proper context,” Laycock said. Del Missier and Diamond, who both resigned in the wake of the Libor scandal in 2012, are scheduled to testify in July.
As well as dealing with whether the interest-rate hedging swap was fair, the case will hinge on how much Barclays executives knew about Libor-rigging and whether the bank was under an obligation to disclose that information to customers, Guardian’s lawyers have said.
At earlier hearings in the case, Judge Flaux was told that Barclays’s head of money markets, Mark Dearlove, was aware of benchmark manipulation, and that the bank ran a proprietary trading fund that profited from low Libor rates.
Barclays failed to block the Libor-related aspects of Guardian’s lawsuit after losing a court of appeal decision in November.
The case is: Graiseley Properties Ltd & Ors. v. Barclays Bank Plc, case no. 12-1259, High Court of Justice, Queen’s Bench Division.
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