A year ago, Gary Hartland turned a trial about interest-rate swaps into a public examination of Barclays Plc executives’ misconduct in the Libor scandal. Now he wants to do the same to Lloyds Banking Group Plc.
From an office in an old Lloyds branch in Wednesfield, a working class town in England’s industrial Midlands, the 55-year-old entrepreneur plots an “aggressive strategy.”
“That’s the only language they understand,” Hartland said in an interview at the building, where he keeps his collection of bronze animals in the old bank vault. “Kindness is a weakness with them people.”
Wingate, Hartland’s real-estate investment firm, lost millions of pounds on an interest-rate swap sold by Lloyds. He sued the bank saying the deal wasn’t fair because it was pegged to a crooked benchmark: the London interbank offered rate.
Hartland was the first to seize upon the Libor scandal -- which has resulted in a total of about $9 billion in global fines against financial institutions -- to overturn an interest-rate swap. The derivatives, which were tied to Libor, were supposed to keep borrowing costs low, but turned out to be ruinously expensive for thousands of businesses following the 2008 financial crisis.
The lawsuit allows Hartland to get hold of internal e-mails and reports about Lloyds’ role in rigging Libor and use them to force the bank’s hand. His lawyers will keep asking for disclosure until he gets to the top levels of management.
Bang Them Up
“We get hold of somebody, we bang them up until we get the next one,” he says in the distinctive accent of the Black Country region, named for the soot that used to be produced by its heavy industries.
Lloyds said Hartland already agreed to a settlement over the Wingate swaps back in 2011.
“We do not believe the matter has any merit and it will be vigorously contested,” the London-based bank said in a statement.
The Lloyds settlement is invalid because of the Libor scandal, Hartland said. He agreed to the deal three years before Lloyds admitted its traders had manipulated the rate and was fined about 226 million pounds ($352 million) by U.S. and U.K. regulators.
Hartland has done this before. The swap lawsuit against Barclays, filed in 2012 by a Hartland business that runs care homes for the elderly, uncovered e-mails written by senior bankers suggesting that they knew about Libor manipulation. Barclays, the first bank fined in the Libor scandal, settled the case last year a few weeks before the trial.
The Express & Star, Hartland’s local newspaper, reported he received 40 million pounds from the Barclays settlement. Hartland and Jon Laycock, a spokesman for Barclays, declined to comment on the figure, saying the agreement was confidential.
Hartland’s parents worked at the market in nearby Wolverhampton and he never moved away from the area. Heavyset with a toothy smile that can quickly turn into a snarl, he says he became an accountant and built his care home and property empire from scratch.
Later, drinking a glass of ale at his local pub, Hartland talks about what it’s like taking on a bank.
“I did this day and night, it was really tough,” says Hartland, who has the walls of his office lined with newspaper clips about the lawsuits.
He says he spent about 5 million pounds on legal fees, which took a toll on his business.
“If you are going to fight big-ticket litigation, you’ve got to have the character for it,” said Philip Young, a lawyer who worked for Hartland at the start of the Barclays case. “It would be foolish to underestimate Gary.”
Libor Guinea Pig
Since the Barclays case, others have tried the same tactic.
Hartland says he was the “guinea pig” for Libor litigation.
Last month, Royal Bank of Scotland Group Plc was ordered by a judge to give Property Alliance Group files from an internal committee that probed Libor. A private jet rental company, a bankrupt storage firm and Champneys Henlow Ltd., which owns a chain of luxury health spas, are also trying to overturn swap contracts linked to Libor.
The strategy isn’t for everyone as it’s hard to show Libor rigging resulted in specific losses.
“I personally wouldn’t do that,” said Jeremy Roe, founder of Bully Banks, a group that aids small businesses in swaps disputes. “The effect on an individual transaction of misstating a Libor rate has got to be very small.”
Hartland, ever confident, believes his in-your-face style is effective against banks, which are used to getting their way.
He says he once told a group of bankers and their lawyers that “as far as you are concerned, I’m the most dangerous man in the world.”
The Lloyds case is Wingate Associates Limited v. Lloyds Bank PLC, High Court of Justice, Queen’s Bench Division, Commercial Court, 15-232.
For more, read this QuickTake: Broken Benchmarks