Schwab Sues BofA and Other Banks Over Libor Manipulation

Charles Schwab Corp., whose antitrust claims against banks over manipulation of the London interbank offered rate were tossed from federal court in New York, sued Bank of America Corp. and other financial institutions for fraud in state court in San Francisco.

Schwab alleged in a complaint filed April 29 that it and other company entities purchased billions of dollars in Libor-based instruments that are paying artificially low returns because the banks agreed to depress the rate.

Bank of America and other banks won dismissal in March of more than two dozen interrelated federal antitrust cases in federal court in Manhattan brought by San Francisco-based independent brokerage Schwab and other institutional investors. U.S. District Judge Naomi Reice Buchwald ruled that the plaintiffs were unable to show they were harmed.

In its new complaint against more than a dozen banks, Schwab alleges they concealed their conduct even after questions were raised beginning in 2007 about potential Libor manipulation. The lawsuit includes claims of fraud, unjust enrichment, violation of California unfair business practices and federal securities laws and seeks to rescind purchases of Libor-based instruments.

Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, didn’t immediately respond to an e-mail seeking comment on the complaint after regular business hours yesterday.

Libor is a key metric for setting interest rates for trillions of dollars in financial instruments. It fixes the rates under which banks lend money to one another for as little as a day and as long as a year. Rates for 10 different currencies including the U.S. dollar, Japanese yen and British pound are computed daily after canvassing banks that comprise membership panels for each type of money.

Barclays Plc agreed to pay 290 million pounds ($441 million) and Royal Bank of Scotland Group Plc paid $612 million to U.S. and U.K. regulators to resolve Libor manipulation claims. UBS AG agreed to pay 1.4 billion Swiss francs ($1.47 billion).

The case is Charles Schwab Corp. v. Bank of America Corp., CGC-13-531016, California Superior Court, San Francisco.