Tags: Libor | Probe | Banks | US

Criminal Libor Probe of Banks Is Under Way, U.S. Tells Judge

Wednesday, 07 Mar 2012 07:10 AM

 

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A criminal investigation into suspected manipulation of benchmark interest rates is being conducted by the U.S. government, the Justice Department said in a letter to a federal judge.

The Feb. 27 letter to U.S. District Judge Naomi Reice Buchwald in Manhattan was made public yesterday and is the first public acknowledgment by the Justice Department of the criminal investigation of benchmark lending rates such as the London interbank offered rate, known as Libor.

Buchwald cited the letter at a March 1 hearing in which she denied a request for documents related to the investigation by investors suing Credit Suisse Group AG, Bank of America Corp. and other companies over claims they artificially suppressed Libor.

“The Department of Justice is conducting a criminal investigation into alleged manipulation of certain benchmark interest rates,” including those for “several currencies” on the Libor exchange, according to the letter signed by lawyers from the fraud section of the Justice Department’s criminal division and its antitrust division.

Bill Halldin, a Bank of America spokesman, declined to comment on the letter. Steven Vames, a Credit Suisse spokesman, didn’t immediately return an e-mail seeking comment yesterday after regular business hours.

Regulators worldwide are investigating whether banks attempted to manipulate Libor and the Tokyo and euro interbank offered rates, known as Tibor and Euribor.

Alleged Conspiracy

Buchwald is presiding over multidistrict litigation involving 21 class-action, or group, lawsuits against banks accused of conspiring to artificially suppress Libor by understating their borrowing costs to the British Bankers’ Association.

In a Feb. 17 letter to Buchwald, the defendant banks objected to the plaintiffs’ demand for documents already given the Justice Department.

“Plaintiffs have demanded discovery to help them draft their consolidated complaints,” said lawyers for Bank of America, Credit Suisse, Barclays Bank Plc, HSBC Holdings Plc, JPMorgan Chase & Co., Lloyds Banking Group Plc, Norinchukin Bank and Royal Bank of Canada. The Justice Department letter doesn’t identify the banks that received subpoenas.

The banks said turning over such evidence to plaintiffs would impose a “substantial burden” because they are already complying with requests from “U.S. and foreign government authorities.”

U.S. Request

In the government’s letter to Buchwald, the Justice Department’s lawyers asked that they be allowed input on “the timing and scope of discovery.” They said they may submit papers to the judge alone “to protect the confidentiality of details of the investigation.”

Buchwald denied the investors’ request for documents in a ruling from the bench on March 1.

“To me, it is simply too much to have them piggyback on the government’s investigation at this stage,” Buchwald said.

The case is In re: LIBOR-Based Financial Instruments Antitrust Litigation, 11-MD-2262, Southern District of New York (Manhattan).


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