Now the FBI investigates 14 Barclays staff at the heart of the rate-rigging scandal
- Traders under scrutiny are based mainly in London and New York
- It follows the £290m fine given to Barclays for fixing Libor lending rate
By TOBY HARNDEN
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Although much of the immediate political fallout over Barclays has occurred in the UK, the US could become the main legal arena for the scandal, with financial and custodial punishments dwarfing those imposed elsewhere.
The City of Baltimore has already launched a class action suit and the brokerage firm Charles Schwab has brought a lawsuit in California.
Probe: Fourteen Barclays traders at the heart of the Libor-fixing scandal are being investigated by the FBI (File photograph)
The Schwab lawsuit, filed against several banks, including Barclays, HSBC, Lloyds and RBS, indicates the scale of the scandal could be far bigger than first thought.
The FBI investigation was announced by Assistant Attorney General Lanny Breuer. The 14 traders under scrutiny are believed to have been based mostly in London and New York.
As part of a non-prosecution agreement last week, Barclays paid a record £59.5million to Britain’s Financial Services Authority, while American regulators and prosecutors took about £230million.
The deal covers Barclays but not its current and former employees.
Barclays has agreed to assist US investigators, essentially becoming a co-operating witness against some of its own people and rival banks.
Mr Breuer noted last week that Barclays had ‘substantially assisted the Criminal Division in our ongoing investigation of individuals and other financial institutions in this matter’.
Scrutiny: The FBI investigation was announced by Assistant Attorney General Lanny Breuer
President Barack Obama formed a Financial Fraud Enforcement taskforce in 2009 which, the US Department of Justice highlighted last week, was designed ‘to wage an aggressive, co-ordinated and proactive effort to investigate and prosecute financial crimes’.
The result could be extraditions of bankers to face US courts – even if the alleged criminal acts did not take place on American soil.
A 23-page statement of facts regarding Barclays was drawn up by the Justice Department and posted on its website and that of the FBI.
The document paints a picture of a network of traders conspiring on both sides of the Atlantic to manipulate both the Libor and Euribor rates.
The document, in a statement of facts agreed to by Barclays, said ‘interbank communications’ included ‘ones in which certain Barclays swaps traders communicated with former Barclays swaps traders who had left Barclays and joined other financial institutions’.
High stakes: A lawsuit has been filed in the US against several banks, including Barclays, HSBC, Lloyds and RBS
According to the Schwab lawsuit, each bank ‘dramatically increased its collusive suppression of Libor’. It claims that ‘under-reporting of Libor had a $45billion (£28billion) effect on the market’ – a shortfall that the banks avoided paying to investors buying their financial products.
Manipulating Libor would have had a significant effect on pension and investment funds that buy complex financial products, known as derivatives, linked to interest rates.
At least 16 of the world’s biggest banks, including UBS, Deutsche Bank, Citigroup, HSBC, RBS and Lloyds, are likely to be looked at by the FBI or other US federal agencies. As well as Britain and the US, investigations are taking place in other European countries, Japan, Canada and Singapore.
Inquiries are centred around which banks participated in the alleged collusion and whether any criminal actions were authorised or condoned by senior figures. Canada’s Competition Bureau filed an affidavit against banks including HSBC and RBS, demanding emails and other documents.
According to the affidavit, one bank became a whistleblower and agreed to assist the authorities.
A trader at the whistleblower bank is alleged to have communicated with traders at HSBC, Deutsche Bank, RBS, JP Morgan and Citibank.
Last week, Harvey Pitt, former chairman of the US Securities and Exchange Commission, said Barclays’ actions over Libor were likely to be only ‘the proverbial tip of the iceberg’.
More to come: Harvey Pitt said Barclays' actions over Libor were likely to be only 'the proverbial tip of the iceberg'
Read more: http://www.dailymail.co.uk/news/article-2167469/Libor-scandal-Now-FBI-investigates-14-Barclays-bank-staff.html#ixzz1zShKXdVI
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