Attorney General Porrino Announces N.J. Participation in $100 Million Multi-State Settlement with Barclays over LIBOR
TRENTON – Attorney General Christopher S. Porrino today announced New Jersey’s participation in a $100 million, multi-state settlement with Barclays Bank PLC and Barclays Capital Inc. that resolves allegations of fraudulent and anti-competitive conduct involving manipulation by Barclays of the London Interbank Offered Rate (LIBOR.)
LIBOR is a benchmark interest rate that affects financial instruments worth trillions of dollars, and has a widespread impact on global markets and consumers.
A multi-state investigation found that Barclay’s manipulation of LIBOR harmed a number of government entities and non-profit organizations across the U.S., including the New Jersey Turnpike Authority and Shore Memorial Medical Center in Somers Point, Atlantic County (formerly Shore Memorial Hospital.)
“As we all recognize, when public confidence in banks and the practice of investing erodes, the entire economy can suffer. This is an important settlement, not only for the recovery it provides for government entities and non-profit organizations that were harmed, but also for the message it sends –- that manipulation of financial markets is not acceptable and will not be tolerated,” said Attorney General Porrino.
The Barclays investigation, conducted by a multi-state working group of 44 state Attorneys General, determined that Barclays manipulated LIBOR through two different kinds of fraudulent and anti-competitive conduct.
During the financial crisis period of roughly 2007-2009, Barclays' managers frequently told LIBOR submitters to lower their LIBOR settings in order to avoid the appearance that Barclays was in financial difficulty and needed to pay a higher rate than some of its peers to borrow money. The LIBOR submitters complied with those instructions and suppressed their LIBOR submissions during that period.
In addition, at various times from 2005 to 2007 -- and continuing at least into 2009 -- Barclays’ traders asked Barclays’ LIBOR submitters to change their LIBOR settings in order to benefit their trading positions, and the submitters often agreed to the requests. At times, those requests came from traders outside the bank, and Barclays traders agreed to pass them along to Barclays’ submitters, thus colluding with other banks. Barclays also believed that other banks’ LIBOR submissions likewise did not reflect their true borrowing rates, and that therefore, published LIBOR did not reflect the cost of borrowing funds in the market, as it was supposed to do.
According to the participating states, many government entities and non-profit organizations were defrauded of millions of dollars when they entered into swaps and other investment instruments with Barclays without knowing that Barclays and other banks on the U.S. dollar (USD)-LIBOR-setting panel were manipulating LIBOR and colluding with other banks to do so.
Governmental and not-for-profit entities with LIBOR-linked swaps and other investment contracts with Barclays will be notified if they are eligible to receive restitution from a total settlement fund of $93.35 million. The balance of the settlement fund will be used to pay costs and expenses of the investigation, and for other uses consistent with state law.
Barclays is the first of several USD-LIBOR-setting panel banks under investigation by the states to resolve the claims against it, and Barclays has cooperated fully from the outset. A multi-state investigation into the conduct of several other USD LIBOR-setting panel banks remains ongoing.
New Jersey is part of a Leadership Group that leads a National Association of Attorneys General (NAAG) multi-state Working Group focused on LIBOR and related bank conduct. The Leadership Group also includes New York, Connecticut, Massachusetts, California, Illinois, Florida and Maryland.
The investigation on behalf of New Jersey was conducted by the Division of Law’s Affirmative Civil Enforcement Practice Group in conjunction with the New Jersey Bureau of Securities. Assistant Attorney General Brian F. McDonough, Deputy Attorney General Toral M. Joshi, Deputy Attorney General Nicholas Dolinsky, and Special Deputy Attorney General Elisabeth Juterbock worked on the Barclays matter on behalf of the State.