Barclays must face US lawsuit over Libor, court rules

Rules shareholders may pursue lawsuit against bank

Barclays Plc shareholders may pursue a lawsuit accusing the British bank of causing them to lose money because it manipulated the interest rate known as Libor, a federal appeals court decided on Friday, reversing a lower court ruling.

The 2nd US Circuit Court of Appeals in New York said shareholders presented a "plausible claim" that a 12% drop on June 28, 2012, in the price of their American depositary shares stemmed from misrepresentations by Barclays and several officials, including one-time Chief Executive Robert Diamond.

That decline came a day after Barclays agreed to pay roughly $453 million of fines in settlements with US and British regulators, and admitted to having often made artificially depressed Libor submissions from August 2007 to January 2009.

Libor underpins hundreds of trillions of dollars of transactions, and is used to set interest rates on credit cards, student loans and mortgages. US and European regulators have been probing whether banks artificially depressed Libor during the 2008 financial crisis to appear healthier.

"We're obviously pleased with the decision and look forward to prosecuting the case," said David Rosenfeld, a partner at Robbins Geller Rudman & Dowd representing investors led by the Carpenters Pension Trust Fund of St. Louis in Missouri and the St. Clair Shores Police & Fire Retirement System in Michigan.

Barclays spokesman Brandon Ashcraft declined to comment.

Investors claimed that Barclays' share price was propped up artificially from July 2007 to June 2012 because the bank had understated its borrowing costs through false Libor submissions from August 2007 to January 2009.

They also said Diamond, then Barclays' president, deceived them on an Oct. 31, 2008, conference call when he denied Barclays' borrowing costs were higher than those of rivals, saying: "We're categorically not paying higher rates in any currency."

Diamond is represented by Cheryl Krause and Andrew Levander, partners at the law firm Dechert. A spokeswoman for the firm declined to comment. Diamond became Barclays' chief executive in January 2011 and was ousted 1-1/2 years later.

UNDERSTATED COSTS

US District Judge Shira Scheindlin in Manhattan dismissed the lawsuit last May, saying any inflation in Barclays' share price resulting from Libor manipulation had dissipated by the time the settlement was disclosed.

Writing for the 2nd Circuit, however, Judge Richard Berman, who normally sits on the same court as Scheindlin, said the dismissal was premature.

"Defendants argue that Barclays' Libor misrepresentations were 'stale,'" and that the share price drop resulted from the fines rather than any inadequate disclosures, Berman said. "But defendants' arguments here involve questions of fact and should not be resolved upon a motion to dismiss."

The 2nd Circuit also said Scheindlin correctly ruled that Barclays' statements in US Securities and Exchange Commission filings about its internal controls were not materially false. It returned the case to her court for further proceedings.

Royal Bank of Scotland Group Plc , Switzerland's UBS AG , Britain's ICAP Plc and Dutch bank Rabobank have also reached regulatory accords over Libor manipulation. The Federal Deposit Insurance Corp, bondholders and others have accused 16 banks in US lawsuits of Libor manipulation.

The case is Carpenters Pension Trust Fund of St. Louis et al v. Barclays Plc et al, 2nd US Circuit Court of Appeals, No. 13-2678.