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A.G. Reyes Announces a $220 Million Multi-state Settlement with Deutsche Bank for Manipulating Interest Rate Benchmarks

LIBOR manipulation hurt government and not for profit counterparties

in Utah and across the country

SALT LAKE CITY  October 30, 2017 – Attorney General Sean Reyes today announced a $220 million settlement with Deutsche Bank for fraudulent conduct involving the manipulation of LIBOR. This is a benchmark interest rate that affects financial instruments worth trillions of dollars and has a widespread impact on global markets and consumers.

“The fraudulent acts by Deutsche Bank hurt Utahns, cheating local non-profits and governmental bodies out of millions of dollars through fraudulent manipulation of interest rate benchmarks,” said Attorney General Sean Reyes. “Any company that defrauds Utahns out of hard-earned money must be held to account.

“I appreciate the hard work by Ron Ockey, Antitrust Section Director, David Sonnenreich, Deputy Attorney General, and Edward Vasquez, Assistant Attorney General, and their team for their hard work on this settlement.”

The investigation, conducted by a working group of 43 State Attorneys General revealed that Deutsche Bank manipulated LIBOR in a number of ways.  Deutsche Bank employees improperly (a) made internal requests for LIBOR submissions to benefit Deutsche Bank’s trading positions; (b) attempted to influence other banks’ LIBOR submissions in a manner intended to benefit Deutsche Bank’s trading positions; and (c) received communications from inter-dealer brokers and external traders attempting to influence Deutsche Bank’s LIBOR submissions.  At times, Deutsche Bank LIBOR submitters and supervisors expressly acknowledged and indicated they would work to implement the requests they received.

Given this conduct, Deutsche Bank LIBOR submitters and management had strong reason to believe that Deutsche Bank’s and other banks’ LIBOR submissions did not reflect their true borrowing rates (as they were supposed to do pursuant to published guidelines) and that the LIBOR rates submitted by the banks did not reflect the actual borrowing costs of Deutsche Bank and other panel banks.

Deutsche Bank employees did not disclose these facts to the governmental and not-for-profit counterparties with whom Deutsche Bank executed LIBOR-referenced transactions even though these rates were material terms of the transactions.

Government entities and not-for-profit organizations in Utah and throughout the U.S., among others, were defrauded of millions of dollars when they entered into swaps and other investment instruments with Deutsche Bank without knowing that Deutsche Bank and other banks on the U.S. Dollar (USD)-LIBOR-setting panel were manipulating LIBOR.

Governmental and not-for-profit entities with LIBOR-linked swaps and other investment contracts with Deutsche Bank will be notified if they are eligible to receive a distribution from a settlement fund of $213.35 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 laws.

Deutsche Bank is the second of several USD-LIBOR-setting panel banks under investigation by the State Attorneys General to resolve the claims against it and has cooperated with the investigation.  The Utah Attorney General’s Office benefits from the information and evidence provided by corporations that timely cooperate with the Attorney General’s investigations. Such cooperation can facilitate civil enforcement efforts, including the distributions of funds for victims of the offense.

In addition to Utah, the states joining the  Deutsche Bank  settlement include: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.  The investigation into the conduct of several other USD LIBOR-setting panel banks is ongoing.

 

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Utah Attorney General's Office

AG Reyes Announces a $100M Settlement with Barclays for Manipulating LIBOR

LIBOR manipulation hurt government entities and not-for-profit organizations
in Utah and across the country

SALT LAKE CITY August 8, 2016 – Attorney General Sean D. Reyes today announced a $100 million settlement with Barclays Bank PLC and Barclays Capital Inc. for fraudulent and anticompetitive conduct involving the manipulation of LIBOR.  This is a benchmark interest rate that affects financial instruments worth trillions of dollars and has a widespread impact on global markets and consumers.

“It is important for a successful free market that financial institutions play by the rules, especially those that help set rates upon which the market relies. Companies that break the rules, cheat or otherwise manipulate positions of trust should be held accountable for their mistakes,” said Attorney General Reyes. “Our congratulations to the entire Anti-Trust Section of the Attorney General’s Office for their team work in seeing this difficult settlement through.”

The investigation, conducted by a multistate working group of 44 State Attorneys General, led by the Attorneys General of New York and Connecticut, revealed that Barclays manipulated LIBOR through two different kinds of fraudulent and anticompetitive conduct.  First, 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 the instructions and suppressed their LIBOR submissions during that period.  Second, 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.

Government entities and not-for-profit organizations in Utah and throughout the U.S., among others, 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 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 State Attorneys General to resolve the claims against it, and Barclays has cooperated fully from the outset.  The State Attorneys General will benefit from the information and evidence provided by corporations that elect to cooperate with the investigations.  Such cooperation can facilitate civil enforcement efforts, including restitution for victims of the offense.  

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