case 2:12-cv-10903-cas-ajw document 1 filed 12/21/12 page ... · defendants ubs ag (“ubs”) and...

Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 of 60 Page ID #:3

-i- CLASS ACTION COMPLAINT

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TABLE OF CONTENTS

I. NATURE OF THE ACTION .......................................................................... 1

II. SUMMARY OF THE ACTION ..................................................................... 5

III. JURISDICTION AND VENUE .................................................................... 12

IV. PARTIES ....................................................................................................... 13

A. Plaintiff ................................................................................................ 13

B. Defendants ........................................................................................... 13

C. Unnamed Co-Conspirators And Agents .............................................. 15

V. SUBSTANTIVE ALLEGATIONS ............................................................... 15

A. LIBOR ................................................................................................. 15

B. The Formation And Operation Of The Conspiracy ............................ 17

1. Defendants Manipulated LIBOR To Reap Enormous Profits ....................................................................... 18

2. Defendants Manipulated LIBOR To Avoid Media Scrutiny Of Their Financial Condition ..................................... 20

C. The Wrongful Acts Of The Conspiracy .............................................. 23

D. Government Investigations, Criminal And Civil Enforcement Proceedings, And SEC Filings Further Support Defendants’ Conspiracy To Manipulate LIBOR ................... 34

E. Plaintiff And The Class Suffered Damages Caused By Defendants’ Manipulation Of LIBOR ................................................ 38

VI. CLASS ACTION ALLEGATIONS .............................................................. 38

VII. EQUITABLE TOLLING AND FRAUDULENT CONCEALMENT ......................................................................................... 40

VIII. CLAIMS FOR RELIEF AGAINST ALL DEFENDANTS .......................... 44

IX. PRAYER FOR RELIEF ................................................................................ 52

X. DEMAND FOR JURY TRIAL ..................................................................... 53


-1- CLASS ACTION COMPLAINT

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Plaintiff Los Angeles County Employees Retirement Association (“Plaintiff”

or “LACERA”), individually and on behalf of all others similarly situated, by its

undersigned attorneys, for its Class Action Complaint (“Complaint”) against

Defendants, alleges upon personal knowledge as to itself and its own acts, and

upon information and belief as to all other matters, based on, inter alia, the

investigation conducted by and through its attorneys, which included, among other

things, a review and analysis of news reports, the public documents of the

Defendants (as identified below), regulatory materials, court documents, scholarly

research and other expert analysis, wire and press releases, and other publicly

available information:

I. NATURE OF THE ACTION

1. This action concerns a massive scheme by Defendants to manipulate

the London Interbank Offered Rate (“LIBOR”) – the primary benchmark

referenced in approximately $350 trillion of financial products and transactions

worldwide – beginning at least as early as January 1, 2005, and continuing through

at least December 31, 2010 (the “Class Period”),1 and asserts claims against

Defendants for violations of California’s Cartwright Act, interference with

economic advantage under California law, and violations of the federal Racketeer

Influenced and Corrupt Organizations Act (“RICO”).

2. The enormous scope of Defendants’ conspiracy to manipulate LIBOR

is reflected by, and well documented in, among other things: (i) record fines paid

by Defendants UBS and Barclays totaling $1.5 billion and $450 million,

respectively, which include guilty pleas to criminal charges, detailed admissions of

a “coordinated campaign” of fraudulent conduct spanning at least three continents

by multiple banks and traders to manipulate LIBOR, and related departures of

1 The Class Period is defined based on currently available information, which includes detailed admissions of LIBOR-rigging during the Class Period by Defendants UBS AG (“UBS”) and Barclays Bank plc (“Barclays”) in connection with settlements with regulators.



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employees, including the chairman and chief executive of Barclays; (ii) additional

settlements that are reportedly being negotiated by other Defendant banks with

regulators due to the rigging of interbank lending rates, including statements by

Defendant The Royal Bank of Scotland Group plc (“RBS”) that it is endeavoring

to settle charges related to its manipulation of LIBOR with multiple authorities by

February 2013; (iii) admissions by Defendant Deutsche Bank AG (“Deutsche

Bank”) that its own internal investigations uncovered potential wrongdoing by

certain unnamed individuals within the bank; (iv) arrests by British fraud

prosecutors of three traders, including a former trader that worked for both

Defendant UBS and Defendants Citigroup, Inc. and Citibank N.A. (together

“Citigroup”) who are being investigated for reportedly coordinating the

manipulation of LIBOR among employees at multiple banks; (v) firings at several

of the Defendant banks; and (vi) numerous other civil and criminal governmental

investigations in the United States and abroad into Defendants’ collective

manipulation of LIBOR, including investigations specifically targeting other

Defendants Bank of America, Citigroup, Deutsche Bank, HSBC Holdings plc,

Lloyds Banking Group plc, and JPMorgan Chase & Co. (“JPMorgan”).

3. Following the announcement of extensive admitted facts of LIBOR-

rigging by Defendant Barclays in late June 2012, which culminated in Barclays

paying a total of $450 million to United States and British regulators to settle

charges of LIBOR manipulation and the resignation of Barclays’ President and

Chief Executive Officer (“CEO”), the British government asked Martin Wheatley

(“Director Wheatley”), Managing Director of the United Kingdom Financial

Services Authority (“FSA”), the United Kingdom’s (“U.K.”) principal financial

regulatory agency, to undertake an independent review of the setting and usage of

LIBOR. On September 28, 2009, the FSA announced that it was transferring

oversight of LIBOR from the British Bankers Association (“BBA”) – a private

trade group – to U.K. regulators based on recommendations by Director Wheatley.



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The FSA also published “The Wheatley Review of LIBOR Final Report,” which

included detailed findings regarding the manipulation of LIBOR by LIBOR

contributing panel banks, which are comprised of the Defendants and other banks,

during the Class Period and recommendations for reform to prevent further abuse.

In his speech accompanying the release of the report, Director Wheatley issued a

scathing critique of the LIBOR panel banks: “The [LIBOR] system is broken and

needs a complete overhaul. The disturbing events we have uncovered in the

manipulation of LIBOR have severely damaged our confidence and our trust – it

has torn the very fabric that our financial system is built on.”2 Director Wheatley

further emphasized that the “shocking,” “shameful” and “unscrupulous” conduct,

which flourished in an environment of “unfettered latitude,” was not isolated to “a

few rogue individuals” but was a “systemic problem” that remained hidden until

only recently “exposed by the FSA and others” in June 2012.3 In short, Director

Wheatley concluded, during the Class Period, LIBOR was “a broken system built

on flawed incentives, incompetence and the pursuit of narrow interests that are to

the detriment of markets, investors and ordinary people.”4

4. On December 19, 2012, Defendant UBS agreed to pay fines totaling

$1.5 billion to the U.S. Commodity Futures Trading Commission (“CFTC”), the

U.S. Department of Justice (“DOJ”), and the FSA to resolve charges of LIBOR-

rigging. In a guilty plea by UBS’s Japan subsidiary to felony wire fraud, the bank

admitted that for at least six years, between January 1, 2005, and December 31,

2010, “UBS, acting through its managers and employees sought to manipulate

certain LIBOR currencies and EURIBOR,” including efforts to collude with other

2 Martin Wheatley, Speech – Wheatley Review Final Report, Pushing the Rest Button on LIBOR (Sept. 28, 2012) (available at http://www.fsa.gov.uk/library/ communication/speeches/2012-0928-mw.shtml). 3 Id. (emphasis added throughout unless otherwise indicated). 4 Id.



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LIBOR panel banks.5 The FSA found that UBS’s LIBOR submitters “routinely

took the positions of its interest rate derivative traders [] into account when making

[LIBOR] submissions . . . . [and] also sought to influence the JPY LIBOR

submissions of other banks.”6 The CFTC found that “[f]or at least six years UBS

regularly tried to manipulate multiple benchmark interest rates for profit” with

“[m]ore than 2,000 instances of unlawful conduct involving dozens of UBS

employees, colluding with other panel banks . . . to spread false information and

influence other banks” and that “UBS made false U.S. Dollar LIBOR and other

submissions to protect its reputation during the global financial crisis.”7 In a

corporate press release, UBS’s CEO, Sergio Ermotti stated simply: “We deeply

regret this inappropriate and unethical behavior.”8

5. This action seeks recompense for damages sustained by Plaintiff and

all other California persons and entities who held, purchased or otherwise acquired

from issuers or market participants other than the Defendants any financial

instrument for which the rate of return was based upon U.S. Dollar-denominated

(“USD”) LIBOR at any time during the Class Period and who were damaged

thereby. Class Members (as defined below) did not transact directly with the

Defendants but nonetheless were injured as a foreseeable and proximate result of

Defendants’ concerted unlawful conduct, which caused the returns on USD

5 Financial Services Authority, Final Notice to UBS AG, FSA 186958, at 1 (Dec. 19, 2012) (“FSA Final Notice”) (available at http://www.fsa.gov.uk/static/pubs/ final/ubs.pdf). 6 Id. 7 Press Release: PR6472-12, U.S. Commodity Futures Trading Commission, CFTC Orders UBS to Pay $700 Million Penalty to Settle Charges of Manipulation, Attempted Manipulation and False Reporting of LIBOR and Other Benchmark Interest Rates (“CTFC Press Release”) (Dec. 19, 2012) (on file with author). 8 Press Release, UBS AG, UBS Board of Directors authorizes settlements of LIBOR-related claims with US and UK authorities; Swiss regulator to issue order (“Press Release, UBS AG”) (Dec. 19, 2012) (on file with author).



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LIBOR-based financial instruments to be artificially depressed during the Class

Period thereby depriving Plaintiff of millions if not billions of dollars. Defendants

have argued in other LIBOR-related litigation that “indirect purchasers,” such as

LACERA and similarly-situated plaintiffs, have no adequate remedy under the

federal antitrust laws. Thus, the claims are brought under California law, including

the California Cartwright Act, which provides redress “regardless of whether the

injured person dealt directly or indirectly with the defendant,” in order to

compensate Plaintiff and other Class Members for harms caused by Defendants’

six-year secret conspiracy to distort the world’s financial markets and unfairly tip

the economic scales in their favor.

6. Defendants’ manipulation of LIBOR depressed returns on various

types of financial instruments, including floating-rate notes, whose interest rates

are specifically set as a variable amount over LIBOR, or short-term fixed-rate

instruments, such as fixed-rate notes maturing in one year or less. Thus, by

suppressing LIBOR, Defendants caused artificially low interest rates to attach to

fixed-rate and variable rate notes and other LIBOR-based financial instruments

sold by issuers and market participants other than Defendants, depriving Plaintiff

and the Class of substantial sums of money.

7. During the Class Period, Plaintiff acquired or held millions of dollars’

worth of LIBOR-based financial instruments from issuers and market participants

other than Defendants, which paid artificially low returns due to Defendants’

suppression of LIBOR. By this action, Plaintiff seeks compensation on behalf of

itself and all Class Members – California “indirect” purchasers and/or holders of

LIBOR-based financial products – who were harmed as a result of Defendants’

illegal conduct.

II. SUMMARY OF THE ACTION

8. Beginning as early as January 1, 2005, despite knowing that

manipulating LIBOR could profoundly impact vast quantities of financial



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transactions, Defendants together and in concert repeatedly made intentionally

false representations about their borrowing costs to the BBA, resulting in the

artificial suppression of USD LIBOR and other currency-denominated LIBOR

rates during the Class Period and causing significant damages to Plaintiff and the

Class who purchased and/or held such LIBOR-based financial instruments issued

by market participants other than the Defendants.

9. In June 2012, the first admissions of Defendants’ deliberate and

coordinated efforts to suppress LIBOR began to come to light, when Defendant

Barclays announced that it had agreed to pay $450 million to resolve investigations

in the United States and the United Kingdom. Barclays internal investigation into

LIBOR-rigging resulted in multiple firings, departures, and disciplinary actions,

including the forced resignation of Barclays’ chairman and chief executive. As

part of its settlement, Barclays admitted to a detailed “Statement of Facts”

(“Barclays SOF”9) citing scores of internal emails, as well as communications with

other LIBOR panel banks, in furtherance of their agreement to manipulate and

suppress the published LIBOR rates.

10. For example, the Barclays’ SOF reveals that on March 10, 2006, a

Barclays trader sent an e-mail to a Barclays submitter stating as follows:

Hi mate[.] We have an unbelievably large set on Monday (the IMM).

We need a really low 3m [3-month] fix, it could potentially cost a

fortune. Would really appreciate any help, I’m being told by my

NYK [counterparts in New York] that it’s extremely important.

Thanks.

The next business day, the trader wrote to the submitter:

9 Department of Justice, Criminal Division, Fraud Section, and Barclays Bank PLC, Appendix A, Statement of Facts (June 2012) available at http://www.justice.gov/iso/opa/resources/9312012710173426365941.



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The big day has[] arrived . . . My NYK were screaming at me about

an unchanged 3m libor. As always, any help wd [would] be greatly

appreciated. What do you think you’ll go for 3m?

The submitter responded:

I am going 90 altho[ugh] 91 is what I should be posting.

The trader replied:

I agree with you and totally understand. Remember, when I retire

and write a book about this business your name will be in golden

letters . . . .

The submitter then replied:

I would prefer this not be in any books!

Barclays’ 3-month USD LIBOR submission on March 13, 2006, was 4.90%, which

was a rate unchanged from the previous trading day and was tied for the lowest

rate submitted. Barclays SOF ¶13.

11. By way of further example, on December 21, 2006, a Barclays

submitter created an electronic calendar entry stating,

“SET 3 MONTH US$ LIBOR LOW!!!!!!” that was scheduled to

begin on December 22, 2006 at 9:00 a.m. and continue until January

1, 2007 at 9:30 a.m. On December 22, 2006 and the subsequent

trading days through the end of the year, Barclays’ 3-month Dollar

LIBOR submissions were 5.36%, 5.365%, 5.35%, and 5.36%,

respectively.

Barclays SOF ¶15.

12. An enormous amount of evidence – some of which is detailed herein –

demonstrates that Barclays was not some rogue panel member that single-handedly

manipulated LIBOR, as has been argued by Defendants, but rather the

manipulation was the result of collusive and concerted manipulation by

Defendants. As the BBA has repeatedly stressed, no one institution can single-



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handedly alter the calculations behind the published LIBOR. Indeed, as FSA

Director Wheatley made clear in his remarks in September 28, 2012:

“One bank we know of [defendant Barclays] made no effort at all to

aid credible [LIBOR] submissions and has now paid the price. Other

banks will follow.”10

13. Barclays itself has admitted that it conspired with other panel banks to

manipulate USD LIBOR: “From at least approximately August 2005 through at

least approximately May 2008, certain Barclays swap traders communicated with

swaps traders at other Contributor Panel banks and other financial institutions

about requesting LIBOR and EURIBOR contributions that would be favorable to

the trading positions of the Barclays swaps traders and/or their counterparts at

other financial institutions.” Barclays SOF ¶23. For example, on October 26,

2006, a trader at another bank requested a low LIBOR setting from Barclays and,

when the Barclays trader agreed, the trader responded:

“Dude, I owe you big time! Come over one day after work and I’m

opening up a bottle of Bollinger! Thanks for the libor.”

Barclays SOF ¶26.

14. UBS has also now admitted that it colluded with other panel banks to

manipulate LIBOR. In its own corporate statement commenting on the settlements

with U.S. and U.K. regulators, UBS conceded that, during the Class Period,

“employees at the bank colluded with employees at other banks and cash brokers

to influence certain benchmark rates . . .” and that UBS personnel gave

“inappropriate directions to UBS submitters” that were designed to misrepresent

the bank’s financial condition.11

15. Internal UBS communications – previously unavailable to Plaintiff

but now made public by regulators – provide further evidence of UBS’s

10 Wheatly Review Final Report, supra note 2. 11 Press Release, UBS AG, supra note 8.



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participation in a massive, coordinated international scheme by the Defendants to

manipulate LIBOR over at least six years. For example, the FSA found that UBS

traders “routinely” made requests of UBS’s LIBOR submitters to adjust

submissions to benefit UBS trading positions, including “more than 800

documented Internal Requests” to manipulate JPY LIBOR and “more than 115

Internal Requests” to manipulate other currency-denominated LIBOR, including

USD LIBOR.12 Moreover, these requests were not limited to a single day or

submission but often

“covered a sustained period of time. For example, on 24 January

2007 in response to a Trader’s request about three month and six

month JPY LIBOR submissions, [UBS] Manager A, who was

overseeing the [UBS] Trader Submitter responsible for determining

the submissions, replied: ‘standing order, sir.’

16. Similarly, newly-released information from internal UBS documents

confirms that UBS colluded with other panel banks to manipulate LIBOR. The

FSA found that UBS “colluded with interdealer brokers to attempt to influence the

JPY LIBOR submissions of other banks” and were in “regular contact” with at

least four other Panel Banks that contributed JPY LIBOR submissions. Id. The

FSA further found that UBS’s “external” efforts with other panel banks were

coordinated with UBS’s “internal” efforts. Id. For example, the FSA found:

In the course of one campaign of manipulation, a UBS Trader agreed

with his counterpart [at another panel bank] that he would attempt to

manipulate UBS’s submissions in ‘small drops’ in order to avoid

arousing suspicion. The Trader made it clear that he hoped to profit

from the manipulation and referred explicitly to his UBS trading

positions and the impact of the JPY LIBOR rate on those positions.

He offered to ‘return the favour’ and entered into facilitation trades

12 FSA Final Notice, supra note 5.



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and other illicit transactions in order to incentivise and reward his

counterparts. Id. at 3 (italics in original).

17. The conduct at UBS reached mangers who knew about and were even

“actively involved in UBS’s attempts to manipulate LIBOR and EURIBOR

submissions.” Id. at 4. Indeed, UBS made “corrupt payments of £15,000 per

quarter to Brokers to reward them for their assistance” in rigging LIBOR. Id.

18. In short, the FSA concluded:

The nature of the relationship and total disregard for proper standards

by these Traders and Brokers is clear from the documented

communications in which particular individuals referred to each other

in congratulatory and exhortatory terms such as “the three muscateers

[sic]”, “SUPERMAN”, “BE A HERO TODAY” and “captain caos

[sic]”. Id. at 4. (italics in original).

19. Incredibly, UBS has argued in prior court filings in other LIBOR

litigation that there were only “attempts by Barclays alone to lower its LIBOR

submissions – not a panel-wide conspiracy to keep USD LIBOR artificially low.”13

This factual argument is now clearly belied by UBS’s admission of wire fraud,

detailed admissions of misconduct involving UBS managers, and the staggering

$1.5 billion that UBS has agreed to pay to resolve charges over its LIBOR

misconduct.

20. Other investigations into the manipulation of LIBOR remain ongoing

in the United States, Switzerland, Japan, United Kingdom, Canada, the European

Union, and Singapore by at least ten different governmental agencies, including the

United States DOJ, the Securities and Exchange Commission (“SEC”), and the

CFTC. Additionally, numerous employees at the Defendant banks, including

13 See Reply Memorandum in Support of UBS AG’s Motion to Dismiss, ECF No. 133, at p. 1, in 11-cv-6411-NRB (S.D.N.Y. Sept. 27, 2012) (emphasis in original).



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supervisors, traders, and brokers, from various financial institutions have been

accused of – or terminated for – improper conduct related to LIBOR.

21. In addition to Barclays and UBS, several other Defendant banks

reportedly are presently negotiating settlements in an effort to avoid even more

enormous penalties. On November 2, 2012, Defendant RBS acknowledged that it

faces impending fines for the bank’s role in the LIBOR-rigging conspiracy and is

eager to reach a settlement as soon as possible after cleaning house and firing

“numerous” employees implicated in the scheme. RBS CEO Stephen Hester

(“Hester”) admitted that Defendants’ LIBOR conspiracy “is a deeply regrettable

thing . . . . this is the sort of thing the industry has to put behind it.”14 Indeed,

Hester stated: “We are up for settling with all and every one as soon as they are

ready.” Id.

22. New information confirming the collusive nature of Defendants’

manipulation is being revealed on a nearly daily basis. Criminal arrests have

recently been made, including three men on December 11, 2012, “as part of a

widening criminal investigation into attempted manipulation of interest rates,”

according to The WallStreet Journal (“WSJ”). According to the WSJ, one of the

men arrested by British law enforcement authorities, Thomas Hayes (“Hayes”), is a

former trader at UBS and Citigroup Inc., and “[a]uthorities in multiple countries

have been looking into Mr. Hayes as an alleged coordinator of a group of

employees at multiple banks who sought to manipulate [LIBOR], according to

people familiar with the case.” As explained in the WSJ report, “Authorities in the

U.S. and elsewhere have been focusing on rings of traders at various banks who

allegedly tried to coordinate their efforts to improperly influence Libor and

Euribor.” Bloomberg similarly reported on December 13, 2012, that Hayes is also

14 Matt Schuffman and Steve Slater, RBS braced for fines to settle Libor probe, Reuters, Nov. 2, 2012, available at http://uk.reuters.com/assets/print?aid =UKBRE8A100620121102.



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being probed by Canada’s Competition Bureau for rate manipulation “along with

counterparts at five banks including HSBC, RBS and JPMorgan, according to a

person brief on the investigation.”

23. Bloomberg’s December 13, 2012 article entitled “Libor Transcripts

Expose Rate-Rigging With Police Nearby” also recites transcripts of instant

messages and telephone conversations among Defendant traders agreeing to rig the

LIBOR rate. The transcripts were reportedly made public by a Singapore court and

reviewed by Bloomberg before being sealed by a judge at RBS’s request. For

example, Bloomberg reportedly reviewed a transcript of an instant message

discussion held on December 3, 2007, wherein Jezri Mohideen, then RBS’s head of

yen products in Tokyo, instructed colleagues in the U.K. to lower the bank’s six-

month LIBOR submission that day, ordering “We want lower Libors. . . . Let the

money market guys know.” Will Hall, a trader in London, confirmed “Sure, I’m

setting.” Mohideen replied, “Great, set it nice and low.” Hall agreed to, and did,

set the rate at 1.01 percent.

III. JURISDICTION AND VENUE

24. This Court has jurisdiction pursuant to 28 U.S.C. § 1331, 18 U.S.C. §

1965, 28 U.S.C. § 1332(d) and the Class Action Fairness Act of 2005 (“CAFA”),

28 U.S.C. § 1711, et seq.

25. This Court may also exercise supplemental jurisdiction over

Plaintiff’s state law claims in accordance with 28 U.S.C. § 1367.

26. This Court has personal jurisdiction over all of the Defendants by

virtue of their business activities in this jurisdiction.

27. This District is a proper venue under Section 1965 of RICO (18

U.S.C. § 1965) and under 28 U.S.C. §§ 1391(b), (c), and (d), as each Defendant

transacted business in this District and a substantial part of the events or omissions

giving rise to Plaintiff’s claims occurred in this District. Venue is also proper

under Cal. Bus. & Prof. Code § 16750.



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IV. PARTIES

A. Plaintiff

28. Plaintiff Los Angeles County Employees Retirement Association

(“LACERA”) is a California public pension fund created and operating under the

County Employees Retirement Law of 1937, Cal. Gov. Code §§ 31450, et seq.

LACERA is the largest county retirement system in the United States, providing

retirement, disability, death and other benefits for more than 150,000 active and

retired employees of Los Angeles County. LACERA’s Board of Investments

manages more than $38 billion in assets for the benefit of its members. During the

Class Period, LACERA acquired or held millions of dollars’ worth of USD

LIBOR-based financial instruments from issuers and market participants other than

the Defendants and was damaged by Defendants’ misconduct.

B. Defendants

29. Defendant Bank of America Corporation is a Delaware corporation

headquartered in Charlotte, North Carolina. Defendant Bank of America, N.A.—a

federally chartered national banking association headquartered in Charlotte, North

Carolina—is an indirect, wholly-owned subsidiary of Defendant Bank of America

Corporation. Defendants Bank of America Corporation and Bank of America, N.A.

are referenced collectively in this Complaint as “Bank of America.”

30. Defendant Barclays is a British public limited company headquartered

in London, England.

31. Defendant Citigroup, Inc. is a Delaware corporation headquartered in

New York, New York. Defendant Citibank, N.A.—a federally-chartered national

banking association headquartered in New York, New York—is a wholly-owned

subsidiary of Defendant Citigroup, Inc. Defendants Citigroup, Inc. and Citibank,

N.A. are referenced collectively in this Complaint as “Citibank.”



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32. Defendant Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A.

(“Rabobank”) is a financial services provider headquartered in Utrecht, the

Netherlands.

33. Defendant Credit Suisse Group AG (“Credit Suisse”) is a Swiss

company headquartered in Zurich, Switzerland.

34. Defendant Deutsche Bank is a German financial services company

headquartered in Frankfurt, Germany.

35. Defendant HSBC is a United Kingdom public limited company

headquartered in London, England. Defendant HSBC Bank plc—a United

Kingdom public limited company headquartered in London, England—is a wholly-

owned subsidiary of Defendant HSBC Holdings plc. Defendants HSBC Holdings

plc and HSBC Bank plc are referenced collectively in this Complaint as “HSBC.”

36. Defendant JPMorgan Chase & Co. is a Delaware corporation

headquartered in New York, New York. Defendant JPMorgan Chase Bank,

National Association—a federally chartered national banking association

headquartered in New York, New York—is a wholly owned subsidiary of

Defendant JPMorgan Chase & Co. Defendants JPMorgan Chase & Co. and

JPMorgan Chase Bank, National Association are referenced collectively in this

Complaint as “JPMorgan Chase.”

37. Defendant Lloyds Banking Group plc (“Lloyds”) is a United

Kingdom public limited company headquartered in London, England. Defendant

Lloyds was formed in 2009 through the acquisition of Defendant HBOS plc

(“HBOS—a United Kingdom banking and insurance company headquartered in

Edinburgh, Scotland—by Lloyds TSB Bank plc.

38. Defendant Royal Bank of Canada (“RBC”) is a Canadian company

headquartered in Toronto, Canada.

39. Defendant RBS is a United Kingdom public limited company

headquartered in Edinburgh, Scotland.



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40. Defendant UBS is a Swiss company based in Basel and Zurich,

Switzerland.

41. Defendant WestLB AG is a German joint stock company

headquartered in Dusseldorf, Germany. Defendant Westdeutsche ImmobilienBank

AG—a German company headquartered in Mainz, Germany—is a wholly-owned

subsidiary of WestLB AG. Defendants WestLB AG and Westdeutsche

ImmobilienBank AG are referenced collectively in this Complaint as “WestLB.”

42. Defendants Bank of America, Barclays, Citibank, Rabobank, Credit

Suisse, Deutsche Bank, HSBC, JPMorgan Chase, Lloyds, HBOS, RBC, RBS,

UBS, and WestLB were members of the BBA’s USD-LIBOR contributor panel

during the Class Period.

C. Unnamed Co-Conspirators And Agents

43. Various others, presently unknown to Plaintiff, materially aided or

participated as co-conspirators with the Defendants in the violations of law alleged

in this Complaint and have engaged in conduct and made statements in furtherance

thereof.

44. The acts alleged in this Complaint have been done by Defendants and

their co-conspirators, or were authorized, ordered or done by their respective

officers, agents, employees or representatives while actively engaged in the

management or furtherance of Defendants’ business or affairs.

45. Each of the Defendants named herein acted as either an agent, joint

venture of or for the other Defendants with respect to the acts, violations and

common course of conduct alleged herein. Each Defendant that is a subsidiary of a

foreign parent acts as a United States agent for its parent company.

V. SUBSTANTIVE ALLEGATIONS

A. LIBOR

46. The BBA describes LIBOR as “the primary benchmark for short term

interest rates globally.” Indeed, since its inception in approximately 1986, LIBOR



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has been a benchmark interest rate used in financial markets around the world.

Futures, options, swaps and other derivative financial instruments traded in over-

the-counter markets and on exchanged worldwide are settled based on LIBOR. As

the DOJ explained in its December 19, 2012 Statement of Facts with UBS (“UBS

SOF”), “[b]ecause of the widespread use of LIBOR and other benchmark interest

rates in financial markets, these rates play a fundamentally important role in

financial systems around the world.”15

47. LIBOR is calculated for ten currencies and fifteen borrowing periods

ranging from overnight to one year. Each day between 11:00 and 11:10 a.m.

(London time), banks contributing to the LIBOR-setting process submit their

interbank borrowing rates – the rates at which contributor banks can borrow money

from each other each day – to Thomson Reuters, which discards the highest and

lowest contributors (the top and bottom quartiles) and then uses the middle two

quartiles to calculate an average. The average for each currency and borrowing

period as well as each contributing bank’s individually-submitted rate is published

daily at 11:30 a.m. (London time).

48. USD LIBOR is the “primary benchmark” for short-term interest rates

in the United States. As an analyst for a division of Defendant Citigroup

explained:

LIBOR is by far the most popular floating-rate index in the world. Its

importance has evolved far beyond its humble roots as an interbank

lending rate. LIBOR touches everyone from the largest international

conglomerate to the smallest borrower in Peoria: It takes center stage

in every interest rate swap (whether it is explicitly part of the cash

flow or not) and the great majority of floating-rate securities and

15 Department of Justice, Criminal Division, Fraud Section, and UBS AG, Appendix A, Statement of Facts, at ¶12 (Dec. 19, 2012) (“UBS SOF”) available at http://www.justice.gov/iso/opa/resources/6942012121911725320624.pdf.



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loans. As such, the functionality and relevance of LIBOR is of

primary importance to the global financial system.

See S. Peng, C. Gandhi, A. Tyo, Special Topic: Is LIBOR Broken?, Citigroup

Capital Markets, April 10, 2008.

49. For example, tens, if not hundreds, of billions of dollars of loans are

originated or sold each year with rates tied to USD LIBOR. Typically, the interest

rate on floating-rate notes are set as a spread against LIBOR (e.g., “LIBOR + [X]

bps).16 Similarly, market participants use LIBOR as a basis to determine the rate of

return on short-term fixed-rate notes by comparing the offered rate to LIBOR.

Accordingly, any manipulation of LIBOR distorts capital allocations worldwide.

B. The Formation And Operation Of The Conspiracy

50. During the Class Period, Defendants conspired to suppress LIBOR

below the levels it would have been set had Defendants accurately reported their

borrowing costs to the BBA.

51. According to the BBA, at all times relevant hereto, the LIBOR panel

banks – including Defendants – were supposed to submit their own rates without

reference to rates contributed by other panel banks. The basis for a panel bank’s

submission, according to the BBA, must be the rate at which members of the

bank’s staff primarily responsible for management of a bank’s cash consider that

the bank can borrow unsecured funds in the interbank market. As BBA panel

banks, Defendants had actual knowledge of these submission standards.

52. Importantly, no regulatory agency oversees the setting of LIBOR by

the BBA and its members. The resultant rates are not reviewed by or subject to the

approval of any regulatory agency, and therefore the integrity of LIBOR relies

entirely upon the honesty of the contributing panel banks. The BBA has been

quoted as saying it “calculates and produces BBA Libor at the request of [its]

members for the good of the market.”

16 The term “bps” stands for basis points. 100 basis points equals 1%.



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53. Beginning at least as early as January 1, 2005, and continuing

throughout the Class Period, Defendants collectively and in concert caused the

USD LIBOR to be artificially suppressed by knowingly and intentionally

submitting false data to the BBA, which did not accurately reflect the submitting

banks’ actual borrowing costs on the interbank market. As a consequence, during

the Class Period, the published USD LIBOR rates generally were lower than they

would have been had Defendants made truthful and accurate submissions.

54. Defendants had two motives to falsify their submissions. First, due to

their own net interest rate exposure tied to USD LIBOR and transactions in

LIBOR-based financial instruments, Defendants were motivated to – and did in

fact – reap substantial financial benefits from their manipulation of LIBOR.

Second, particularly during the financial crisis the emerged in 2007, Defendants

wanted to avoid negative publicity by being perceived as financially weak or by

admitting publicly that their peers were reluctant to lend to them except at elevated

rates.

1. Defendants Manipulated LIBOR To Reap Enormous Profits

55. Defendants had a substantial economic incentive to suppress the

aggregate reported USD LIBOR rate because financial instruments issued by

Defendants and other transactions involving Defendants included payment

obligations linked to USD LIBOR. By agreeing to artificially suppress LIBOR,

Defendants enabled each other to reap enormous profits by avoiding paying

counterparties the higher amounts they otherwise would have been obligated to pay

absent Defendants’ unlawful conduct. For example, in Defendant Citibank’s Form

10-K Annual Report for the year ending December 31, 2007, filed with the SEC in

early 2008, Citibank calculated that it would profit between $540 and $837 million

from a 100 basis point (i.e., 1%) decrease in interest rates. Similarly, in its 2007,

Form 10-K, Defendant Bank of America estimated that a 100 basis point drop



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would yield a profit on its net interest rate exposure of more than $800 million. An

academic study by UCLA economics professor Connan Snider and University of

Minnesota economics professor Thomas Youle, discussed below, also concludes

that bank portfolio exposure to LIBOR − the most popular measure of interest rates

in swaps and other derivatives − is a “source of misreporting incentive.”

Defendants therefore had a powerful financial motive, in addition to a reputational

motive, to manipulate USD LIBOR.

56. Defendants’ motive to manipulate LIBOR submissions in order to

reap enormous profits is further confirmed by the FSA’s findings in connection

with UBS’s $1.5 billion settlement: “UBS sought to manipulate LIBOR and

EURIBOR in order to improve the profitability of trading positions.”17 Similarly,

the CFTC found that, from at least January 2005 to at least June 2010, UBS

attempted to manipulate LIBOR in UBS’s favor “to enhance the profits the Bank

earned from trading benchmark-based derivatives.” To this end, “UBS regularly,

and for certain benchmarks sometimes daily, made false rate submissions,” and

“colluded with at least four other panel banks to make false submissions, and

induced at least five interdealer brokers to disseminate false information or

otherwise influence other panel banks’ submissions.”18

57. Additionally, derivatives traders and brokers were encouraged to –

and richly rewarded for – engaging in the scheme to rig LIBOR rates. According

to the FSA, UBS paid bonuses to certain brokers who helped the bank in its rate-

rigging efforts. For example, two UBS traders whose positions depended on

LIBOR rates, engaged in wash trades (i.e., risk-free trades that cancelled each

other out and which had no legitimate commercial rational) to gin up “corrupt

brokerage payments . . . as reward for their efforts” to manipulate the

17 FSA Final Notice, supra note 5, at 4. 18 CTFC Press Release, supra note 7.



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submissions.19 In a 2008 phone conversation detailed by the FSA, a UBS trader

promised the UBS broker:

If you keep 6s [i.e., the six month JPY LIBOR rate] unchanged today

. . . I will [] do one humongous deal with you . . . Like a 50,000 buck

deal, whatever . . . I need you to keep it as low as possible . . . If you

do that . . . I’ll pay you, you know, 50,000 dollars, 100,000 dollars . .

. whatever you want . . . I’m a man of my word.20

58. In another example, during the week of June 16, 2008, a Zurich-based

UBS Senior Manager instructed USD LIBOR submitters to lower their

submissions over the next three days “to get in line with the competition” and

avoid being noticed as an outlier when compared to other contributor panel banks.

UBS’s 3-month USD LIBOR submissions immediately dropped 5 basis points to

the “middle of the pack” of the other contributor panel banks’ submissions.21

2. Defendants Manipulated LIBOR To Avoid Media Scrutiny Of Their Financial Condition

59. Defendants were also motivated to manipulate LIBOR to avoid

negative publicity, particularly during the financial crisis that emerged in 2007. By

August 2007, the global credit crisis was just beginning to unfold and banks

worldwide were under increasing scrutiny. The BBA published the rates reported

by every LIBOR panel bank. If a panel bank’s published rate revealed that its

peers were charging it heightened rates for interbank loans, this would signal to the

market that the financial institution was perceived to be risky. In the worst case,

fears could snowball and create a run on the bank. Therefore, Defendants had a

motive to, and did in fact, falsify the rates that they submitted to give the

appearance that their funding costs were lower than they actually were, and to give

19 FSA Final Notice, supra note 5, at ¶15b. 20 Id. 21 Id. at ¶¶120-21.



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the appearance that Defendants remained strong despite the deteriorating economic

environment.

60. The business press also focused on high USD LIBOR submissions as

a sign of distress at submitting banks. For example, in early September 2007,

Barclays reported higher USD LIBOR rates than its peers, a Bloomberg article

entitled “Barclays Takes a Money-Market Beating” questioned “So what the hell is

happening at Barclays and its Barclays Capital securities unit that is prompting its

peers to charge it premium interest in the money market?” Other newspapers,

including the U.K. Financial Times and The Standard, ran similar articles.

61. In an April 10, 2008 analyst report titled “Is LIBOR Broken?”

Citibank head of U.S. rates strategy Scott Peng explained why contributing panel

banks might be motivated to understate LIBOR submissions to misrepresent their

liquidity and financial condition:

[T]he most obvious explanation for LIBOR being set so low is

the prevailing fear of being perceived as a weak hand in this

fragile market environment. If a bank is not held to transact at

its posted LIBOR level, there is little incentive for it to post a

rate that is more reflective of real lending levels, let alone one

higher than its competitors. Because all LIBOR postings are

publicly disclosed, any bank posting a high LIBOR level runs

the risk of being perceived as needing funding. With markets in

such a fragile state, this kind of perception could have

dangerous consequences.

62. As the FSA concluded in connection with its investigation of UBS, the

bank “acted improperly” and made false LIBOR submissions “whose primary

purpose was to protect [UBS’s] reputation by avoiding negative media attention

about its submissions and speculation about its creditworthiness.”22 Indeed,

22 FSA Final Notice, supra note 5, at 4.



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internal UBS documents quoted by the FSA confirm that UBS made false LIBOR

submissions designed to portray the bank as financially healthy and avoid negative

publicity during the financial crisis:

[I]n reaction to increased media scrutiny of the financial standing of

banks and banks’ LIBOR submissions during the financial crisis, UBS

issued directives to its LIBOR submitters intended to: ‘protect our

franchise in these sensitive markets’ . . . . These directives changed

over time, but for a significant part of the period from at least 17 June

2008 to at least December 2008, their purpose was to influence UBS’s

LIBOR submissions to ensure that they did not attract negative media

comment about UBS’s creditworthiness.” Id. at 4-5 (italics in

original).

63. Similarly, the CFTC concluded that, from August 2007 through mid-

2009, UBS managers directed that the bank’s USD LIBOR and certain other

currency submissions:

[B]e tailored to protect the Bank’s reputation and avoid what it

perceived to be unfair speculation about its fundraising ability and

creditworthiness. The first wrongful direction was for the submissions

to ‘err on the low side.’ Later, the directions were revised to place

UBS in ‘the middle of the pack’ of panel bank submissions . . . .

[T]hese directions, at times, caused UBS’s U.S. Dollar LIBOR and

other benchmark submissions to be knowingly false.23

64. Internally at UBS, some employees questioned the directive to report

false LIBOR submissions in order to be below or within the “pack” of other panel

contributors. In one 2008 internal exchange via electronic chat quoted by the FSA,

a UBS employee responds to another that “Libors are currently even more

23 CTFC Press Release, supra note 7.



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fictitious than usual.”24 The first UBS employee asks, “isn’t libor meant to

represent the rates at which banks lend to each other?” The response: “it’s a made

up number” that the panel banks were collectively underreporting at the time “to

not show where they really pay in case it creates headlines about . . . being

desperate for cash.” Or as one UBS Senior Manager explained, “the answer would

be ‘because the whole street was doing the same and because [UBS] did not want

to be an outlier in the libor fixings, just like everybody else.”25

C. The Wrongful Acts Of The Conspiracy

65. As explained in more detail below, Defendants’ conspiracy was by its

nature self-concealing. Accordingly, Plaintiff believes that additional substantial

evidence supporting the allegations of Defendants’ conspiracy will be developed

through discovery. Nonetheless, significant information has recently become

publicly available that confirms the coordinated and collusive manipulation of

USD LIBOR by Defendants during the Class Period.

66. On June 27, 2012, the DOJ, the CFTC, and the FSA each entered into

settlements with Barclays, totaling $450 million in fines, in connection with

Barclays’ role in trying to artificially manipulate LIBOR. In connection with the

settlements, Barclays admitted to its own misconduct, as well as colluding with

other banks to artificially manipulate LIBOR, in: (1) a Barclays SOF issued by the

DOJ; (2) an Order Instituting Proceedings Pursuant to Sections 6(c) and 6(d) of the

Commodity Exchange Act, As Amended, Making Finding and Imposing Remedial

Sanctions, CFTC Dkt. No. 12-25 (June 27, 2012) (“CFTC Order”); and (3) a Final

Notice issued by the Financial Services Authority (“FSA Report”).

67. In connection with the settlement, Barclays has admitted that starting

at least as early as August 2007, Barclays submitted USD LIBOR quotes that were

“improperly low” and “inaccurate,” and thus did not reflect Barclay’s actual

24 UBS SOF, supra note 15, at ¶101. 25 Id. at ¶117.



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anticipated borrowing costs. Barclays SOF ¶¶36, 39. Barclays also confirmed to

United States and British regulators that “all of the Contributor Panel banks,

including Barclays, were contributing rates that were too low” during this same

period. Id. at ¶42.

68. The Barclays SOF, CFTC Order and FSA Report contain further

detailed revelations about Defendants’ concerted, deliberate and coordinated efforts

to manipulate and suppress LIBOR for their own benefit, including colluding with

other banks to artificially manipulate LIBOR.

69. Barclays has now admitted that managers gave instructions to

Barclays USD LIBOR submitters to lower their LIBOR submissions, and

instructed the USD LIBOR submitters to stay “within the pack” of other members

of the USD LIBOR contributor panel to avoid negative attention. Barclays SOF

¶37. Indeed, internal Barclays documents uncovered by the DOJ confirm, as

Barclays employees stated in internal communications, the purpose of the strategy

of under-reporting USD LIBORs was to keep Barclay’s “head below the parapet”

so that it did not get “shot” off. Barclays SOF ¶40.

70. Moreover, during the Class Period, traders at Barclays and other banks

entered into positions with various financial instruments, where the returns on such

instruments would increase as LIBOR decreased. To maximize the return on such

instruments for the benefit of Defendants, these traders sought to artificially

manipulate LIBOR downward by engaging in the following: (1) communicating

with other Defendant banks to request that that bank submit artificially low LIBOR

submissions, and/or (2) requesting that submitters at their own bank submit

artificially low LIBOR quotes.

71. For example, traders at Barclays routinely collaborated with other

banks to get those banks to submit artificially low LIBOR quotes. According to

the FSA Report, between February 2006 and October 2007, Barclays’ traders made

at least 63 requests to traders at other banks to pass on the requests for LIBOR



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submissions to their banks’ submitters. FSA Report ¶89. For example, on

October 26, 2006, a trader at another bank requested a low LIBOR setting from

Barclays and, when the Barclays trader agreed, the trader responded:

“Dude, I owe you big time! Come over one day after work and I’m

opening up a bottle of Bollinger! Thanks for the libor.”

Barclays SOF ¶26.

72. Similarly, Barclays traders relied on traders at other panel banks for

assistance in suppressing LIBOR. For example, on February 28, 2007, a Barclays

Trader made a request to an external trader in relation to three month US dollar

LIBOR “duuuude . . . whats up with ur guys 34.5 3m fix . . . tell him to get it

up!!” The external trader responded “ill talk to him right away.” FSA Report

¶91.

73. Additional emails and transcripts of instant messages and telephone

calls further confirm the intentional manipulation. For example, on

March 10, 2006, a Barclays trader sent an e-mail to a Barclays submitter stating:

“Hi mate[.] We have an unbelievably large set on Monday (the

IMM). We need a really low 3m [3-month] fix, it could potentially

cost a fortune. Would really appreciate any help, I’m being told by

my NYK [counterparts in New York] that it’s extremely important.

Thanks.”

The next business day, the trader wrote to the submitter:

“The big day has[] arrived . . . My NYK were screaming at me about

an unchanged 3m libor. As always, any help wd [would] be greatly

appreciated. What do you think you’ll go for 3m?”

The submitter responded,

“I am going 90 altho[ugh] 91 is what I should be posting.”

The trader stated:



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“I agree with you and totally understand. Remember, when I retire

and write a book about this business your name will be in golden

letters . . . .”

The submitter, in an admission recognizing that this conduct was improper and

should be kept secret, replied, “I would prefer this not be in any books!”

Barclays’ 3-month USD LIBOR submission on March 13, 2006, was 4.90%, which

was a rate unchanged from the previous trading day and was tied for the lowest

rate submitted. Barclays SOF ¶13.

74. Similarly, on April 7, 2006, a Barclays trader requested that a Barclays

submitter submit quotes with low one-month and three-month USD LIBOR; the

submitter responded “Done . . . for you big boy . . .” CFTC Order at 10.

75. And on September 13, 2006, a Barclays trader in New York requested

to a Barclays submitter:

“Hi Guys, We got a big position in 3m libor for the next 3 days. Can

we please keep the labor fixing at 5.39 for the next few days. It

would really help. We do not want it to fix any higher than that. Tks

a lot.”

CFTC Order at 10.

76. On December 14, 2006, a Barclays trader requested to a Barclays

submitter: “For Monday we are very long 3m cash here in NY and would like the

setting to be set as low as possible . . . thanks.” CFTC Order at 10.

77. On December 19, 2006, a Barclays trader sent an e-mail to a Barclays

submitter with the subject line, “3m Libor,” asking, “Can you pls [please]

continue to go in for 3m Libor at 5.365 or lower, we are all very long cash here in

ny.” The submitter asked “How long . . .?” The trader replied “Until the effective

date goes over year end (i.e. turn drops out) if possible.” The submitter replied

“Will do my best sir.” On December 19, 20, and 21, 2006, Barclays’ 3-month USD

LIBOR submissions were 5.37%, 5.37%, and 5.375%, respectively. On



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December 21, 2006, the submitter created an electronic calendar entry stating,

“SET 3 MONTH US$ LIBOR LOW!!!!!!” that was scheduled to begin on

December 22, 2006, at 9:00 a.m. and continue until January 1, 2007, at 9:30 a.m.

On December 22, 2006, and the subsequent trading days through the end of the

year, Barclays’ 3-month Dollar LIBOR submissions were 5.36%, 5.365%, 5.35%,

and 5.36%, respectively. Barclays SOF ¶15.

78. Recently revealed evidence further confirms that the intentional

LIBOR manipulation was not limited to Barclays, and instead, the panel banks

worked collaboratively with one another to achieve the manipulation. For

example, Bloomberg’s December 13, 2012 article entitled “Libor Transcripts

Expose Rate-Rigging With Police Nearby” recites transcripts of instant messages

and telephone conversations among panel banks agreeing to rig the LIBOR rate.

The transcripts were reportedly made public by a Singapore court and reviewed by

Bloomberg before being sealed by a judge at RBS’s request. For example,

Bloomberg reportedly reviewed a transcript of an instant message discussion held

on December 3, 2007, wherein Jezri Mohideen, then RBS’s head of yen products

in Tokyo, instructed colleagues in the U.K. to lower the bank’s six-month LIBOR

submission that day, ordering “We want lower Libors, . . . Let the money market

guys know.” Will Hall, a trader in London, confirmed “Sure, I’m setting.”

Mohideen replied, “Great, set it nice and low.” Hall agreed to, and did, set the rate

at 1.01 percent.

79. Information from internal UBS communications and documents

recently made public further confirm efforts to manipulate USD LIBOR. For

example, internal UBS communications show that UBS U.S. Dollar derivative

traders in UBS’s offices in Stamford, Connecticut made requests for favorable

submissions by the USD LIBOR submitters in Zurich, Switzerland.26 Indeed, in

one 2007 exchange, a UBS U.S. Dollar derivatives trader emailed UBS USD

26 UBS SOF, supra note 15, at ¶88.



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LIBOR submitters in London and Zurich, stating: “only one mission for the

London crew on Monday. We need 3mo libor set low.”27

80. Regulators have concluded that UBS and Barclays were not alone in

their efforts to manipulate and suppress LIBOR. Indeed, since LIBOR rates are

averaged, UBS and Barclays had to collude with other contributor panel banks to

affect the reported rates. Filings by the FSA, DOJ and CFTC confirm that they

did. As the FSA concluded:

UBS’s misconduct extended beyond UBS’s own internal submission

process to sustained and repeated attempts to influence the

submissions of other banks, acting in collusion with panel banks and

brokers at a number of different firms.

81. Indeed, criminal investigations are continuing worldwide, and

criminal arrests have recently been made. For example, on December 11, 2012,

three men were arrested by British law enforcement authorities “as part of a

widening criminal investigation into attempted manipulation of interest rates,”

according to the WSJ. One of the men arrested, Thomas Hayes, is a former trader

at UBS and Citigroup, and “[a]uthorities in multiple countries have been looking

into Mr. Hayes as an alleged coordinator of a group of employees at multiple

banks who sought to manipulate [LIBOR], according to people familiar with the

case.” As explained in the WSJ report, “Authorities in the U.S. and elsewhere have

been focusing on rings of traders at various banks who allegedly tried to

coordinate their efforts to improperly influence Libor and Euribor.” Bloomberg

similarly reported on December 13, 2012, that Hayes is also being probed by

Canada’s Competition Bureau for rate manipulation “along with counterparts at

five banks including HSBC, RBS and JPMorgan, according to a person brief on the

investigation.”

27 Id. at ¶89.



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82. Similarly, Peter Hahn, a finance professor at London’s Cass Business

School and a former managing director at Defendant Citigroup, has stated that:

“Libor has always been a lie, because it represents what banks would

pay for funds rather than what they are actually paying. . . . People

who have an incentive to make money from mispriced markets are

able to misprice those markets, and that is a serious control

problem.”28

83. Following the settlements with the United States DOJ, CFTC, and the

U.K. FSA, Barclays’ chairman Marcus Agius resigned on July 2, 2012. The

following day, Barclays’ CEO Bob Diamond (“Diamond”) resigned.

84. On July 16, 2012, Barclays Chief Operating Officer (“COO”) Jerry

Del Messier testified before Parliament that Diamond instructed him to lower

Barclays’ LIBOR submissions.

85. Other Defendant banks have admitted their involvement in the scheme

to manipulate LIBOR and/or fired numerous employees in connection with the

LIBOR scandal. For example, on July 31, 2012, Defendant Deutsche Bank

revealed that certain employees improperly manipulated LIBOR.

86. On August 3, 2012, it was reported that Defendant RBS fired several

employees in connection with an investigation into manipulation of LIBOR and on

August 5, 2012, it was reported that Defendant UBS fired 24 employees in

connection with an investigation into the manipulation of LIBOR. The CEO of

Defendant RBS, Stephen Hester, acknowledged in an article published on

November 2, 2012, that RBS faces impending fines for the bank’s role in the

LIBOR-rigging conspiracy and that it is eager to reach a settlement as soon as

28 Lindsay Fortado, Liam Vaughan & Joshua Gallu, UBS Turning Whistleblower in Libor Probe Pressures Rivals, Bloomberg, Feb. 21, 2012, available at http://www.bloomberg.com/news/2012-02-21/ubs-turning-whistleblower-in-libor-probe-pressures-rivals.html.



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possible.29 Hester further admitted that Defendants’ LIBOR conspiracy “is a

deeply regrettable thing . . . this is the sort of thing the industry has to put behind

it.”30

87. Additional corroborating evidence confirms that Defendants did in

fact collaboratively manipulate USD LIBOR rates during the Class Period:

An analysis by the Federal Reserve Bank of New York (“New York

Fed”) reported USD LIBOR rates and actual rates paid for funding

under the Federal Reserve’s Term Auction Facility suggested that

USD LIBOR rates were being underreported;

Contacts at the Defendant Banks admitted to the New York Fed that

USD LIBOR rates were being underreported;

A New York Fed analysis of USD LIBOR spikes during periods of

media scrutiny found that the spikes likely were reversions to actual

borrowing rates, demonstrating that the surrounding rates were

artificially depressed and did not reflect actual borrowing rates;

Certain Defendants, or their employees, have admitted that rates were

being manipulated;

Deviations between rates reported by the Defendant banks and rates

charged in the marketplace for credit default swaps on Defendant

banks confirm that rates were being underreported;

Intraday analysis of submissions suggests that USD LIBOR rates were

being manipulated by underreporting; and

Deviations between USD LIBOR rates and other rates with which

they typically correlated, such as Federal Reserve Eurodollar Deposit

29 Schuffman, supra note 14. 30 Id.



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Rates and Overnight Index Swaps further demonstrate that USD

LIBOR rates were being manipulated.31

88. On April 12, 2008, the New York Fed Federal Reserve Bank of New

York noted in an internal report that the USD LIBOR, a rate reflecting the

representations of the contributing panel banks rather than actual transacted rates,

was significantly lower than the rate that banks had bid to access USD funds in the

Federal Reserve’s Term Auction Facility (“TAF”), a true auction for actual funding.

According to the New York Fed, this raised “questions over the accuracy of the

BBAs [USD] LIBOR fixing rate.”

89. The divergence between the actual transactions banks were willing to

pay to access TAF funds and the reported USD LIBOR rates reached as much as 30

basis points by April 2008, “similar to that observed during prior periods of

heightened market stress, most notably in August and early December 2007.” The

New York Fed acknowledged that sources within the Defendant banks had

admitted to the New York Fed that the divergence was caused by false reporting to

BBA:

Our contacts at LIBOR contributing banks have indicated a tendency

to under-report actual borrowing costs when reporting to the BBA in

order to limit the potential for speculation about the institutions’

liquidity problems.

90. In a May 6, 2008 presentation that the New York Fed made to officials

at the United States Department Treasury, the New York Fed again acknowledged

that there were suggestions that the contributing panel banks were “actually

misquoting LIBOR” and that the misquoting may have been spurred by the

contributing panel banks’ economic “incentive to avoid signaling funding

challenges.”

31 See, e.g., Amended Consolidated Class Action Complaint [ECF No. 134], MDL No. 2262, 11 Civ. 2613 (S.D.N.Y. Apr. 30, 2012), at ¶¶51-72.



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91. In another internal report dated May 20, 2008, the New York Fed

stated that the unmonitored quoting mechanism employed in calculating USD

LIBOR “may lead to some deliberate misreporting designed to avoid the stigma of

revealing high funding costs” by panel banks. The report noted as evidence of

manipulation that there were momentary lapses in the depression of USD LIBOR

rates that occurred when LIBOR credibility questions surfaced in the business

press:

Additionally, around days on which the BBA’s efforts to address

LIBOR have received media attention, there have been fairly dramatic

increases in the LIBOR fixings. For example, in the two days

surrounding the WSJ’s April 16 article, 3-month LIBOR increased 17

bps, which was the largest two-day increase in the rate since August 9.

Earlier this week, as the integrity of LIBOR again received attention,

1-year LIBOR increased 21 bps, and OIS and fed funds-LIBOR basis

swaps suggest that a large portion of this rise was not due to a re-

pricing of policy expectations.

92. Thus, Defendants’ USD LIBOR reporting was more honest in those

brief periods when they knew that dishonesty was likely to be exposed by media

scrutiny.

93. In a confidential presentation that the New York Fed made to the

United States Inter-Agency Financial Markets Working Group, the New York Fed

cited additional evidence of malfeasance: reports from brokers that contributing

panel banks were bidding in the swap market above USD LIBOR quotes. In other

words, those banks were seeking interbank funding at rates higher than their

purported interbank funding costs that they reported to the BBA.



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94. An academic study conducted by Professors Snider and Youle finds

further evidence that Defendants tampered with LIBOR rates.32 For example,

Snider and Youle note that Citigroup’s quote was often “significantly below its

CDS spread,” implying “there were interbank lenders willing to lend to Citigroup

at rates which, after purchasing credit protection, would earn them a guaranteed 5

percent loss.” That implication would contravene basic rules of economics and

finance; the only rational explanation was that Citibank underreported its

borrowing costs to the BBA.

95. The Snider and Youle research and analysis further confirm that the

rates reported by certain panel members, in particular, Citibank, Bank of America,

and JPMorgan Chase, also demonstrated suspicious “bunching” around the fourth

lowest quote submitted by the 16 banks to the BBA. Indeed, Citibank’s and Bank

of America’s quotes often tended to be identical to the fourth-lowest quote for the

day.

96. Because the USD LIBOR calculation involved excluding the lowest

(and highest) four reported rates every day, bunching around the fourth-lowest rate

suggests Defendants collectively depressed USD LIBOR by reporting the lowest

possible rates that would not be excluded from the calculation of USD LIBOR on a

given day.

97. According to Snider and Youle, the fact that observed bunching

occurred around the pivotal fourth-lowest reported rate reflects the reporting banks’

intention to ensure that the lowest possible borrowing rates were included in the

calculation of USD LIBOR (which includes only the fifth lowest through the

twelfth-lowest quotes).

98. In other words, banks that bunched their quotes around the fourth-

lowest submission helped ensure the maximum downward manipulation of the

32 See Connan Snider and Thomas Youle, Does the LIBOR reflect banks’ borrowing costs?, (Apr. 2, 2010), available at http://www.ssrn.com.



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resulting rate. Further demonstrating the aberrant nature of the observed bunching

around the fourth-lowest quote, Snider and Youle noted “the intraday distribution

of other measures of bank borrowing costs do not exhibit this bunching pattern.”

99. For example, Snider and Youle found that the “bunching”

phenomenon was not apparent in CDS spreads for the same banks. They

concluded, “If banks were truthfully quoting their costs . . . we would expect these

distributions to be similar.”

D. Government Investigations, Criminal And Civil Enforcement Proceedings, And SEC Filings Further Support Defendants’ Conspiracy To Manipulate LIBOR

100. Beginning in early 2011, Defendants first began disclosing the

existence of government investigations into possible LIBOR manipulation. For

example, on March 15, 2011, UBS revealed in its annual report on Form 20-F filed

with the SEC that the bank had “received subpoenas” from the SEC, the CFTC,

and the U.S. DOJ “in connection with investigations regarding submissions to the

[BBA]” and that these investigations “focus on whether there were improper

attempts by UBS either acting on its own or together with others, to manipulate

LIBOR rates at certain times.” UBS, also confirmed that it had “received an order

to provide information to the Japan Financial Supervisory Agency concerning

similar matters” and that it was “conducting an internal review” and “cooperating

with the investigations.”

101. Similarly, in March 2011, various news agencies reported that UBS,

Band of America, Citigroup and Barclays also had received subpoenas from United

States regulators regarding the potential manipulation of USD LIBOR. For

example, a March 16, 2011 Financial Times article specified that investigators had

“demanded information” from WestLB, and that, in the year prior, all sixteen USD



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LIBOR panel banks had received informal requests from regulators for information

regarding the setting of LIBOR during the period 2006-2008.33

102. On July 26, 2011, UBS disclosed in a Form 6-K filed with the SEC

that it had “been granted conditional leniency or conditional immunity from

authorities in certain jurisdictions, including the Antitrust Division of the DOJ, in

connection with potential antitrust or competition law violations related to

submissions for Yen LIBOR and Euroyen TIBOR (Tokyo Interbank Offered

Rate).” Accordingly, the company stated, it would “not be subject to prosecutions,

fines or other sanctions for antitrust or competition law violations in connection

with the matters [UBS] reported to those authorities, subject to [UBS’s] continuing

cooperation.” The conditional leniency UBS received derives from the Antitrust

Criminal Penalties Enhancement and Reform Act and the DOJ’s Corporate

Leniency Policy, under which the DOJ only grants leniency to corporations

reporting actual illegal activity. On February 7, 2012, UBS also disclosed that the

Swiss Competition Commission had granted the bank conditional immunity

regarding submissions for Yen LIBOR, TIBOR, and Swiss franc LIBOR.

103. Similar to UBS and the other Defendants, HSBC disclosed in an

interim report filed on August 1, 2011, that it and/or its subsidiaries have “received

requests” from various regulators to provide information. In the same report,

HSBC confirmed that it is “cooperating with [the regulators’] enquiries.”

104. In 2011, the Criminal Matters Branch of the Canadian Competition

Bureau (“Competition Bureau”) commenced an investigation into whether certain

banks, including HSBC, RBC, Deutsche Bank, JPMorgan Chase and Citibank,

conspired to “enhance unreasonably the price of interest rate derivatives from 2007

to March 11, 2010; to prevent or lessen, unduly, competition in the purchase, sale

or supply of interest derivatives from 2007 to March 11, 2010; to restrain or injure

33 Brooke Masters, Patrick Jenkins & Justin Baer, Banks served subpoenas in Libor case, Financial Times, Mar. 16, 2011, available at http://www.ft.com/intl/cms/s/0/ 52958d66-501f-11e0-9ad1-00144feab49a.html.



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competition unduly from 2007 to March 11, 2010; and to fix, maintain, increase or

control the price for the supply of interest rate derivatives from March 12, 2010 to

June 25, 2010.” According to an affidavit submitted by Brian Elliott, a Canadian

Competition Law Officer, submitted in May 2011 in support of an “Ex Parte

Application for Orders to Produce Records” in connection with that investigation

(the “Elliott Affidavit”), the Competition Bureau “became aware of this matter”

after one of the banks (identified in the Elliott Affidavit as the “Cooperating

Party”) “approached the Bureau pursuant to the Immunity Program” and, in

connection with that bank’s application for immunity, its counsel “orally proffered

information on the Alleged Offences” to officers of the Competition Bureau on

numerous occasions in April and May 2011.

105. Furthermore, according to the Elliott Affidavit, counsel for the

Cooperating Party “stated that they have conducted an internal investigation of the

Cooperating Party that included interviews of employees of the Cooperating Party

who had knowledge of or participated in the conduct in question, as well as a

review of relevant internal documents.” The Elliott Affidavit also notes that on

May 17, 2011, counsel for the Cooperating Party provided the Competition Bureau

with “electronic records,” which are “believe[d] to be records of some of the

communications involving the Cooperating Party that were read out as part of the

orally proffered information by counsel for the Cooperating Party.” The press has

reported that UBS was the “Cooperating Party” referred to in the Elliott Affidavit.

106. The Elliott Affidavit also states that, according to the Cooperating

Party’s counsel, the participant banks—at times “facilitated” by “Cash Brokers”—

“entered into agreements to submit artificially high or artificially low London

Inter-Bank Offered Rate (‘LIBOR’) submissions in order to impact the Yen LIBOR

interest rates published by the [BBA].” Those entities engaged in that misconduct

to “adjust[] the prices of financial instruments that use Yen LIBOR rates as a

basis.” The Elliott Affidavit further states the Cooperating Party’s counsel



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“indicated the Participant Banks submitted rates consistent with the agreements

and were able to move Yen LIBOR rates to the overall net benefit of the

Participants.” According to the Elliott Affidavit, the participating banks that

engaged in this scheme included HSBC, Deutsche Bank, RBS, JPMorgan Chase,

and Citibank.

107. In December 2011, Japanese regulators ordered Citigroup and UBS to

suspend some businesses after bankers were found to have attempted to influence

the Tokyo interbank offered rate, or Tibor.34

108. Currently, the DOJ is conducting an unprecedented joint investigation

by both the antitrust and criminal divisions of the DOJ into potential manipulation

of LIBOR rates for various currencies. The investigation reportedly focuses on

“whether banks whose funding costs were rising as the financial crisis intensified

tried to mask that trend by submitting artificially low readings of their daily

borrowing costs.”35 These banks include Bank of America, Citigroup and UBS,

among others. Id.

109. As alleged above, numerous governmental investigations regarding

the manipulation of LIBOR remain ongoing worldwide, including in the United

States, Switzerland, Japan, the United Kingdom, Canada, the European Union, and

Singapore, and additional settlements and/or charges are anticipated. Indeed, while

encompassed by the December 18, 2012 non-prosecution agreement between the

DOJ and UBS, the DOJ’s investigation into UBS’s submissions for various

34 John Detrixhe, Libor Reported as Rigged in ’08 Proving 2012’s Revelation, Bloomberg, July 19, 2012, available at http://www.bloomberg.com/news/2012-07-18/libor-reported-as-rigged-in-08-crisis-proving-revelation-in-12.html. 35 David Enrich, Carrick Mollenkamp & Jean Eaglesham, U.S. Libor Probe Includes BofA, Citi, UBS, The Wall Street Journal, Mar. 18, 2011, available at http://online.wsj.com/article/SB10001424052748703818204576205991698548286.html.



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(unspecified) LIBOR benchmark rates “remain the focus of an ongoing

investigation.”36

E. Plaintiff And The Class Suffered Damages Caused By Defendants’ Manipulation Of LIBOR

110. Plaintiff and members of the Class were damaged by Defendants’

unlawful suppression of LIBOR. Specifically, during the Class Period, Plaintiff

and the Class received lower returns on LIBOR-based financial instruments than

they would have absent Defendants’ conspiracy and unlawful conduct.

Accordingly, Plaintiff’s and other Class Members’ injuries were direct, proximate,

foreseeable, and natural consequences of Defendants’ manipulation of LIBOR.

VI. CLASS ACTION ALLEGATIONS

111. Plaintiff brings this action as a class action on behalf of itself and all

other California persons and entities that held, purchased or otherwise acquired

from issuers or market participants other than the Defendants any financial

instrument for which the rate of return was based upon USD LIBOR at any time

during the Class Period and who were damaged thereby (the “Class”). Excluded

from the Class are Defendants and any businesses controlled or majority-owned by

any Defendant and the officers and directors of any Defendant, the members of

their immediate families and their legal representatives, heirs, successors or

assigns.

112. The Class suffered damages that, with trebling provisions applicable

pursuant to the claims asserted herein, amount to $5 million or more.

113. The members of the Class are so numerous that joinder of all

members is impracticable. While the exact number of Class Members is unknown

to Plaintiff at this time and can only be ascertained through appropriate discovery,

36 See Department of Justice, Criminal Division, non-prosecution agreement with UBS (Dec. 18, 2012), at n.1, available at http://www.justice.gov/iso/opa/resources /1392012121911745845757.pdf



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Plaintiff believes that there are thousands of members of the Class. Class Members

may be identified from records maintained by Defendants and/or their agents,

and/or may be notified of the pendency of this action by mail, national publication,

and/or using a form of notice similar to that customarily used in class actions.

114. Plaintiff’s claims are typical of the claims of the other members of the

Class, as all members were similarly affected by the Defendants’ wrongful

conduct.

115. Plaintiff will fairly and adequately protect the interests of the

members of the Class and has retained counsel competent and experienced in class

action litigation.

116. Common questions of law and fact exist as to all members of the

Class and predominate over any questions solely affecting individual members.

Questions of law and fact common to the Class include:

(a) Whether Defendants entered into and engaged in an unlawful

trust in restraint of trade or commerce in violation of the

Cartwright Act, California Business and Professions Code

§ 16720, et seq.;

(b) Whether Defendants engaged in a pattern of racketeering activity

that affected interstate commerce in violation of RICO, 18 U.S.C.

§ 1961, et seq.;

(c) Whether Defendants’ unlawful manipulation of LIBOR interfered

with and disrupted economic relationships between Plaintiff and

Class Members on one hand, and issuers or sellers of USD

LIBOR-based financial instruments, on the other hand, by

defeating the parties’ expectations that USD LIBOR would be set

honestly and accurately and would provide a fair benchmark for

those USD LIBOR-based financial instruments;



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(d) Whether Defendants acted with the knowledge that interference

or disruption of the Plaintiff’s and Class Members’ relationships

with issuers or sellers of USD LIBOR-based financial

instruments were certain or substantially certain to result from

Defendants’ unlawful manipulation of LIBOR;

(e) Whether, by intentionally misrepresenting their borrowing costs

and conspiring with one another in doing so, Defendants and

their co-conspirators engaged in mail fraud, wire fraud and/or

bank fraud, in violation of applicable federal law;

(f) What was the duration of the mail fraud, wire fraud, bank fraud

and conspiracy alleged herein and what were the acts performed

by Defendants in furtherance of the conspiracy;

(g) Whether the alleged conspiracy violated RICO;

(h) Whether Defendants manipulation of LIBOR caused damages to

Plaintiff and members of the Class; and

(i) The extent to which Plaintiff and members of the Class have

sustained damages.

117. A class action is superior to all other available methods for the fair

and efficient adjudication of this controversy since joinder of all members is

impracticable. Furthermore, as the damages suffered by individual Class Members

may be relatively small, the expense and burden of individual litigation makes it

impossible for members of the Class to individually redress the wrongs done to

them. There will be no difficulty in the management of this suit as a class action.

VII. EQUITABLE TOLLING AND FRAUDULENT CONCEALMENT

118. During the Class Period, Defendants effectively, affirmatively, and

fraudulently concealed their unlawful combination and conspiracy from Plaintiff

and the public.



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119. Plaintiff and the Class did not know, nor could they reasonably have

known, about Defendants’ misconduct during the Class Period because

Defendants’ misconduct was, by its very nature, inherently self-concealing.

120. Defendants’ wrongful conduct was carried out in part through means

and methods that were designed and intended to avoid detection, including

numerous private telephone calls, email communications, and in-person meetings

among the conspirators which, in fact, successfully precluded detection. First,

Defendants’ actual or reasonably expected costs of borrowing were not publicly

disclosed, rendering it impossible for Class Members, including Plaintiff, to

discover (without sophisticated expert analysis) any discrepancies between

Defendants’ publicly disclosed LIBOR quotes and other measures of those banks’

actual or reasonably expected borrowing costs. Second, communications within

and among the banks in connection with the conspiracy likewise were not publicly

available, which further precluded Class Members, including Plaintiff, from

discovering Defendants’ misconduct, even with reasonable diligence.

121. The FSA emphasized the secretive nature of the conspiracy in its

findings against UBS, “[t]he misconduct was extensive and widespread” and

included “an unquantifiable number of oral requests, which by their nature would

not be documented . . . .”37 As a result of the efforts of UBS and other co-

conspirators to hide the conspiracy from regulators and the public, the FSA

concluded that the “routine and widespread manipulation of the submissions was

not detected by Compliance or by Group Internal Audit,” despite five audits of the

relevant business area during the Class Period. Id.

122. As a result of the self-concealing nature of Defendants’ collusive

scheme, no person of ordinary intelligence would have discovered, or with

37 Financial Services Authority, FSA/PN/116/2012, UBS fined £160 million for significant failings in relation to LIBOR and EURIBOR (Dec. 19, 2012) (available at http://www.fsa.gov.uk/library/communication/pr/2012/116.shtml).



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reasonable diligence could have discovered, facts indicating Defendants were

unlawfully manipulating LIBOR during the Class Period. Accordingly, the

running of any Statute of Limitations has been suspended with respect to with

respect to any claims which Plaintiff and other members of the Class have

sustained as a result of the unlawful combination and conspiracy alleged herein

and with respect to their rights to injunctive relief by virtue of the doctrine of

fraudulent concealment.

123. Additionally, Defendants undertook affirmative and concerted conduct

to deceive the public and disclaim any manipulation of LIBOR. Specifically, in

late spring 2008, media reports began questioning whether the panel banks were

accurately reporting their LIBOR rates. In response, the Defendants provided

affirmative and unequivocal assurances that their LIBOR submissions were

reliable and truthful and, instead, attempted to deflect suspicions by offering

alternative explanations for the phenomena reported by the media. Because of

Defendants’ deliberate and concerted efforts to prevent discovery of their

conspiracy, and not because any lack of reasonable diligence, Plaintiff and other

members of the Class were unable to discover the misconduct until June 2012,

when Barclays first admitted that it, along with other banks, had in fact

manipulated LIBOR.

124. As but one example of Defendants’ efforts to conceal the conspiracy,

on April 21, 2008, Dominic Konstam of Credit Suisse claimed in an interview

published by the Financial Times that the low LIBOR quotes were attributable to

the fact that U.S. banks, such as Citibank and JPMorgan Chase, had access to large

customer deposits and borrowing from the Federal Reserve and did not need more

expensive loans from other banks. “Banks are hoarding cash because funding from

the asset-backed commercial paper market has fallen sharply while money market



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funds are lending on a short term basis and are restricting their supply.”38 In a

subsequent Financial Times interview, Mr. Konstam continued to tout LIBOR’s

reliability:

“Libor has been a barometer of the need for banks to raise capital. The

main problem with Libor is the capital strains facing banks.

* * *

Initially there was some confusion that Libor itself was the problem,

with talk of the rate being manipulated and not representative of the

true cost of borrowing.”39

As a result of these statements, Credit Suisse misled investors to believe that low

reported USD LIBOR was a function of readily available alternative sources of

cash, which lessened the need for interbank borrowing, rather than any possible

collusive effort to suppress LIBOR.

125. Similarly, JPMorgan Chase dispelled speculation of potential

manipulation of LIBOR. For example, in a May 16, 2008 Reuters report,

JPMorgan Chase claimed:

The Libor interbank rate-setting process is not broken, and recent rate

volatility can be blamed largely on reluctance among banks to lend to

each other amid the current credit crunch.

* * *

Everyone is funding at a similar level, but when credit conditions

worsen and we have periods like this of unprecedented turmoil, the

reality is there is not a single borrowing rate.”40

38 Gillian Tett, Michael Mackenzie, Doubts over Libor widen, Financial Times, Apr. 21, 2008, available at http://www.ft.com/cms/s/0/d1d9a792-0fbd-11dd-8871-0000779fd2ac.html. 39 Michael Mackenzie, Talk of quick fix recedes as Libor gap fails to close, Financial Times, July 29, 2008, available at http://www.ft.com/intl/cms/s/0 /3da27a46-5d05-11dd-8d38-000077b07658.html.



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In that same May 16, 2008 Reuters report, Colin Withers of Citigroup claimed that

LIBOR was reliable because its methods were time-tested: “[T]he measures we are

using are historic – up to 30 to 40 years old.” Id.

126. These and other similar statements by Defendants effectively

dispelled any suspicion of wrongdoing and prevented Plaintiff and other members

of the Class from discovering the manipulation of LIBOR.

VIII. CLAIMS FOR RELIEF AGAINST ALL DEFENDANTS

FIRST CLAIM (Violations of The Cartwright Act, Cal. Bus. & Prof. Code § 16720, et seq.)

127. Plaintiff incorporates by reference and realleges the preceding

allegations as though fully set forth herein.

128. Defendants entered into and engaged in an unlawful trust in restraint

of the trade and commerce described above in violation of the Cartwright Act,

California Business and Professions Code section 16720, et seq.

129. During the Class Period, Defendants controlled what USD LIBOR

rate would be reported and therefore controlled prices in the market for USD

LIBOR-based financial instruments. Defendants competed in this market.

130. For at least four years before this Complaint was filed, Defendants, in

concert, conspired to make false statements to the BBA for the purpose and with

the effect of manipulating USD LIBOR to be lower than it otherwise would have

been. Defendants did so for the purpose and with the effect of decreasing their

payment obligations on financial instruments tied to USD LIBOR and increasing

Defendants’ net interest revenues. Defendants earned hundreds of millions, if not

billions, of dollars in wrongful profits as a result.

40 Kirsten Donavan, et al., UPDATE 2-European, U.S. bankers work on Libor problems, Reuters, May 16, 2008, available at http://in.reuters.com/assets/print?aid =INL162110020080516.



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131. Defendants’ violations of the Cartwright Act consisted of a continuing

agreement, understanding or concerted action between and among Defendants and

their co-conspirators in furtherance of which Defendants fixed, maintained, or

made artificial prices for LIBOR-based financial instruments. Defendants’ conduct

constitutes a per se violation of the Cartwright Act and is, in any event, an

unreasonable and unlawful restraint of trade.

132. As a proximate result of Defendants’ unlawful conduct, Plaintiff and

the Class suffered injury to their business or property.

133. Accordingly, Plaintiff and the Class seek three times their damages

caused by Defendants’ violations of the Cartwright Act, interest, the costs of

bringing suit, reasonable attorneys’ fees, and a permanent injunction enjoining

Defendants’ from ever again entering into similar agreements in violation of the

Cartwright Act.

SECOND CLAIM (Violations of RICO, 18 U.S.C. § 1961, et seq.)

134. 18 U.S.C. § 1962(c) makes it illegal for “any person employed by or

associated with any enterprise engaged in, or the activities of which affect,

interstate or foreign commerce, to conduct or participate, directly or indirectly, in

the conduct of such enterprise’s affairs through a pattern of racketeering activity or

collection of unlawful debt.”

135. 18 U.S.C. § 1962(d), in turn, makes it “unlawful for any person to

conspire to violate any of the provisions of subsection (a), (b), or (c) of this

section.”

136. Under 18 U.S.C. § 1961(1), and as applicable to Section 1962,

“racketeering activity” means (among other things) acts indictable under certain

sections of Title 18, including 18 U.S.C. § 1341 (relating to mail fraud), 18 U.S.C.

§ 1343 (relating to wire fraud), and 18 U.S.C. § 1344 (relating to financial

institution fraud).



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137. 18 U.S.C. § 1961(5) provides that, to constitute a “pattern of

racketeering activity,” conduct “requires at least two acts of racketeering activity,

one of which occurred after the effective date of this chapter and the last of which

occurred within ten years (excluding any period of imprisonment) after the

commission of a prior act of racketeering activity.”

138. 18 U.S.C. § 1961(3) defines “person” as “any individual or entity

capable of holding a legal or beneficial interest in property,” and 18 U.S.C. §

1961(4) defines “enterprise” as “any individual, partnership, corporation,

association, or other legal entity, and any union or group of individuals associated

in fact although not a legal entity.”

139. 18 U.S.C. § 1341, the mail fraud statute invoked by 18 U.S.C.

§ 1961(1) as a predicate act, makes it unlawful to have “devised or intend[ed] to

devise any scheme or artifice to defraud, or for obtaining money or property by

means of false or fraudulent pretenses, representations, or promises, or to sell,

dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or

procure for unlawful use any counterfeit or spurious coin, obligation, security, or

other article, or anything represented to be or intimated or held out to be such

counterfeit or spurious article, for the purpose of executing such scheme or artifice

or attempting so to do, places in any post office or authorized depository for mail

matter, any matter or thing whatever to be sent or delivered by the Postal Service,

or deposits or causes to be deposited any matter or thing whatever to be sent or

delivered by any private or commercial interstate carrier, or takes or receives

therefrom, any such matter or thing, or knowingly causes to be delivered by mail

or such carrier according to the direction thereon, or at the place at which it is

directed to be delivered by the person to whom it is addressed, any such matter or

thing, shall be fined under this title or imprisoned not more than 20 years, or both .

. . . [If the] violation affects a financial institution, such person shall be fined not

more than $1,000,000 or imprisoned not more than 30 years, or both.”



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140. 18 U.S.C. § 1343, the wire fraud statute invoked by 18 U.S.C.

§ 1961(1) as a predicate act, provides that “[w]hoever, having devised or intending

to devise any scheme or artifice to defraud, or for obtaining money or property by

means of false or fraudulent pretenses, representations, or promises, transmits or

causes to be transmitted by means of wire, radio, or television communication in

interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for

the purpose of executing such scheme or artifice, shall be fined under this title or

imprisoned not more than 20 years, or both.”

141. 18 U.S.C. § 1344, the federal bank fraud statute invoked by 18 U.S.C.

§ 1961(1) as a predicate act, states:

Whoever knowingly executes, or attempts to execute, a scheme or

artifice –

1. to defraud a financial institution; or

2. to obtain any of the moneys, funds, credits, assets, securities, or

other property owned by, or under the custody or control of, a

financial institution, by means of false or fraudulent pretenses,

representations, or promises;

3. Shall be fined not more than $1,000,000 or imprisoned for not

more than 30 years, or both.

142. At all relevant times, Defendants, including the employees who

conducted Defendants’ affairs through illegal acts (including by communicating

false LIBOR quotes to the BBA or directing other employees to do so) were

“person[s]” within the meaning of 18 U.S.C. § 1961(4), with a definable corporate

structure and a hierarchy of corporate direction and control.

143. At all relevant times, Plaintiff and the members of the Class were

“person[s]” within the meaning of 18 U.S.C. § 1961(3).



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Defendants Formed A RICO Enterprise

144. Defendants’ collective association, including through their

participation together as members of the BBA’s USD LIBOR panel, constitutes the

RICO enterprise in this action. Every member of the enterprise participated in the

process of misrepresenting their costs of borrowing to the BBA. Using those false

quotes to cause the BBA to set USD LIBOR artificially low constitutes the

common purpose of the enterprise.

The Enterprise Has Perpetrated A Continuing Practice Of Racketeering

145. For at least four years before this Complaint was filed, Defendants, in

concert, made false statements to the BBA for the purpose and with the effect of

manipulating USD LIBOR to be lower than it otherwise would have been. As a

result of Defendants’ scheme, Defendants earned hundreds of millions, if not

billions, of dollars in wrongful profits, which they shared with the employees who

perpetrated the scheme. The conduct of every party involved in the scheme is

hardly an isolated occurrence but constituted a concerted and organized pattern and

practice.

146. In perpetrating the scheme, each Defendant directly or indirectly

through its corporate structure designed and implemented a substantially uniform

effort to manipulate USD LIBOR. Defendants’ daily making and communicating

of quotes to the BBA comprise one common enterprise.

147. For at least the past four years, Defendants have knowingly,

intentionally, or recklessly engaged in an ongoing pattern of racketeering under 18

U.S.C. § 1962(c) by committing the predicate acts of mail fraud within the

meaning of 18 U.S.C. § 1341, wire fraud within the meaning of 18 U.S.C. § 1343,

and bank fraud within the meaning of 18 U.S.C. § 1344(2), by knowingly and

intentionally implementing the scheme to make false statements about their costs

of borrowing, to manipulate USD LIBOR, which allowed Defendants to reap

unlawful profits.



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148. Defendants have committed the predicate act of mail fraud under 18

U.S.C. § 1341, thus triggering Section 1962(c) liability, by devising or intending to

“devise a scheme or artifice to defraud” purchasers and holders of USD LIBOR-

based financial instruments, and “for the purpose of executing such scheme or

artifice or attempting so to do,” placed or knowingly caused to be placed in a post

office or authorized depository for mail matter, documents or packages to be sent

or delivered by the Postal Service or a private or commercial interstate carrier, or

received from those entities such documents or packages, including: (i) documents

offering for sale USD LIBOR-based financial instruments; and (ii) correspondence

regarding offerings of USD LIBOR-based financial instruments (the conduct

described in this paragraph is referred to as the “Mail Fraud”).

149. On information and belief, the Mail Fraud is the result of Defendants

“having devised or intended to devise a scheme or artifice to defraud” purchasers

and holders of USD LIBOR-based financial instruments, for the purpose of

obtaining money from those persons and entities through “false or fraudulent

pretenses, representations, or promises.”

150. By devising the scheme or artifice to defraud consumers as described

herein, and for obtaining money from holders of USD LIBOR-based financial

instruments through “false or fraudulent pretenses, representations, or promises”

about USD LIBOR-based financial instruments, Defendants transmitted or caused

to be transmitted by means of “wire communication in interstate or foreign

commerce, . . . writings, signs, signals, [and] pictures,” “for the purpose of

executing such scheme or artifice,” including by: (i) transmitting documents

offering USD LIBOR-based financial instruments for sale; (ii) transmitting phony

statements about their costs of borrowing; and (iii) transmitting e-mail

communications relating to the process of determining, making, or transmitting

phony statements about their borrowing costs.



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151. In addition to that conduct, Plaintiff is informed and believes that

Defendants used the mails and wires in conjunction with reaching their agreement

to make false statements about their costs of borrowing, to manipulate USD

LIBOR.

152. Plaintiff does not base any RICO claims on any conduct that would

have been actionable as fraud in the purchase or sale of securities.

The Racketeering Scheme Affected Interstate Commerce

153. Through the racketeering scheme described above, Defendants used

the enterprise to improperly increase their profits to the detriment of purchasers

and holders of USD LIBOR-based financial instruments, who resided in different

states.

154. Plaintiff’s allegations satisfy RICO’s “interstate commerce” element

because the racketeering claims alleged herein arise out of, and are based on,

Defendants’ use of the Internet or the mails across state lines as well as agreements

between entities in different states to manipulate USD LIBOR. Using those

interstate channels to coordinate the scheme and transmit fraudulent statements to

the BBA and consumers of financial products, among others, across state lines

satisfies RICO’s requirement of an effect on interstate commerce.

Defendants Conspired To Violate RICO

155. Apart from constructing and carrying out the racketeering scheme

detailed above, Defendants conspired to violate RICO, constituting a separate

violation of RICO under 18 U.S.C. § 1962(d).

156. The fraudulent scheme, as set forth above, alleges a violation of RICO

in and of itself.

157. Defendants organized and implemented the scheme, and ensured it

continued uninterrupted by concealing their manipulation of USD LIBOR from

Plaintiff and the Class, among others.



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158. Defendants knew the scheme would defraud purchasers and holders of

USD LIBOR-based financial instruments of millions of dollars of interest, yet each

Defendant remained a participant despite the fraudulent nature of the enterprise.

At any point while the scheme has been in place, any of the participants could have

ended the scheme by abandoning the conspiracy and notifying the public and law

enforcement authorities of its existence. Rather than stopping the scheme, however,

the members of the enterprise deliberately chose to continue it, to the detriment of

Plaintiff and the Class.

Plaintiff And The Class Suffered Injury Resulting From Defendants’ Pattern Of Racketeering Activity

159. Because Plaintiff and members of the Class unknowingly purchased

and/or held USD LIBOR-based financial instruments that paid interest at a

manipulated rate, and in fact collected less interest than they would have absent the

conspiracy, Plaintiff and the Class are victims of Defendants’ wrongful and

unlawful conduct. Plaintiff’s and other Class Members’ injuries were proximate,

foreseeable, and natural consequences of Defendants’ conspiracy. There are no

independent factors that account for the economic injuries suffered by Plaintiff and

the Class, and the loss of money satisfies RICO’s injury requirement.

160. Plaintiff and the Class are entitled to recover treble damages for the

injuries they have sustained, according to proof, as well as restitution and costs of

suit and reasonable attorneys’ fees in accordance with 18 U.S.C. § 1964(c).

161. The pattern of racketeering activity, as described in this Complaint, is

continuous, ongoing and will continue unless Defendants are enjoined from

continuing their racketeering practices. Defendants have consistently demonstrated

their unwillingness to discontinue the illegal practices described herein, and they

continue their pattern of racketeering as of the filing of this Complaint.

162. As a direct and proximate result of the subject racketeering activities,

Plaintiff and the Class are entitled to an order, in accordance with 18 U.S.C.



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§ 1964(a), enjoining and prohibiting Defendants from further engaging in their

unlawful conduct.

THIRD CLAIM (Interference With Economic Advantage Under California Common Law)

163. Plaintiff incorporates by reference and realleges the preceding

allegations as though fully set forth herein.

164. As set forth in this Complaint, Defendants manipulated USD LIBOR

in violation of federal and state law.

165. An economic relationship existed between Plaintiff or Class Members,

on one hand, and issuers or sellers of USD LIBOR-based financial instruments, on

the other hand, which obligated the issuers or sellers to make payments to Plaintiff

or Class Members at rates dependent on USD LIBOR.

166. Defendants’ unlawful manipulation of USD LIBOR interfered with

and disrupted those relationships by defeating the parties’ expectations that USD

LIBOR would be set honestly and accurately and would provide a fair benchmark

for those USD LIBOR-based financial instruments. As a result, Plaintiff and the

other Class Members received lower payments on those instruments than they

otherwise would have, and overpaid for the instruments, and were damaged

thereby.

167. Defendants acted with the knowledge that interference or disruption

of the Plaintiff’s and Class Members’ relationships with issuers or sellers of USD

LIBOR-based financial instruments were certain or substantially certain to result

from Defendants’ unlawful manipulation of USD LIBOR.

IX. PRAYER FOR RELIEF

WHEREFORE, Plaintiff prays for relief and judgment as follows:

1. That the Court enter an order declaring that Defendants’ actions as set

forth in this Complaint, and in other respects, violate federal and/or California law;



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Fax: (858) 793-0323 Counsel for Plaintiff Los Angeles County Employees Retirement Association


case 2:12-cv-10903-cas-ajw document 1 filed 12/21/12 page ... · defendants ubs ag (“ubs”) and...

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