Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 1 of 60 Page ID #:3
-i- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 2 of 60 Page ID #:4
-1- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 3 of 60 Page ID #:5
-2- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 4 of 60 Page ID #:6
-3- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 5 of 60 Page ID #:7
-4- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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).
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 6 of 60 Page ID #:8
-5- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 7 of 60 Page ID #:9
-6- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 8 of 60 Page ID #:10
-7- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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-
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 9 of 60 Page ID #:11
-8- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 10 of 60 Page ID #:12
-9- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 11 of 60 Page ID #:13
-10- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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).
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 12 of 60 Page ID #:14
-11- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 13 of 60 Page ID #:15
-12- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 14 of 60 Page ID #:16
-13- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.”
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 15 of 60 Page ID #:17
-14- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 16 of 60 Page ID #:18
-15- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 17 of 60 Page ID #:19
-16- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 18 of 60 Page ID #:20
-17- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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%.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 19 of 60 Page ID #:21
-18- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 20 of 60 Page ID #:22
-19- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 21 of 60 Page ID #:23
-20- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 22 of 60 Page ID #:24
-21- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 23 of 60 Page ID #:25
-22- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 24 of 60 Page ID #:26
-23- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 25 of 60 Page ID #:27
-24- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 26 of 60 Page ID #:28
-25- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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:
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 27 of 60 Page ID #:29
-26- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
“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
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 28 of 60 Page ID #:30
-27- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 29 of 60 Page ID #:31
-28- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 30 of 60 Page ID #:32
-29- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 31 of 60 Page ID #:33
-30- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 32 of 60 Page ID #:34
-31- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 33 of 60 Page ID #:35
-32- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 34 of 60 Page ID #:36
-33- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 35 of 60 Page ID #:37
-34- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 36 of 60 Page ID #:38
-35- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 37 of 60 Page ID #:39
-36- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 38 of 60 Page ID #:40
-37- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
“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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 39 of 60 Page ID #:41
-38- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
(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
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 40 of 60 Page ID #:42
-39- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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;
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 41 of 60 Page ID #:43
-40- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
(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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 42 of 60 Page ID #:44
-41- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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).
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 43 of 60 Page ID #:45
-42- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 44 of 60 Page ID #:46
-43- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 45 of 60 Page ID #:47
-44- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 46 of 60 Page ID #:48
-45- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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).
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 47 of 60 Page ID #:49
-46- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.”
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 48 of 60 Page ID #:50
-47- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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).
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 49 of 60 Page ID #:51
-48- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 50 of 60 Page ID #:52
-49- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 51 of 60 Page ID #:53
-50- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 52 of 60 Page ID #:54
-51- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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.
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 53 of 60 Page ID #:55
-52- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
§ 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;
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 54 of 60 Page ID #:56
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 55 of 60 Page ID #:57
-54- CLASS ACTION COMPLAINT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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 56 of 60 Page ID #:58
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 57 of 60 Page ID #:59
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 58 of 60 Page ID #:60
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 59 of 60 Page ID #:61
Case 2:12-cv-10903-CAS-AJW Document 1 Filed 12/21/12 Page 60 of 60 Page ID #:62