As the Express reported last week, Richmond and East Bay MUD have both filed lawsuits in federal court alleging collusion among the world's biggest banks to steal millions from the public through an elaborate interest-rate scam. And Oakland city officials said this week that they're also considering filing a lawsuit after estimating that banks might have fleeced the city of several hundred thousand dollars.
Oakland's losses likely stem from several interest-rate swaps purchased by the city in 2004 from UBS and Bank of America. By the manipulation of interest rates over several years, both UBS and Bank of America appear to have increased the amount of money Oakland owed them through the swaps. The UBS and Bank of America interest-rate swaps ran for four years until Oakland terminated them in 2008, paying millions to both banks to unwind the deals. The termination payments Oakland made were also likely inflated by the banks' rigging of LIBOR (the London Interbank Offered Rate).
"We're outraged that the banks would potentially defraud residents and taxpayers of the city of Oakland," said City Attorney Barbara Parker. Parker's office is working on a strategy to seek any stolen money back, which may mean a new lawsuit, or joining existing litigation.
UBS has already admitted to criminal wrongdoing in the global conspiracy to manipulate LIBOR. In December 2012, the bank paid a $1.5 billion fine to US and British regulators. Bank of America is currently under investigation for its role in the conspiracy. But Bank of America has admitted no wrongdoing, and is even seeking a dismissal of a class action lawsuit led by the City of Baltimore that is currently being heard before a federal judge in New York. Along with JP Morgan Chase, Citibank, and another fourteen foreign banks, Bank of America filed a motion for summary judgment in an effort to have the case thrown out. Richmond and East Bay MUD's lawsuits have already been consolidated into this case and are thus imperiled by the banks' efforts to seek a dismissal.
The Oakland City Council has already authorized a lawsuit, if need be, after discussing the problem in several closed sessions with attorneys and finance staff. Councilwoman Libby Schaaf said the financial damage done to Oakland could be around $300,000, but city staffers are still working to determine exactly how the rigged rates would have harmed Oakland. Under US and California laws plaintiffs in antitrust and financial fraud cases can seek treble damages plus punitive fines against defendants, meaning that Oakland could potentially recoup more than $1 million.
Oakland's interest rate swap deal with Goldman Sachs, the subject of much controversy last year, would also have been affected by the bank conspiracy to rig LIBOR. However, Goldman Sachs is not a member of the British Bankers Association LIBOR rate setting panel, as are both UBS and Bank of America, and so it's uncertain if the fraud legally affects Goldman.
Source: http://www.eastbayexpress.com/SevenDays/archives/2013/03/07/oakland-might-sue-banks-over-rate-rigging-conspiracy
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| Barbara Parker |
"We're outraged that the banks would potentially defraud residents and taxpayers of the city of Oakland," said City Attorney Barbara Parker. Parker's office is working on a strategy to seek any stolen money back, which may mean a new lawsuit, or joining existing litigation.
UBS has already admitted to criminal wrongdoing in the global conspiracy to manipulate LIBOR. In December 2012, the bank paid a $1.5 billion fine to US and British regulators. Bank of America is currently under investigation for its role in the conspiracy. But Bank of America has admitted no wrongdoing, and is even seeking a dismissal of a class action lawsuit led by the City of Baltimore that is currently being heard before a federal judge in New York. Along with JP Morgan Chase, Citibank, and another fourteen foreign banks, Bank of America filed a motion for summary judgment in an effort to have the case thrown out. Richmond and East Bay MUD's lawsuits have already been consolidated into this case and are thus imperiled by the banks' efforts to seek a dismissal.
The Oakland City Council has already authorized a lawsuit, if need be, after discussing the problem in several closed sessions with attorneys and finance staff. Councilwoman Libby Schaaf said the financial damage done to Oakland could be around $300,000, but city staffers are still working to determine exactly how the rigged rates would have harmed Oakland. Under US and California laws plaintiffs in antitrust and financial fraud cases can seek treble damages plus punitive fines against defendants, meaning that Oakland could potentially recoup more than $1 million.
Oakland's interest rate swap deal with Goldman Sachs, the subject of much controversy last year, would also have been affected by the bank conspiracy to rig LIBOR. However, Goldman Sachs is not a member of the British Bankers Association LIBOR rate setting panel, as are both UBS and Bank of America, and so it's uncertain if the fraud legally affects Goldman.
Source: http://www.eastbayexpress.com/SevenDays/archives/2013/03/07/oakland-might-sue-banks-over-rate-rigging-conspiracy
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