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Interest and rate manipulation hurt government and not-for-profits

in Colorado and across the country


DENVER - Attorney General Cynthia H. Coffman today announced Colorado’s participation in a $100 million settlement with Barclays Bank PLC and Barclays Capital Inc. for fraudulent and anticompetitive conduct involving the manipulation of LIBOR. The London Interbank Offered Rate (LIBOR) is a benchmark interest rate that affects financial instruments worth trillions of dollars and heavily impacts global markets and consumers.

“LIBOR is critical to global financial markets and has a widespread impact on consumers here in Colorado and around the world,” said Attorney General Coffman. “This settlement holds Barclays accountable for their serious fraudulent conduct and will help return millions of dollars to governments and nonprofit entities who relied on the accuracy of LIBOR, and were seriously harmed by this scheme.”

Government entities and not-for-profit organizations in Colorado and throughout the U.S., were defrauded of millions of dollars when they entered into swaps and other investment instruments with Barclays without knowing that Barclays and other banks on the U.S. dollar (USD)-LIBOR-setting panel were manipulating LIBOR and colluding with other banks to do so.

The investigation, conducted by a multistate working group of 44 state attorneys general, revealed that Barclays manipulated LIBOR through two different kinds of fraudulent and anticompetitive conduct. First, around the financial crisis period between 2007 to 2009, Barclays' managers frequently told LIBOR submitters to lower their LIBOR settings in order to avoid the appearance that Barclays was in financial difficulty and needed to pay a higher rate than some of its peers to borrow money. The LIBOR submitters complied with the instructions and suppressed their LIBOR submissions during that period.

Second, at various times from 2005 to 2007, and continuing at least into 2009, Barclays’ traders asked Barclays’ LIBOR submitters to change their LIBOR settings in order to benefit their trading positions, and the submitters often agreed to the requests. At times, those requests came from traders outside the bank, and Barclays’ traders agreed to pass them along to Barclays’ submitters, thus colluding with other banks. Barclays also believed that other banks’ LIBOR submissions likewise did not reflect their true borrowing rates, and that therefore, published LIBOR did not reflect the cost of borrowing funds in the market, as it was supposed to do.

Governmental and not-for-profit entities with LIBOR-linked swaps and other investment contracts with Barclays will be notified if they are eligible to receive restitution from a settlement fund of $93.35 million. Over $4 million from that settlement fund should be returned to Colorado. The balance of the settlement fund will be used to pay costs and expenses of the investigation and for other uses consistent with state law.

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

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