Barclays lawsuit settlement agreement with the attorney general’s of 44 states was entered on August 8, 2016, according to a press release by New York Attorney General Eric T. Schneiderman. Barclays PLC is a global company with headquarters in London, England, that has offices in New York.
The settlement agreement was reached after an investigation of Barclays, and a number of other banks, found it had engaged in anti-competitive and fraudulent activities. The illegal activities that were uncovered included the manipulation of benchmark interest rates, including the U.S. Dollar and the London Interbank Offered Rate, LIBOR. The investigation revealed that the deception occurred periodically by Barclays and other banks from 2005 to 2009.
A 16 bank panel is tasked with reporting the interbank market borrowing rates of specific banks. During its financial crisis, Barclays’ traders requested that LIBOR Contributor Panel bank submitters give a false lower setting so that it could avoid the appearance of being in financial difficulty. If the correct setting had been reported, it would have indicated that Barclays was in trouble and, as a result, it would have had to pay more to borrow funds in the market. The LIBOR submitters honored those requests. That deception caused false borrowing rates to be reported in the market.
As a result of the manipulation of the U.S. Dollar and LIBOR, United States government entities and nonprofit organizations that entered into financial contracts with Barclays lost millions of dollars. Attorney General Schneiderman stated in his press release: “There has to be one set of rules for everyone, no matter how rich or how powerful, and that includes big banks and other financial institutions that engage in fraud or impair the fair functioning of financial markets. As a result of Barclays’ misconduct, government entities and not-for-profits were defrauded of funds that otherwise could have been used to benefit the people of New York.
The Barclays settlement agreement dictates that the bank pays $100 million to the Attorneys General and sets out the amount that will be distributed to individual parties, both those involved in the lawsuit and those entities and organizations that were affected by the fraud.
This is not the only lawsuit that Barclays has been involved in since its financial troubles began. For example, in 2015, a settlement of $325 million was made in lawsuits that alleged Barclays had misled the buyers about the quality of the loans that were involved when it sold mortgage backed securities to two separate credit unions.
As can be seen, Barclays has a history of deceptive, fraudulent practices designed to put itself in a favorable light and to make significant amounts of money for its own benefit. As noted in the Attorney General Schneiderman’s press release, other banks are involved in the same types of activities. It is likely that settlements will be reached with the other banks at some point in the future.
Since Barclays financial troubles began, as early as 2005, and it is now paying millions of dollars in settlements in both governmental and civil lawsuits, I find it surprising it is still operating. Common sense dictates that if a company is in trouble, paying millions of dollars to avoid criminal or civil convictions in lawsuits would be a major drain on its finances. That statement begs the question of whether Barclays was actually financially strapped, or if the repeated frauds were a result of not making the amount of profits that they preferred.
It appears that the Department of Justice and the Attorneys General in numerous states are doing their job and taking steps to enforce the laws designed to protect entities, organizations and consumers from fraud and deceptive practices. The question would be whether those departments are only tackling cases that could result in high dollar settlements or judgments.