There's a new entry in the category of no-brainers: A holder of Barclays American Depository Receipts has brought the first of what is sure to be a string of Libor-related securities fraud class actions. The 47-page complaint, filed by Wolf Haldenstein Adler Freeman & Herz in federal court in Manhattan, asserts that Barclays and its former CEO, Bob Diamond, and outgoing chairman, Marcus Agius, lied to shareholders when they failed to disclose the bank's manipulation of reports to the authorities who calculate the daily London interbank offered rate (or Libor), a benchmark for short-term interest rates.
Barclays told shareholders that it was a model corporate citizen even though since at least 2007 it was "participating in an illegal scheme to manipulate rates in a way that would allow defendants and other bankers to exploit the market," the complaint asserted. On the day Barclays' settlements with U.S. and British financial regulators were announced, the complaint said, the price of its ADRs fell 12 percent; the next day the ADRs tumbled an additional 5 percent. (If you're wondering why the complaint was filed by ADR holders, it's because Morrison v. National Australia Bank bars claims in the United States by common stockholders in the British-listed bank.)
Barclays obviously has far bigger problems than a securities class action, what with Libor hearings in Parliament, talk of criminal actions, and billions of dollars in potential exposure in a Libor antitrust class action that's already under way in federal court in Manhattan, plus the recently filed antitrust class action based on Barclays' admitted manipulation of the European interbank offered rate.
But don't underestimate the securities side. Barclays' settlement with the U.S. Commodity Futures Trading Commission included the usual "neither admit nor deny" language, but an agreement with the U.S. Department of Justice said the bank "admits, accepts and acknowledges responsibility" for the assertions in the department's statement of facts. That's going to be persuasive language in the securities case. And according to the complaint, there are three billion (with a 'b') Barclays ADRs outstanding. That doesn't mean there are three billion class members who bought shares in the asserted class period, but it means this is not a small case by any means.
I reached out to class counsel Daniel Krasner of Wolf Haldenstein and David Braff of Sullivan & Cromwell, who represented Barclays in the regulatory settlements. Neither got back to me.
(Reporting by Alison Frankel)
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