An Undeniable Murder of Crows
Forbes recently queried: "What do Barclays, JP Morgan, MF Global and Chesapeake Energy have in common? They are all examples of risk management and audit failures and the auditor of all of them is PricewaterhouseCoopers."
How many more lies and how much more fraud will JPM shareholders and bank customers tolerate before the Titanic JPM goes down? The bigger question for homeowners is "What are the legal implications of the LIBOR scandal for real estate borrowers whose loans are LIBOR indexed?" Were borrowers overcharged for their mortgage loans that were based on the LIBOR? What are the implications in the foreclosure crises if borrowers have been overpaying or even underpaying their mortgages? Had the proper interest rate been charged up front, could these hapless borrowers have even qualified for these fraudulent mortgages? Does this fraud invalidate Notices of Default, Notices of Trustee Sales, and mortgages themselves?
Will JPMorgan Chase Bank NA bear any liabilities to Washington Mutual Bank borrowers or will they continue to deny the existence of the "true and complete" 118 page or so Purchase and Assumption Agreement?
Will the US Justice Department cast another blind eye and not hold these criminal banksters accountable?
To give you some idea of what this LIBOR scandal is all about, let me refer you to an ongoing civil RICO antitrust lawsuit. On August 23, 2011 entities of JPMorgan Chase were named Defendants in a a civil complaint, a LIBOR Based Financial Instruments Anti-Trust Litigation filed by Charles Schwab Bank NA et al against numerous major national and international banks (see below) in the US District Court, Northern California, San Francisco. On September 24, 2011 the Court transferred the case to the Southern District of New York to the Honorable Judge Naomi Reice Buchwald; Case Number 1:11-cv-06411. The case is presently moving forward according to documents published on PACER. Plaintiffs allege RICO charges, mail fraud, antitrust violations and so forth. This is a case worthy of following as it has been in the court for 11 months.
Banc of America Securities, LLC, Bank of America Corporation, Bank of America, N.A., Bank of Pennsylvania, Bank of Scotland PLC, Barclays Bank PLC, Barclays US Funding Corp., Chase Bank USA, CitiGroup, Inc., Citibank, N.A., Citigroup Funding, Inc., Citigroup Global Markets Inc., Citizens Bank of Massachusetts, Citizens Bank, N.A., Credit Suisse Group AG, Credit Suisse Holdings (USA) Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank AG, Deutsche Bank Financial LLC, Deutsche Bank Securities, Inc., HSBC Bank USA, HSBC Finance Corporation, HSBC Holdings plc, HSBC Securities (USA) Inc., J.P. Morgan Chase & Co., J.P. Morgan Securities Inc., JP Morgan Securities LLC, JPMorgan Chase Bank National Association, Lloyds Banking Group PLC, Lloyds Tsb Bank Plc, RBS Citizens, NA, RBS Securities Inc., Royal Bank of Scotland Group plc, UBS AG, UBS Finance (Delaware) Inc., UBS Financial Services Inc., UBS Securities LLC, and Westlb AG,[Filing Fee: $350.00, Receipt Number 34611063832] Filed by Plaintiffs The Charles Schwab Corporation, Charles Schwab Bank, N.A. & Charles Schwab & Co., Inc.. (tn, COURT STAFF) (Filed on 8/23/2011) (mjj2S, COURT STAFF). [Transferred from California Northern on 9/16/2011.] (Entered: 08/25/2011)
The Schwab complaint asserts the following Nature of the Issues:
This case arises from ongoing manipulation of the London Interbank Offered Rate (“LIBOR”) by a cadre of prominent financial institutions. Beginning in 2007 and continuing approximately until the announcement of government investigations and subpoenas in March 2011 (the “Relevant Period”), Defendants (identified below) purported to report to the British Bankers’ Association (“BBA”) the actual interest rates they paid on funds they borrowed from other financial institutions—i.e., their true “costs of borrowing”—on a daily basis. The BBA then relied on the false information Defendants provided to set LIBOR, a benchmark set of interest rates used to price trillions of dollars’ worth of financial instruments worldwide. By acting together and in concert to knowingly understate to the BBA their true costs of borrowing, Defendants caused LIBOR to be set artificially low.
Defendants perpetrated their fraudulent scheme and conspiracy to artificially depress LIBOR as a means to pay lower interest rates on interest-bearing financial instruments and securities paying returns based on, tied to, benchmarked or indexed to LIBOR (collectively, “LIBOR-based instruments and securities”) that Defendants sold to investors, including Plaintiffs. Specifically, Defendants misrepresented, in connection with numerous offerings of LIBOR-based instruments and securities during the Relevant Period, that the interest rates investors would receive on the subject LIBOR-based instruments and securities were based on LIBOR, when in fact Defendants were actively working together to ensure LIBOR was set at artificially low rates. Thus surreptitiously bilking investors of their rightful rates of return on their investments, Defendants reaped hundreds of millions, if not billions, of dollars in ill-gotten gains. Defendants—in the debt securities context, the borrowers—have been cheating investors—the lenders—out of interest payments for years. Moreover, by understating their true costs of borrowing, Defendants provided a false or misleading impression of their financial strength to investors.
Defendants’ manipulation similarly depressed returns on securities they sold and issued that paid a fixed rate of return, such as fixed-rate notes. As Defendants know, market participants use LIBOR as the starting point for negotiating rates of return on short-term fixed-rate instruments, such as fixed-rate notes maturing in a year or less. Defendants borrowed money from Plaintiffs by issuing short-term paper at a rate set as a spread above LIBOR. By depressing LIBOR, Defendants paid lower interest rates on short-term paper Plaintiffs purchased from them. Additionally, by depressing LIBOR, Defendants depressed the rates of return Plaintiffs earned on short-term paper they purchased from other entities who based those rates on LIBOR.
While Defendants successfully perpetrated their unlawful scheme for years (amid isolated expressions of concern by some market participants), a series of recently initiated government investigations within the United States and abroad has begun to shed light on Defendants’ malfeasance. Among other things, UBS recently disclosed that it received a grant of conditional leniency from the United States Department of Justice (“DOJ”) under the Antitrust Criminal Penalties Enhancement and Reform Act and the DOJ’s Corporate Leniency Policy in exchange for cooperating with the DOJ’s investigation into LIBOR manipulation. Under that policy, the DOJ only grants leniency to corporations that report actual illegal activity. Other Defendants likewise are targets of government investigations concerning the misconduct alleged in this Complaint.
During the Relevant Period, Plaintiffs acquired tens of billions of dollars’ worth of LIBOR-based instruments and securities from Defendants and other issuers, which paid artificially low returns to Plaintiffs based on Defendants’ manipulation of LIBOR. 6. Plaintiffs now seek relief for the damages they have suffered as a result of Defendants’ violations of federal and state law. Plaintiffs assert claims under the Sherman Act, 15 U.S.C. §§ 1 et seq.; the Clayton Act, 15 U.S.C. §§ 12 et seq.; the Securities Act of 1933 (“Securities Act”), 15 U.S.C. § 77k; the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the United States Securities and Exchange Commission (“SEC”), 17 C.F.R. § 240.10b-5; the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961 et seq.; and the statutory and common law of California. Plaintiffs’ allegations are based on personal knowledge with respect to their own conduct and on information and belief as to other allegations based on facts obtained during the course of their attorneys’ investigation.
Each of the Securities Dealer Defendants joined and furthered the conspiracy by selling LIBOR-based instruments and securities at elevated prices and that paid depressed rates of
interest as a result of the misconduct alleged herein, to the direct benefit of their corporate parents
that manipulated LIBOR.
The LIBOR Panel Defendants agreed to manipulate LIBOR on behalf of, and reported this manipulation to, their respective corporate families. As a result, the entire corporate family was represented in these meetings and discussions by their agents and were parties to the agreements reached in them. Furthermore, to the extent that subsidiaries or affiliates within the corporate families sold LIBOR-based instruments and securities to buyers such as Plaintiffs, these subsidiaries and affiliates played a significant role in the conspiracy. Thus, all entities within the corporate families that were engaged in the setting of LIBOR or the marketing, sale and distribution of such LIBOR-based instruments and securities were active, knowing participants in the alleged conspiracy
Plaintiffs Allege that they Suffered Injury Resulting From The Pattern of Racketeering Activity -- RICO.Because Plaintiffs unknowingly paid money to Defendants for notes and other securities that paid interest at a manipulated rate, and in fact collected less interest than they would have absent the conspiracy, Plaintiffs are direct victims of Defendants’ wrongful and unlawful conduct. Plaintiffs’ injuries were direct, proximate, foreseeable and natural consequences of Defendants’ conspiracy; indeed, those effects were precisely why the scheme concocted. In making payments to Defendants, Plaintiffs gave money in the custody or control of financial institutions. There are no independent factors that account for Plaintiffs’ economic injuries, and the loss of money satisfies RICO’s injury requirement.
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.
Plaintiffs 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). 180. As a direct and proximate result of the subject racketeering activities, Plaintiffs are entitled to an order, in accordance with 18 U.S.C. § 1964(a), enjoining and prohibiting
Defendants from further engaging in their unlawful conduct.
Link to Complaint 1:11-cv-06411 Charles Schwab Bank NA et al v Bank of America, JPMorgan Chase, Citigroup, Barclays, et al
|Defendant: WestDeutsche Immobilienbank AG|