Libor admissions no knock-out punch for antitrust plaintiffs
NEW YORK (Reuters) - Royal Bank of Scotland's admission that its employees coordinated with a trader at another bank to manipulate benchmark interest rates is not necessarily the knock-out punch needed by plaintiffs who accuse the bank of collusion.
As part of a deferred prosecution agreement with the U.S. Department of Justice announced on Wednesday by British and American authorities, RBS admitted its derivatives traders agreed with a UBS AG (UBSN.VX) trader to seek to manipulate the London interbank offered rate, known as Libor, calculated for the Japanese yen.
But that agreement would not be considered a final judgment and therefore could not be used as evidence the bank engaged in an antitrust conspiracy, some legal experts said.
"It's not evidence of anything," said Eleanor Fox, a professor at the New York University School of Law specializing in antitrust. "It's only a settlement."
Under the Clayton Act, a U.S. antitrust statute, final judgments obtained by the government can be used by plaintiffs as evidence of wrongdoing by defendants. But the law also makes clear that plaintiffs cannot use "consent judgments or decrees entered before any testimony has been taken."
RBS, which agreed to pay $612 million (389 million pounds) to U.S. and British authorities, is the third bank to resolve liability with regulators for its role in rate-rigging. Switzerland's UBS agreed in December to pay penalties of $1.5 billion and Britain's Barclays Bank Plc has paid $453 million. Parts of those settlements have been used to boost the credibility of lawsuits filed by private plaintiffs.
RBS and some of the world's other biggest banks are facing several class action lawsuits alleging they colluded to manipulate Libor, which sets prices on trillions of derivatives and other financial products. The lawsuits claim billions of dollars in damages.
In one of the biggest cases, the city of Baltimore has filed a class action on behalf of entities and individuals who purchased in the United States financial instruments indexed to Libor between August 2007 and May 2010.
For such plaintiffs as Baltimore, the most valuable part of the RBS (RBS.L) settlement and other similar government deals could come from the underlying documents that led to those agreements, according to legal experts. But to gain access to those documents, the plaintiffs will likely have to survive a motion to dismiss by the defendants.
In the Baltimore case, a hearing on the defendants' motion to dismiss will be heard on March 5 by U.S. District Judge Naomi Reice Buchwald in Manhattan. William Carmody, an attorney representing the city of Baltimore, said on Wednesday he had not carefully studied RBS's deferred prosecution agreement, but added that the statement of facts contained in it was remarkable for its length and specificity.
"It's incredibly helpful for our case," Carmody added.
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