NEW YORK (Reuters) - Three former Barclays Plc (BARC.L) traders facing charges in the United Kingdom over manipulation of Libor benchmark interest sued the bank in New York on Tuesday, accusing it of retaliating against them by failing to pay their legal fees.
In a lawsuit filed in Manhattan federal court, Alex Pabon, Jay Merchant and Ryan Reich accused Barclays of violating whistleblower retaliation protections in the Dodd-Frank Act.
The three U.S. citizens who worked for the bank in New York were the first individuals to be charged criminally by the UK Serious Fraud Office (SFO) following a global investigation into alleged rigging of benchmark interest rates. Trial is expected in 2016, the lawsuit said.
British and U.S. prosecutors have charged several individuals and extracted billions of dollars in fines from banks as part of the manipulation of Libor and related rates.
Libor, which is calculated based on submissions from a panel of banks, underpins hundreds of trillions of dollars of transactions and is used to set interest rates on credit cards, student loans and mortgages.
Barclays agreed in 2012 to pay $453 million to settle investigations by U.S. and British authorities related to Libor. The case prompted wide criticism and led to the resignation of its chief executive, Bob Diamond.
In April, the SFO charged Merchant, a director of dollar fixed-income swaps, and interest-rate derivative traders Alex Pabon and Ryan Reich with conspiring with each other to commit fraud in connection with setting Libor rates.
At that point, Barclays, which had paid the trio’s legal bills since 2010 as they met with authorities investigating Libor manipulation, reversed course and said it would no longer pay their attorneys’ fees, the lawsuit said.
The traders contend the bank’s action amounted to retaliation for participating in regulatory investigations. They also accused the bank of breach of contract and violations of Connecticut state law for failing to indemnify them.
A spokeswoman for Barclays did not respond to a request for comment.
The case is Pabon v. Barclays Bank Plc, U.S. District Court, Southern District of New York, No. 14-7897.
Reporting by Nate Raymond in New York; Editing by Cynthia Osterman