Thank you for sharing!

Your article was successfully shared with the contacts you provided.

A group of 7,000 community banks were poised to file a racketeering class action accusing Bank of America, Citigroup and JPMorgan Chase of fixing an interbank loan rate in a way that cut into the small banks’ mortgage earnings. Boston firm Shapiro Haber & Urmy planned to file Community Bank & Trust v. Bank of America Corp. on May 25 in the Southern District of New York. The plaintiffs are a group of community banks with less than $1 billion in assets. The lead plaintiff is Community Bank of Sheboygan, Wis. The defendants include Bank of America Corp. and its subsidiary Bank of America N.A.; Citigroup Inc. and its subsidiary Citibank N.A.; JPMorgan & Co. and JPMorgan Chase Bank N.A., which are part of JPMorgan Chase & Co. The complaint claims that the large banks artificially suppressed the U.S. Dollar London Interbank Offered Rate (U.S. LIBOR) “which damaged Plaintiff and other Community Banks by artificially decreasing the interest rate it received on loans tied to USD LIBOR.” U.S. community banks typically used the rate as a benchmark for floating-rate loans throughout the August 2006 through May 2010 class period, according to the complaint. LIBOR is a variable-interest rate set daily by the three defendant banks and others, according to the complaint. Community Bank claimed the defendants suppressed the rate during the class period. Although the artificially low LIBOR rate also harmed defendants, they got government bailout money following the 2008 mortgage and financial crisis, the complaint alleges. The smaller banks, meanwhile, racked up $300 million to $500 million a year in lost interest. The complaint claims that 16 banks, including the defendants, submitted USD LIBOR rates daily to London for dissemination. During the class period, the British Bankers Association announced the rate, which was calculated by Thompson Reuters for the banking group. Community Bank claimed that it had $8 million in loans tied to USD LIBOR in 2008. Public information indicates that the rate may have been understated by 80 basis points that year, according to the complaint. That boils down to a $64,000 loss in interest for that bank for that year and an estimated $448 million loss for the 7,000 class banks in 2008. “Knowing the importance of the USD LIBOR in setting floating interest rates throughout the country, Defendants and the other banks on the USD LIBOR panel repeatedly made intentionally false representations about their borrowing costs as part of a scheme to suppress USD LIBOR,” the complaint alleges. “These intentional misrepresentations resulted in the artificial suppression of USD LIBOR and resulted in significant monetary damages to Plaintiff and other members of the Community Bank Class.” “At the same time the big banks were being bailed out by the government, the small banks were having to survive on less revenue than they would have if LIBOR had been set fairly,” said Charles Tompkins, who leads the antitrust and unfair competition practice at Shapiro Haber. The main legal claim against the defendants is violation of the Racketeer Influenced and Corrupt Organizations Act with unnamed conspirators. Community Bank also asserts a claim under the Wisconsin Organized Crime Control Act on behalf of a Wisconsin sub-class, which claims damages of more than $5 million. Danielle Romero-Apsilos, a managing director of Citi’s Institutional Clients Group, declined to comment. So did spokesmen for Bank of America and JPMorgan. Public revelations about banks’ alleged LIBOR-rate manipulations have also spawned an ongoing multidistrict litigation in the Southern District of New York. The In Re: Libor-Based Financial Instruments Antitrust Litigation plaintiffs bought, held or sold LIBOR-based financial instruments during the class period. On March 6, U.S. District Judge Naomi Reice Buchwald released a Feb. 17 letter from defendants’ counsel acknowledging an investigation by the Justice Department and other regulators into their LIBOR practices. Sheri Qualters can be contacted at [email protected].  

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.