Barclays turns to Sullivan as backlash over Libor scandal intensifies
Record fines for Barclays over the rigging of interest rates could pave the way for a wave of commercial litigation in the UK and the US.
Sullivan & Cromwell has taken the lead role for the British Bank in its cross-border settlement with the authorities.
From a panel comprising of Cleary Gottlieb Steen & Hamilton, Shearman & Sterling and Sullivan & Cromwell, Barclays turned to the latter’s US-based team of criminal defence and investigations partner Steven Peikin, litigation managing partner David Braff, litigation partner Jeffrey Scott and special counsel Matthew Fitzwater.
Meanwhile, the bank has remained tightlipped on the future of general counsel Mark Harding, on whose watch the compliance failures happened.
Mark Harding
The probe into the British bank’s “attempted manipulation” of the London interbank offered rate (Libor) by making false reports to boost its derivatives trading positions, has opened the door for a raft of class action claims in the US.
The Lawyer understands that every major law firm is involved in the case, either instructed by one of 20 banks - including Lloyds TSB, HSBC and RBS named in US lawsuits - or a dozen regulators in various countries.
Yesterday Barclays was fined £59m by the Financial Services Authority, $200m by the US Commodity Futures Trading Commission (CFTC), and £160m by the US Department of Justice (DoJ).
Despite Barclays co-operating with the investigation for a 30 per cent discount and agreeing to settle at an early stage, the total fines of $450m (£290m) are a record high.
However, the cost of spin-off litigation related to the Libor misconduct is likely to dwarf that total figure.
Chief executive Bob Diamond has accepted a “collective responsibility” and the bank admitted misconduct over five years, involving a number of employees who were “motivated by profit” to try to influence the Libor and Euribor setting process.
The FSA said that the bank was reducing its Libor submissions during the financial crisis because of negative media reports. It said Barclays also failed to have adequate systems and controls in place.
Tracey McDermott, acting director of enforcement and financial crime of the FSA said: “Barclays’ misconduct was serious, widespread and extended over a number of years. The integrity of benchmark reference rates such as Libor and Euribor is of fundamental importance to both UK and international financial markets. Firms making submissions must not use those submissions as tools to promote their own interests.
“The FSA continues to pursue a number of other significant cross-border investigations in this area and the action we’ve taken against Barclays should leave firms in no doubt about the serious consequences of this type of failure.”
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Readers' comments (12)
Anonymous | 28-Jun-2012 7:26 pm
What about BarCap's supremely confident ex GCs, Jonathan Hughes and Jake Scrivens?
Why, they went into "the business".
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Ben | 29-Jun-2012 10:37 am
These chaps would never act fraudulently. They're all good eggs, what?
In my experience, low ranking employees frequently commit fraud without any instructions from management in order that their multinational employer is able to borrow at lower rates. It's a little like dozens of journalists going off and all hacking phones without the knowledge of their editors. All completely plausable.
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Dan | 29-Jun-2012 11:08 am
I think it depends on your definition of the 'low ranking employees' which you say are frequently committing fraud without instruction from management.
As far as I am aware, these 'low-ranking employees' do not have the means to alter such significant data, such as the Libor Rate. Moreove, I seriously doubt that 'low-ranking' journalists would benefit from having a casual phone-hacking kit at their disposal.
In conclusion, it's certainly not the case that 'low-ranking employees' are involved in this in anyway. I think perhaps Ben has forgotten what 'low-ranking' means from up there in his Ivory Tower...
I am not saying that this is some sort of fraudulent scheme set up by the full cohort of upper-management at the firm (as I am aware that certain high-ranking individuals would be unaware of the manipulation), I simply maintain that those with the means to manipulate the financial market in such ways are unlikely to end up being a sneaky little 'low-ranking' Customer Services Assistant, while his manager remains oblivious.
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Alf | 29-Jun-2012 11:36 am
Dan, I think Ben might have been joking.
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Anon | 29-Jun-2012 11:37 am
Sarcasm alert, Dan.
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Ben | 29-Jun-2012 12:03 pm
Er, Dan, I was being (rather obviously) sarcastic.
The chances of upper-managment not knowing this is absurdly small, as I am sure we will soon discover unless there is a massive settlement package on the table.
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Dan | 29-Jun-2012 12:17 pm
Oops. I went back after I had sumbitted and realised my error. I failed to register the sarcasm due to being so outraged that anyone could suggest such a thing haha.
My mistake Ben, sorry about that!
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Anonymous | 29-Jun-2012 12:23 pm
Ben, correction, plausible*
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James Keenan | 29-Jun-2012 2:33 pm
In today’s culture of public scrutiny, organisations can ill afford to be complacent when it comes to addressing compliance issues. It is vital that those who fall under public scrutiny for perceived wrong doing to not only take corrective action and are able to demonstrate that they are taking the right corrective action that will deliver long-term, effective change. Although a failure in process or technology is often blamed, in many cases a deeper analysis reveals culture to be the underlying issue. Failure to address the underlying culture risks the same issues arising again in another format and this applies to companies, business programmes or projects.
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Anonymous | 29-Jun-2012 4:43 pm
^ so endeth the sermon
"organisations can ill afford to be complacent when it comes to addressing compliance issues
and are able to demonstrate that they are taking the right corrective action that will deliver long-term, effective change."
Doesn't that depend on how much you make compared to what you pay in fines and whether or not you really care what the public think....
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