Barclays has turned to Sullivan & Cromwell to defend it against fraud allegations in the US, as analysts predict the bank could face a £1.2bn bill for a raft of litigation.
The bank is fighting against claims it falsified documents and misrepresented benefits offered to clients using its “dark pool” trading platform. New York Attorney General Eric Schneiderman brought the case against the bank in June, alleging that the bank’s private stock market purported to offer better protection to customers than it did.
Yesterday a Sanford C. Bernstein analyst said it could face a £1.2bn legal bill to settle the “dark pool” fraud allegations and other cases. The figure adds to the £4bn already set aside by the bank to handle the fallout of the payment protection insurance (PPI) mis-selling scandal.
Sullivan & Cromwell will take home a chunk of that anticipated bill, fielding partners David Braff and Jeffrey Scott as well as special counsel Matthew Fitzwater.
The bank has repeatedly turned to the partners for criminal defence work since the bank was accused of rigging the Libor rate (2 March 2009). In 2009 Sullivan & Cromwell criminal defence and investigations partner Steven Peikin, Braff, Scott and Fitzwater advised the bank in its cross-border settlement with the authorities.
Barclays has also turned to Clifford Chance in the past for its internal investigation into Libor submissions, following the bank’s record £290m fine from the Financial Services Authority, the US Commodity Futures Trading Commission and the US Department of Justice (10 July 2012).
Barclays mounted its defence to the fraud allegations in July and filed a motion to dismiss Schneiderman’s case. In court papers the bank said: “The complaint is based on clear and substantial factual errors”, adding, ”[…] Fundamentally, the complaint fails to identify any fraud—establishing no material misstatements, no identified victims, and no actual harm.”
The research note published by analyst Chirantan Barua said Barclays could have to pay around £200m to settle the fraud allegations relating to its dark pool. The bank could also face a further £700m charge to deal with the fallout from an industry-wide investigation into manipulation of the $5.3tr-a-day currency trading market.
Seven agencies globally are looking into alleged rigging of the forex market with heavyweight One Essex Court silk Tony Grabiner QC leading the Bank of England’s (BoE) investigation (12 March 2014).