Bloomberg reported that
Charles Schwab Corporation
) has a filed a lawsuit against global banks including
Bank of America Corporation
) over charges of rigging the benchmark interest rate - London
Interbank Offered Rate or LIBOR. The company sued the banks for
fraud in the state court in San Francisco.
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Schwab alleged that the banks obscured their conduct related to
LIBOR calculation even when questions were raised about the
rate-rigging in 2007. The company purchased billions of dollars
worth LIBOR-based securities, which were offering less returns as
the banks had decided to artificially lower the rates.
The lawsuit filed by Schwab includes claims of fraud, violation
of California unfair business practices and federal securities
laws as well as unjust enrichment. At the same time, the company
wants to cancel purchases of LIBOR-based securities.
This is not the first time that Schwab has filed a case related
to LIBOR manipulations. In Aug 2011, the company accused nearly
11 banks of manipulating LIBOR.
Schwab alleged that this rate-rigging deprived it and 8 of its
money market and ultra short-term bond mutual funds of returns
worth billions of dollars on LIBOR-based investments. However,
this case and several similar lawsuits filed by other
institutional investors were dismissed by the U.S. District Judge
Naomi Reice Buchwald in Mar 2013.
However, in Feb 2013, Royal Bank of Scotland announced that it
would pay a penalty of £390 million to resolve charges for its
involvement in the manipulation of LIBOR. In 2012,
) finally conceded to pay a penalty of CHF 1.4 billion, while
) admitted having paid a penalty of $450 million for rigging the
Currently, Schwab carries a Zacks Rank #3 (Hold).