Illinois Brick
Among existing lawsuits, the city of Baltimore may stand a better chance than Schwab of winning back investment losses linked to the Libor-rigging scandal if U.S. courts stick to a precedent set by a 1977 landmark price-fixing case.
The Supreme Court's ruling in Illinois Brick Co. versus Illinois barred indirect purchasers from recovering federal antitrust damages, Andrew Verstein, a lecturer at Yale Law School, said in a telephone interview. Applied to the alleged manipulation of Libor, he said only investors such as Baltimore, that lost out in transactions directly with rate-rigging banks, might successfully sue.
"Different plaintiffs will fight about this precedent" depending on whether it helps or hurts their case, said Verstein, who is also executive director of the school's Center for the Study of Corporate Law.
Baltimore Lawsuit
Baltimore's case, filed last year, stems from its purchase of interest-rate swaps aimed at protecting the city from an increase in rates after it sold variable-rate bonds. When Libor was artificially pushed down, Baltimore's suit alleges, the city got a lower rate of return.
"I am going to fight for this city and do what I can to protect the city taxpayers who ultimately suffered financial damage as result of Libor manipulation," Baltimore's Mayor Stephanie Rawlings-Blake said in an e-mailed statement.
Schwab, based in San Francisco, is attempting to recover money it said its mutual funds and other investment products lost when they bought short-term debt instruments with interest rates linked to Libor. While some of the debt Schwab funds bought was issued directly by banks accused of rigging Libor, some of it was also purchased from third parties, according to the suit. The suit names more than a dozen financial institutions as defendants, including units of Barclays, Bank of America, Citigroup, JPMorgan Chase and Credit Suisse.
Sarah Bulgatz, a spokeswoman for Schwab, said the firm doesn't comment on pending litigation.
Credit Suisse CEO Brady Dougan said during a July 18 conference call with analysts that "we don't believe that we have any material issues" related to Libor.
Valid Claim
Steven Vames, a spokesman in New York for Zurich-based Credit Suisse, declined to comment, as did Karina Byrne, a spokeswoman for UBS, Danielle-Romero Apsilos, a spokeswoman for Citigroup, Kerrie Cohen, a spokeswoman for Barclays, and Lawrence Grayson, a spokesman for Bank of America. Jennifer Zuccarelli, a spokeswoman for JPMorgan Chase, did not immediately return calls.