(Adds comment by Diamond lawyer)
By Jonathan Stempel
NEW YORK, April 25 Barclays Plc
shareholders may pursue a lawsuit accusing the British bank of
causing them to lose money because it manipulated the interest
rate known as Libor, a federal appeals court decided on Friday,
reversing a lower court ruling.
The 2nd U.S. Circuit Court of Appeals in New York said
shareholders presented a "plausible claim" that a 12 percent
drop on June 28, 2012, in the price of their American depositary
shares stemmed from misrepresentations by Barclays and several
officials, including one-time Chief Executive Robert Diamond.
That decline came a day after Barclays agreed to pay roughly
$453 million of fines in settlements with U.S. and British
regulators, and admitted to having often made artificially
depressed Libor submissions from August 2007 to January 2009.
Libor underpins hundreds of trillions of dollars of
transactions, and is used to set interest rates on credit cards,
student loans and mortgages. U.S. and European regulators have
been probing whether banks artificially depressed Libor during
the 2008 financial crisis to appear healthier.
"We're obviously pleased with the decision and look forward
to prosecuting the case," said David Rosenfeld, a partner at
Robbins Geller Rudman & Dowd representing investors led by the
Carpenters Pension Trust Fund of St. Louis in Missouri and the
St. Clair Shores Police & Fire Retirement System in Michigan.
Barclays spokesman Brandon Ashcraft declined to comment.
Investors claimed that Barclays' share price was propped up
artificially from July 2007 to June 2012 because the bank had
understated its borrowing costs through false Libor submissions
from August 2007 to January 2009.
They also said Diamond, then Barclays' president, deceived
them on an Oct. 31, 2008, conference call when he denied
Barclays' borrowing costs were higher than those of rivals,
saying: "We're categorically not paying higher rates in any
Diamond is represented by Cheryl Krause and Andrew Levander,
partners at the law firm Dechert. A spokeswoman for the firm
declined to comment. Diamond became Barclays' chief executive in
January 2011 and was ousted 1-1/2 years later.
U.S. District Judge Shira Scheindlin in Manhattan dismissed
the lawsuit last May, saying any inflation in Barclays' share
price resulting from Libor manipulation had dissipated by the
time the settlement was disclosed.
Writing for the 2nd Circuit, however, Judge Richard Berman,
who normally sits on the same court as Scheindlin, said the
dismissal was premature.
"Defendants argue that Barclays' Libor misrepresentations
were 'stale,'" and that the share price drop resulted from the
fines rather than any inadequate disclosures, Berman said. "But
defendants' arguments here involve questions of fact and should
not be resolved upon a motion to dismiss."
The 2nd Circuit also said Scheindlin correctly ruled that
Barclays' statements in U.S. Securities and Exchange Commission
filings about its internal controls were not materially false.
It returned the case to her court for further proceedings.
Royal Bank of Scotland Group Plc, Switzerland's UBS
AG, Britain's ICAP Plc and Dutch bank Rabobank
have also reached regulatory accords over Libor manipulation.
The Federal Deposit Insurance Corp, bondholders and others have
accused 16 banks in U.S. lawsuits of Libor manipulation.
The case is Carpenters Pension Trust Fund of St. Louis et al
v. Barclays Plc et al, 2nd U.S. Circuit Court of Appeals, No.
(Reporting by Jonathan Stempel in New York; Editing by Steve
Orlofsky and Andre Grenon)