Barclays must face US lawsuit over Libor, court rules

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 currency."

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.