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Supreme Court to hear LIBOR interest rate rigging case

ERIN E. ARVEDLUND, INQUIRER STAFF WRITER
Published Monday, September 22, 2014, 1:08 AM
If you read the fine print in your mortgage, student-loan documents, or credit-card statements, you may discover you’re paying an obscure interest rate on your borrowing. And you may be owed some money.
Students, homeowners, mortgagees, and bond investors are accusing a slew of banks of rigging their interest rate, known as the London Interbank Offered Rate, or LIBOR.

In lawsuits, they allege a global conspiracy to manipulate LIBOR.

Some of their cases, and their lawyers, are from the Philadelphia area.

Kirby McInerny is among the lead plaintiff lawyers in New York representing traders and other professional investors who lost money trading in LIBOR-linked securities. The Center City law firm Berger & Montague is helping out in those cases.

Two other local firms, Weinstein Kitchenoff & Asher in Center City and Morris & Morris in Wilmington, represent bondholders in another class-action case.

Consumers are getting in on the action, too. Homeowners are suing, saying they overpaid on mortgages when LIBOR was rigged too high.

Others, like the brokerage Charles Schwab, allege banks manipulated rates lower, so money-market funds lost money.

Linda Zacher of Bryn Mawr is suing as a bondholder. She argues that she lost out on interest paid to her on her bonds.

What is LIBOR anyway? It’s a daily benchmark at which banks set the rate for short-term borrowing from one another. It’s the “wholesale” interest rate banks use in their club; then they turn around and lend us money at “retail” interest rates.

But rigging LIBOR upward – or downward – made the banks more money for their bottom line, and we, the public, had no clue.

Zacher’s bonds were earning interest rates indexed to LIBOR from August 2007 through May 2010. The banks setting her bond rate were in the U.S. dollar LIBOR club, which included almost every major Wall Street, British, and global bank: Credit Suisse Group, Bank of America, JPMorgan Chase, HSBC, Barclays, Lloyds Banking Group, UBS, Royal Bank of Scotland Group, Deutsche Bank, Citigroup, Bank of Tokyo-Mitsubishi, HBOS, and Royal Bank of Canada. She’s suing all of them.

This month, the U.S. Supreme Court agreed to hear an appeal related to the case Zacher brought. Her petition called LIBOR “the most important benchmark for short-term interest rates in the United States and around the world.” We can’t wait to hear what the Supremes think.

If you think you’ve been affected financially by LIBOR manipulations, it’s not too late take similar steps.

earvedlund@phillynews.com
215-854-2808

@erinarvedlund

Erin Arvedlund’s book “Open Secret” (Penguin, 2014), about the LIBOR rate-rigging scandals, is due out Thursday.

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