Last week, Gillian Tett of the Financial Times wrote how five years previously, she and her fellow journalists were intimidated into backing off of a huge story about banks manipulating LIBOR. This is the London Interbank Offered Rate set by a poll of leading banks to determine the benchmark interest rate referenced by many home mortgage loans, floating rate notes, collateralized debt obligations, and many other financial instruments:
“At the time, this sparked furious criticism from the British Bankers’ Association, as well as big banks such as Barclays; the word “scaremongering” was used. But now we know that, amid the blustering from the BBA, the reality was worse than we thought. As emails released by the UK Financial Services Authority show, some Barclays traders were engaged in a constant and pervasive attempt to rig the Libor market from 2006 on, with the encouragement of more senior managers. And the British bank may not have been alone.” (“LIBOR Affair Shows Banking’s Big Conceit,” June 28, 2012.)
At the heart of the allegations is what appears to be a blasé criminal conspiracy within Barclays. Moreover, Tett is correct. Barclays is far from alone.
Unfortunately, the intimidation was a success. The BBA and Barclays chose their word carefully, because accusing journalists of “scaremongering” suggests they are irresponsible sensationalist hacks. In essence, through lies and intimidation, they threatened to ruin careers.
The Financial Times backed off. As a result, the best coverage of the ongoing scandal came from a controversial blog with mostly anonymous writers called ZeroHedge. It pounded on the story harder than mainstream financial media. Not only are other banks implicated in the scandal, the Bank of England, a bank regulator, is also implicated.
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Teri Buhl website:
JPM’s shareholders aren’t getting a lot of transparency from the banks leadership and I’ve learned there is another little problem coming to forefront. A Connecticut State court has ordered whistleblower documents and internal emails sent to the SEC last year turned over to UBS who’s suing a JP Morgan owned hedge fund. According to a suit filed by ex-JPM’er Kevin Dillon the secret documentsallegedly show JP Morgan’s back office trading administration worked with a Hedge Fund, Texas-based Highland Capital, to manipulate the net asset value of their hedge fund assets to get the Swiss banking giant to lend them more money when they were in a performance death spiral.
UBS lawsuit shows a complicated financial restructuring of a mega million security by Dimon’s staff to cover up the assets that likely should have failed sooner than they did. There are allegations of amping up NAV to attract more investor money until the financial crisis whipped them into a tail spin they couldn’t recover from. Until a low-level internal whistleblower started gathering docs and complaining to his superiors we might have known how deep the alleged deception was. Dillon was fired, sued, got some cash from JP Morgan in a private settlement but now UBS plans to reopen the wound and not let JP Morgan hid their bad behavior.
When UBS, who claims to have lost near $700mn on the Highland asset value fraud, gets the whistleblower documents from Dillon’s Greenwich attorney Mark Sherman we could see all kinds of nasty emails exposing illegal acts like: back dating cross-trades between funds, applying trade-date accounting to up the NAV without settling trades, and moving crap assets out of one fund into another fund while making it look nice and rosy so UBS wouldn’t slam them with margin calls. Sherman said in CT state court filings last month there are actually 36,000 whistleblower documents he sent the SEC but since his whistleblower client, Dillon, signed a settlement with JP Morgan he won’t give them up for public viewing until the court orders it. Well, that’s happen now and when UBS gets their hands on the docs I’d expect the Swiss bank files more evidence or claims attached to their fraudulent conveyance lawsuit that will basically outline a securities fraud case for the SEC against Highland and JP Morgan. If Sherman doesn’t request a protective order then the public will get a view of what kind of dirt the SEC has against JP Morgan/Highland.
July 4 (Bloomberg) — Bloomberg’s John Dawson on the Barclays Libor scandals and the smoking gun emails. (Source: Bloomberg)
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