Judge Throws Libor Claims Out of Court

That Libor rigging occurred is not in dispute at a US court house, it’s how it is claimed against that matters – and by whom.

(April 2, 2013) — A case brought by a US city and a public pension fund claiming damages related to the Libor-fixing scandal has been dismissed by a New York District judge, despite government agencies reaping billions in fines on the matter.

In May last year, the mayor and city council of Baltimore and the City of New Britain Firefighters’ and Police Benefit Fund launched a class action lawsuit in which they claimed a global conspiracy by member banks of the British Bankers’ Association to fix the rate upon which lending levels are measured.

On Friday, New York District Judge Naomi Reice Buchwald dismissed the majority of the claims, but gave the plaintiffs leave to pursue a number of minor points made in the case.

The dismissal of the case lay on the grounds upon which the plaintiffs had brought it. They had claimed they had suffered “antitrust injury” due to the manipulation of the Libor rate over a number of years.

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“Regardless of whether defendants’ conduct constituted a violation of the antitrust laws, plaintiffs may not bring suit unless they have suffered an ‘antitrust injury’,” the judgement said. “An antitrust injury is an injury that results from an anticompetitive aspect of defendants’ conduct. Here, although plaintiffs have alleged that defendants conspired to suppress LIBOR over a nearly three-year-long period and that they were injured as a result, they have not alleged that their injury resulted from any harm to competition.”

The judge gave the plaintiffs leave to resubmit claims of commodities manipulation during some time periods. She also permitted them to make a further claim to include new information that was brought to light in the UK’s Financial Services Authority’s multi-billion dollar settlement with Barclays last year.

“Because the Barclays settlements brought to light information that plaintiffs might not previously have been able to learn, we grant plaintiffs leave to move to amend their complaint to include allegations based on such information, provided that any such motion addresses the concerns raised herein and is accompanied by a proposed second amended complaint,” the judgement said.

The judge added that it might seem strange that the plaintiffs’ claims were dismissed after banks had paid such large amounts in fines to government agencies. However, she said: “Under the statutes invoked here, there are many requirements that private plaintiffs must satisfy, but which government agencies need not. The reason for these differing requirements is that the focuses of public enforcement and private enforcement, even of the same statutes, are not identical. The broad public interests behind the statutes invoked here, such as integrity of the markets and competition, are being addressed by ongoing governmental enforcement. While public enforcement is often supplemented by suits brought by private parties acting as ‘private attorneys general,’ those private actions which seek damages and attorney’s fees must be examined closely to ensure that the plaintiffs who are suing are the ones properly entitled to recover and that the suit is, in fact, serving the public purposes of the laws being invoked.”

To read the full judgement, click here.

Obama Proposes Tax-Free Infrastructure Investing for Non-US Pensions

Foreign pension funds may be able to invest tax-free in US infrastructure and real estate, if the White House garners support.

(April 2, 2013) – US President Barack Obama has a solution to rebuild America’s deteriorating infrastructure without tacking the (entire) bill onto the deficit: foreign pension assets. 

The White House has rolled out details of the three-pronged “Rebuild America Partnership” for encouraging private investment in US infrastructure, which was first announced in February during Obama’s state of the union address. 

The plan includes reforming the Foreign Investment in Real Property Tax Act (FIRPTA) to allow foreign pension funds roughly the same exemptions as most domestic plans receive. “Infrastructure assets can be attractive investments for long-term investors such as pension funds that value the long-term, predictable, and stable nature of the cash flows associated with infrastructure,” the White House release said. “Under current law, gains of foreign investors from the disposition of U.S. real property interests are generally subject to US tax under FIRPTA.” 

According to the proposal document, foreign investors including major pension funds regularly cite FIRPTA as an impediment to investing in US infrastructure and real estate assets. Obama has called on Congress to change that. 

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“[I’m] proposing a Partnership to Rebuild America that attracts private capital to upgrade what our businesses need most: modern ports to move our goods; modern pipelines to withstand a storm; modern schools worthy of our children,” Obama said in his state of the union speech. “Let’s prove that there is no better place to do business than the United States of America. And let’s start right away.” 

No bills have been announced in connection with the plan as of yet.

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