PHILADELPHIA (Legal Newsline) -- The city of Philadelphia is suing a group of Wall Street banks responsible for setting the London InterBank Offered Rate, alleging that the banks' efforts to suppress LIBOR caused "significant financial harm" to the city and many others.
The city filed the lawsuit in the U.S. District Court for the Eastern District of Pennsylvania Friday.
LIBOR is the average interest rate at which a select group of large, reputable banks that participate in the London InterBank money market can borrow unsecured funds from other banks.
According to the U.S. Commodity Futures Trading Commission, LIBOR is among the most important benchmark interest rates in the world's economy, and is a key rate in the United States.
LIBOR impacts enormous volumes of swaps and futures contracts, commercial and personal consumer loans, home mortgages and other transactions, according to the CFTC.
The city's 115-page complaint alleges that by mid-2007 the banks -- Bank of America, Barclay's Bank PLC, Citigroup, Citibank, Credit Suisse Group AG, Deutsche Bank AG, J.P. Morgan Chase, Royal Bank of Canada, Royal Bank of Scotland PLC and UBS AG -- were "secretly conspiring" to suppress LIBOR.
The city alleges that in doing so, the banks artificially reduced the amounts they would have to pay to the city and increased how much the city had to pay, causing it to lose the promised financial benefits of the instruments.
"Cities and others paid for those benefits in reliance on the trustworthiness of the LIBOR rate, and on other rates based on LIBOR," said Rob Dubow, the city's director of finance.
"The systematic suppression of LIBOR, as our attorneys have uncovered, caused financial harm to the city of Philadelphia."
Steig Olson of Quinn Emanuel Urquhart & Sullivan LLP, one of the attorneys representing the city in the suit, said he believes that the suppression of LIBOR caused similar harm to other cities, counties and state governments nationwide.
"This conduct, which was kept secret for years, impacted the city of Philadelphia and many other governmental entities at a time when budgets were already being strained by the financial crisis," he said.
Also representing the city: law firms Obermayer Rebmann Maxwell & Hippel LLP and Boni & Zack LLC.
From Legal Newsline: Reach Jessica Karmasek by email at firstname.lastname@example.org.