Scott Holland Feb. 19, 2016, 8:31pm

Two Mississippi and Alabama hospitals and the county that includes the cities of Biloxi and Gulfport, Miss., have squared off in Chicago federal court with many of the country’s biggest financial institutions over so-called interest rate swaps — an issue now impacting governments and other public bodies throughout the country, including Chicago’s public schools system.

In the class action complaint filed Feb. 18, Harrison County, Miss., the Magnolia Regional Health Center, of Corinth, Miss., and Cullman Regional Medical Center, of Cullman, Ala., targeted 33 defendant financial institutions and subsidiaries involved with “interest rate swaps transactions” dating as far back as 2007.

The complaint alleged the transactions, under which one party agrees to pay a fixed interest rate for a fixed amount of principal and time in exchange for a “floating, market-based rate” from the lender, violate federal antitrust law.

“Buy-side customers” - institutional investors such as hospitals, governments, pension funds and corporations - can “use these instruments … to exchange their floating rate obligations or risks for fixed market rates, or vice versa,” the complaint said.

Per the complaint, the global market for such deals has grown to include hundreds of trillions of dollars in principal and more than $1 trillion traded daily.

The complaint detailed how the practice evolved with technology, with electronic transactions enabling larger profits for banks and other lenders, and accused the defendants of using their collective market power, boycotts and collusion “to exclude rivals and new entrants from the marketplace.”

In addition to stifling competition, the strategy put “buy side” customers — the putative class members — at a significant disadvantage, with the market manipulation resulting in the plaintiff class spending “billions of dollars” above what might have been expected had there been equivalent access to electronic trading platforms.

The named bank defendants are Bank of America, Barclays, BNPP, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, RBS and UBS, along with 23 subsidiaries. The Mississippi and Alabama entities request class certification, a jury trial, damages and reimbursement of legal fees and money lost on account of the alleged acts.

While the plaintiffs said they don’t know how large the class actually is, they said it could potentially involve tens of thousands of similar organizations that have engaged in interest rate swap transactions with the defendant banks since 2007.

Attorneys for the plaintiffs include W. Percy Badham III and Sam David Knight, of Badham & Buck, of Birmingham, Ala.; Michael J. Boni and Joshua D Snyder, of Boni & Zack, of Bala Cynywd, Pa.; Michael W. Fuller and S. Wayne Fuller, of Fuller, Willingham, Fuller & Carter, of Cullman, Ala.; Jeffrey S. Istvan, Matthew Duncan and Adam J. Pessin, of Fine, Kaplan and Black, of Philadelphia; Tim C. Holleman, of Boyce Holleman & Associates, of Gulfport, Miss.; and Jonathan Compretta, of Mike Moore Law Firm, of Flowood, Miss.

This lawsuit arrived about two weeks after the Chicago Teachers Union closed a $726,000 Bank of America account because of the rate swaps deals the bank has with Chicago Public Schools. In statements made Feb. 3, union representatives said BOA earned $77 million in profits from its contract with the school system.

“What we hope is that our withdrawal of funds will spark people all over this city, all over this state and all over the country to start withdrawing funds from Bank of America until they give back some of the ill-gotten gains they’ve made off the backs of our students,” CTU Vice President Jesse Sharkey said in a report published online by Progress Illinois.

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Organizations in this Story

Badham & Buck LLC
500 2001 Park Place
Birmingham, AL 35203

Boni & Zack LLC
15 Saint Asaphs Road
Bala Cynwyd, PA 19004

Fuller, Willingham, Fuller & Carter LLC
413 1st Avenue Southwest
Cullman, AL 35055

Fine Kaplan & Black RPC
2300 1 South Broad Street
Philadelphia, PA 19107

Boyce Holleman & Associates
1720 23rd Avenue
Gulfport, MS 39501

Mike Moore Law Firm
10 Canebrake Boulevard
Flowood, MS 39232

Bank of America
101 North Tryon Street
Charlotte, NC 28202

1285 6th Avenue
New York, NY 10019

JP Morgan Chase
17 John Street
New York, NY 10038

Goldman, Sachs & Co
200 West St
New York, NY 10282

Deutsche Bank
12 Taunusanlage
Frankfurt, HE 60325

Chicago Teachers Union
222 West Merchandise Mart Plaza
Chicago, IL 60654

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