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Sunday, December 15, 2019

St. Louis police pension fund joins list of litigants saying big banks should pay for manipulating treasuries market

By Stephanie N. Grimoldby | Sep 28, 2015


The Police Retirement System of St. Louis has filed a federal class action lawsuit against nearly two dozen U.S. banks, claiming the institutions have been manipulating the U.S. Department of Treasury’s market since 2008, violating federal anti-monopoly and anti-trust statutes by sharing with each other competitively sensitive information to move prices in their favor, to the detriment of the class members.

The defendants include banking giants such as J.P. Morgan Securities LLP, Barclays Capital Inc., Citigroup Global Markets Inc. and 19 additional banks. The 22 banks are the only primary dealers authorized to trade in Treasury securities.

The PRSSL, a Missouri-based group that manages nearly $700 million in assets for more than 3,000 beneficiaries, claims the banks violated the Sherman Act and Commodity Exchange Act - which regulate federal trade, commerce and competition - by reducing competition in bond auctions, which ultimately has raised prices for smaller groups.

The PRSSL believes the class could include thousands of members who purchased or sold securities issued by the Treasury from Jan. 1, 2008 to June 8, 2015.

The PRSSL action is the first such lawsuit brought against the defendants in the Northern District of Illinois. More than 30 similar antitrust actions have been filed by public and private pension and retirement funds against the same banking and finance company defendants in federal court in New York. The pension fund representing government workers in Boston brought the first such class action against the banks in late July.

Like the other pending antitrust actions, the PRSSL lawsuit highlights an analysis conducted by “expert economists” of activity during the class period, which found an increase in so-called “auction tail” – or, the difference between the average and highest yield - indicating a lack of demand at auction, which they claim supports the PRSSL’s theory the banks knowingly manipulated the market for their own gain.

In particular, the complaint alleges the defendants used online chat rooms and other communication media in the hours leading up to Treasury auctions “to exchange confidential and market-sensitive customer information, including pricing and demand, and coordinate trading strategies in efforts to drive the prices of Treasury Securities and Treasury Instruments in a direction that would benefit their positions at the expense of ordinary investors, including Plaintiff and Class members.”

PRSSL’s lawyers point to articles published in June by the New York Post reporting the U.S. Department of Justice investigation into “possible fraudulent manipulation in the Treasury market.” Several of the defendants were named in the report in connection with the investigation. Further articles written by financial news organization Bloomberg reported that “many of the same Defendants here pleaded guilty to currency-rigging involving allegations that ‘traders engaged in cartel-like behavior by sharing information, such as via chatrooms.’”

Those defendants, which included Barclays, Citicorp, J.P. Morgan and The Royal Bank of Scotland, among others, already have paid out hundreds of millions in criminal fines, the plaintiffs note.

The lawsuit was filed Sept. 24 in federal court in Chicago, with the PRSSL claiming the banks’ efforts to conceal their manipulations - by using chat rooms, etc. - kept the PRSSL from learning key facts until this past June, when media sources first broke the news that the Department of Justice had opened its investigation.

Describing the banks’ actions as a “collusive and manipulative scheme,” the PRSSL seeks a jury trial, as well as actual damages, treble damages and injunctive relief.

The PRSSL is being represented locally by Norman Rifkind, of Chicago, and by attorneys with Robbins Arroyo LLP of San Diego.

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Organizations in this Story

Lasky & RifkindRobbins Arroyo LLPCitigroup