Steve Marshall announces $100 million settlement with Citibank

This March 23, 2018, file photo shows the entrance to Citibank at the Citigroup Center in downtown Los Angeles. [Photo Credit: AP Photo/Richard Vogel, File]

Alabama Attorney General Steve Marshall announced a $100 million multi-state settlement with Citibank on Friday.

42 other attorney generals in the U.S. joined in the investigation of Citibank’s U.S. Dollar (USD) LIBOR interest rate. The interest rate is a benchmark that affects trillions of dollars of financial instruments and has a widespread impact on global markets and consumers.

According to Marshall, Citibank allegedly misrepresented the integrity of their LIBOR benchmarks to both state and local governments, private trading companies, and several non-profit organizations by failing to disclose that:

  • Citibank, at times, made USD LIBOR submissions to avoid negative publicity and protect the reputation of the bank;
  • Citibank’s USD LIBOR submitters, on occasion, asked Citibank personnel in other units of the bank to avoid offering higher rates than Citibank’s USD LIBOR submissions
  • Citibank expressed belief that other banks, at times, made USD LIBOR submissions that were inconsistent with their borrowing rates and contributed to inaccurate LIBORs.

“As a result of its fraudulent conduct, Citibank made millions in unjust gains when government entities and not-for-profit organizations entered into swaps and other financial contracts with Citibank without knowing that Citibank and other banks on the USD LIBOR-setting panel were manipulating LIBOR submissions,” said Marshall in a news release.

Several entities in Alabama including the state government, local governments and private entities (with LIBOR-linked swaps and investment contracts with Citibank) may be considered as those who were affected by Citibank’s fraudulent conduct, and may be eligible to receive recompense from a settlement fund of $95 million.

The office of the Attorney General will contact those eligible for a portion of the settlement directly, the balance of the fund will then be used to pay costs and expenses of the investigation.

This settlement with Citibank is the third of several USD LIBOR-setting banks to resolve claims following investigation by state Attorneys General. 42 states have collected $100 million for each state involved in the settlement. The funds will be distributed to state and local government entities and not-for-profit associations.