- Office of Attorney General Maura Healey
Media Contact for More Than $12 Million Returned to Local Schools, Hospitals and Government Entities Through Settlement With Deutsche-Bank
Boston — Massachusetts non-profit and governmental entities have received over $12 million as part of a settlement with Deutsche Bank, Attorney General Maura Healey announced today.
The settlement resolves allegations that Deutsche Bank manipulated interest rates and defrauded governmental and non-profit entities in Massachusetts and across the nation. The allocation of proceeds from the case has now been completed and so far a dozen Massachusetts schools, hospitals, and government entities have received reimbursement checks as a result of this fraudulent conduct.
“This case has returned millions of dollars to Massachusetts schools, hospitals and government units that were misled by Deutsche Bank,” said AG Healey. “We will continue to ensure that investment firms treat their clients fairly.”
Several Massachusetts schools have received funds because of the Attorney General’s settlement, including Northeastern University, Harvard College, UMass, and Worcester Polytechnic Institute. Hospitals also received payments, including Brockton Hospital, Lowell General, and South Shore Hospital. Some state entities, including the MBTA and the Massachusetts Housing Finance Agency, as well as the state employee pension fund (PRIT/PRIM) also received payments. Additional payments to other harmed entities will be made available later this year. Deutsche Bank also paid $5 million to the Commonwealth as part of the settlement.
The investigation, conducted by AG Healey and more than 40 other state attorneys general, found that Deutsche Bank manipulated LIBOR (London Interbank Offered Rate) to set deflated interest rates and deceiving counterparties about LIBOR-based transactions.
AG Healey’s Office learned during the investigation that Deutsche Bank manipulated LIBOR in a number of ways, including altering LIBOR submissions to benefit Deutsche Bank’s trading positions, attempting to influence other banks’ LIBOR submissions in a manner intended to benefit Deutsche Bank’s trading positions, and receiving communications from inter-dealer brokers and external traders attempting to influence Deutsche Bank’s LIBOR submissions.
The investigation revealed examples of these manipulated submissions, including emails between the Deutsche Bank LIBOR submitters and other traders within the company who would make money if the LIBOR rate was altered. In one case, a Deutsche Bank trader wrote to the supervisor for Deutsche Bank’s U.S. Dollar (USD)-LIBOR submissions: “I NEED YOUR HELP… IF IT SUITS YOU CAN WE PUT IN A HIGH LIBOR TILL NEXT TUESDAY IN THE 3 MTS?” The supervisor responded: “ok.”
The investigation also identified communications where Deutsche Bank employees showed they knew the LIBOR was inaccurate, including a circumstance in which a Deutsche Bank USD-LIBOR trader wrote to a trader at another bank: “LIBOR is a JOKE!!!!!!!” The trader at the other bank responded: “who put the LIE in LIBOR?”
These communications occurred while Deutsche Bank was entering into financial transactions based on LIBOR, but the bank did not disclose this information.
Government entities and not-for-profit organizations in Massachusetts and throughout the U.S., among others, were defrauded of millions of dollars when they entered into swaps and other investment instruments with Deutsche Bank without knowing that Deutsche Bank and other banks on the USD-LIBOR-setting panel were manipulating LIBOR.
Deutsche Bank was the second of several USD-LIBOR-setting panel banks under investigation by the state attorneys general to resolve the claims against it. Previously, Massachusetts and other states investigated Barclays for similar conduct, and Massachusetts recovered over $30 million for Massachusetts nonprofits and governmental units that had invested with Barclays in tainted LIBOR financial instruments.
The LIBOR activities of banks involved in setting the LIBOR rates are still under active investigation.
This matter is being handled by staff of Attorney General Maura Healey’s Insurance and Financial Services Division, including Madonna Cournoyer, Glenn Kaplan, Diana Hooley, and Brook Kellerman.