Mendocino County has filed a lawsuit against a collection of banks accused of manipulating global interest rates, claiming the banks' actions caused county government and school districts to lose out on investment returns.
The suit, filed in U.S. District Court in San Francisco on Wednesday, adds the county to a growing list of California cities and counties seeking damages they say were caused by banks manipulating LIBOR, a benchmark global interest rate.
The London Interbank Offered Rate is used to set rates on everything from car loans to more complicated investments made by city and county governments. More than 20 current and former LIBOR members, including Barclays, Bank of America and Citigroup, are accused of setting artificially low rates that increased their profits but decreased investors' returns.
Mendocino County began investigating its own lawsuit after Sonoma County filed suit in late June, said Mendocino County Treasurer-Tax Collector Shari Schapmire.
With the help of the same law firm representing Sonoma County and many other cities and counties, Schapmire and her colleagues determined that Mendocino County may have lost as much as $800,000 in investment returns between 2008 and 2010, when LIBOR was allegedly manipulated. The city's total investment pool ranged from $150 million to $220 million during that time, she said, and about 70 percent of that was in LIBOR-type investments. Many of those investments were made on behalf of school districts.
Based on those findings, the Board of Supervisors approved the lawsuit in a closed-session meeting in late October.
“This suit promises to bring justice in the form of fincancial compensation to public agencies like Mendocino County which have suffered losses as the result of illegal banking practices,” Board of Supervisors Chairman Dan Hamburg said in a statement.
Meanwhile, Sonoma County's lawsuit has been suspended as judges consider a related class-action suit, said Jonathan Kadlec, the county's assistant treasurer-tax collector.
He said the Sonoma County's losses could be as much as $2 million, depending on what criteria the court accepts.
“We've got an interest we need to protect here,” he said.
(You can reach Staff Writer Jamie Hansen at 521-5205 or email@example.com.)