Bank of Scot­land ac­cused of rate swap fraud

The Sunday Telegraph - Money & Business - - Front page - By Christo­pher Wil­liams

BANK OF SCOT­LAND, the Lloyds Bank­ing Group sub­sidiary, is fac­ing al­le­ga­tions it de­frauded a prop­erty group out of mil­lions of pounds at the height of the fi­nan­cial cri­sis.

The bank is al­leged to have made mil­lions by sell­ing and then re-sell­ing £100m of in­ter­est rate swaps over a few months in 2008 and 2009.

A court claim filed last month states the owner of Ven­tra In­vest­ments Lim­ited (VIL), Viswa­jit Pala­sun­theram, was con­tacted by his Bank of Scot­land re­la­tion­ship man­ager in 2008 and told he should cash in his swaps as there was “sig­nif­i­cant value” in them.

“The value rep­re­sen­ta­tions, which were false, were made … fraud­u­lently,” the claim form states. In­stead of mak­ing money for VIL, the new swaps net­ted Bank of Scot­land more than £2m, it is al­leged.

VIL is also pur­su­ing the bank in re­la­tion to its role in ma­nip­u­lat­ing the bench­mark against which the swaps were priced, the Lon­don In­ter­bank Bor­row­ing Rate, or Li­bor. VIL claims the bank sold the swaps in the knowl­edge that Li­bor was not a re­li­able rate and was sub­ject to ma­nip­u­la­tion, in­clud­ing by both Lloyds and Bank of Scot­land.

The prop­erty group de­clined to com­ment. VIL is su­ing Lloyds for roughly £80m. A Lloyds spokesman said the claim was “with­out merit and it will be con­tested vig­or­ously”.

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