Bank of Scotland accused of rate swap fraud
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”.