Comptroller fears Nassau lost in bank scandal
Nassau County Comptroller George Maragos called for an investigation Monday into whether the county may have lost money because of the LIBOR scandal roiling global banks on Wall Street.
The Nassau comptroller's office estimated that the manipulation of the London Interbank Offered Rate, or LIBOR, a key short-term interest rate set by large global banks, may have cost Nassau County as much as $13 million on its debt between 2005 and 2010.
Maragos sent a letter Monday asking Nassau County Attorney John Ciampoli to investigate the matter and take any necessary legal action.
"We started looking at it last Tuesday, looking at what was in the press and possible other lawsuits that may have been filed," Maragos said. Last week, top officials, including the chief executive, resigned from Barclays Bank, a large British bank, after admitting to manipulating the LIBOR rate. Other banks, including JPMorgan Chase & Co. and Citigroup, are being investigated.
"We knew we had swap agreements, so we wanted to see the magnitude of any harm or overpayment that the county may have paid as a result," Maragos said.
A lawsuit filed by the City of Baltimore against the banks that set the rate for LIBOR estimated that Baltimore may have overpaid its debts tied to the interest rate by as much as 0.4 percent a year because of the manipulation.
Maragos said he applied that 0.4 percent to the roughly $600 million worth of swaps that Nassau County had during the period rates were manipulated, then multiplied by five years to obtain the $13 million estimate.
Ciampoli said he is assembling a team to more thoroughly investigate how much the LIBOR manipulation may have hurt the county and its taxpayers. Ciampoli is considering joining Baltimore's lawsuit if it receives class-action status.
Several global banks have been accused of manipulating LIBOR around the time of the financial crisis. The rate affects municipalities like Nassau County because they sometimes enter into the swap agreements to reduce their interest costs. As part of the swaps, they sometimes receive interest payments based on LIBOR.
If banks manipulated LIBOR to be artificially low to make their own financial condition look better, municipalities may have received less interest on those deals.
Suffolk County does not plan to pursue any legal action regarding LIBOR because it has not engaged in any swap agreements on its debt in the last decade, said County Comptroller Joseph Sawicki Jr.