Freddie Mac sued Bank of America Corp., UBS AG, JPMorgan Chase& Co. and a dozen other banks over alleged manipulation of theLondon interbank offered rate, saying the mortgage financiersuffered substantial losses as a result of the companies'conduct.

Government-owned Freddie Mac accuses the banks of actingcollectively to hold down the U.S. dollar Libor to “hide theirinstitutions' financial problems and boost their profits,”according to a complaint filed in federal court in Alexandria,Virginia.

“Defendants' fraudulent and collusive conduct caused USD LIBORto be published at rates that were false, dishonest, andartificially low,” Richard Leveridge, a lawyer for Freddie Mac,said in the complaint, which was made public yesterday.

Manipulation of interest rates by some of the world's biggestbanks has spawned probes by half a dozen agencies on threecontinents in what has become the industry's largest andlongest-running scandal. More than $300 trillion of loans,mortgages, financial products and contracts are linked toLibor.

Libor is calculated by a poll carried out daily by ThomsonReuters Corp. on behalf of the British Bankers' Association, anindustry lobby group that asks firms to estimate how much it wouldcost to borrow from each other for different periods and indifferent currencies.

The complaint lists 15 banks as defendants as well as theBritish Bankers' Association. They include Citigroup Inc., BarclaysPlc, Royal Bank of Scotland Group Plc, the Royal Bank of Canada,Deutsche Bank AG and Credit Suisse Group AG.

Freddie Mac accuses the banks of fraud, violations of antitrustlaw and breach of contract. The housing financier is seekingunspecified damages for financial harm, as well as punitive damagesand treble damages for violations of the Sherman Act.

“To the extent that defendants used false and dishonest USDLIBOR submissions to bolster their respective reputations, theyartificially increased their ability to charge higher underwritingfees and obtain higher offering prices for financial products tothe detriment of Freddie Mac and other consumers,” the U.S.-ownedcompany said in the complaint.

Banks Named

Representatives of the banks who declined to comment on thelawsuit were Danielle Romero-Apsilos, a spokeswoman for NewYork-based Citigroup; Jennifer Zuccarelli, a spokeswoman for NewYork-based JPMorgan; Brandon Ashcraft, a Barclays spokesman; BillHalldin, a Bank of America spokesman; Victoria Harmon, aspokeswoman for Credit Suisse; and Ed Canaday, a spokesman forEdinburgh-based Royal Bank of Scotland.

Eberhard Roll, a Portigon AG spokesman, didn't respond to e-mailand phone messages requesting comment.

Calls to Bank of Tokyo-Mitsubishi UFJ Ltd. and Norinchukin Bank,both of Tokyo, which also were named in the complaint, weren'tanswered on a public holiday.

“The BBA is aware of the lawsuit in the United States and isunable to comment,” Brian Mairs, a spokesman for British Bankers'Association, said in an e-mail.

Brad German, a spokesman for McLean, Virginia-based Freddie Mac,said the company doesn't comment on litigation. Denise Dunckel, aspokeswoman for the Federal Housing Finance Agency, the conservatorof Freddie Mac, also declined to comment.

Freddie Mac and its sister company, Washington-based Fannie Mae,could have lost a combined $3 billion because of Libormanipulation, the auditor of the FHFA said in a Nov. 3 internalmemo urging the regulator to investigate further.

Freddie Mac and Fannie Mae use Libor to determine interestpayments on their investments in floating-rate financialinstruments such as bonds and swaps.

The two companies, which package mortgages into securities onwhich they guarantee payments of principal and interest, have beenunder U.S. conservatorship since 2008.

Barclays, UBS and RBS have been fined more than $2.5 billionfollowing a global probe into Libor manipulation. Traders riggedthe benchmark to profit from bets on derivatives, while bankssought to submit artificially low rates to appear financiallyhealthier than they were, according to regulators.

From August 2007 and through at least May 2010, the defendants“formed a combination, conspiracy, or agreement,” to submit falseLibor rates, Freddie Mac alleged in the complaint.

The case is Federal Home Loan Mortgage Corp. v. Bank of AmericaCorp., 13-cv-00342, U.S. District Court, Eastern District ofVirginia (Alexandria).

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