Barclays 2011 Annual Report Download - page 251

31 Legal Proceedings continued
American Depositary Shares
Barclays Bank PLC, Barclays PLC and various current and former members of Barclays PLC’s Board of Directors have been named as defendants in five
proposed securities class actions (which have been consolidated) pending in the United States District Court for the Southern District of New York (the
Court). The consolidated amended complaint, dated 12 February 2010, alleges that the registration statements relating to American Depositary Shares
representing Preferred Stock, Series 2, 3, 4 and 5 (the ADS) offered by Barclays Bank PLC at various times between 2006 and 2008 contained
misstatements and omissions concerning (amongst other things) Barclays portfolio of mortgage-related (including US subprime-related) securities,
Barclays exposure to mortgage and credit market risk and Barclays financial condition. The consolidated amended complaint asserts claims under
Sections 11, 12(a)(2) and 15 of the Securities Act of 1933. On 5 January 2011, the Court issued an order and, on 7 January 2011, judgment was entered,
granting the defendants’ motion to dismiss the complaint in its entirety and closing the case. On 4 February 2011, the plaintiffs filed a motion asking
the Court to reconsider in part its dismissal order. On 31 May 2011, the Court denied in full the plaintiffs’ motion for reconsideration. The plaintiffs have
appealed both decisions (the grant of the defendants’ motion to dismiss and the denial of the plaintiffs’ motion for reconsideration) to the United States
Court of Appeals for the Second Circuit.
Barclays considers that these ADS-related claims against it are without merit and is defending them vigorously. It is not practicable to estimate Barclays
possible loss in relation to these claims or any effect that they might have upon operating results in any particular financial period.
US Federal Housing Finance Agency and Other Residential Mortgage-Backed Securities Litigation
The United States Federal Housing Finance Agency (FHFA), acting for two US government sponsored enterprises, Fannie Mae and Freddie Mac
(collectively, the GSEs), filed lawsuits against 17 financial institutions in connection with the GSEs’ purchases of residential mortgage-backed securities
(RMBS). The lawsuits allege, among other things, that the RMBS offering materials contained materially false and misleading statements and/or
omissions. Barclays Bank PLC and/or certain of its affiliates or former employees are named in two of these lawsuits, relating to sales between 2005 and
2007 of RMBS, in which Barclays Capital Inc. was lead or co-lead underwriter.
Both complaints demand, among other things: rescission and recovery of the consideration paid for the RMBS; and recovery for the GSEs’ alleged
monetary losses arising out of their ownership of the RMBS. The complaints are similar to other civil actions filed against Barclays Bank PLC and/or
certain of its affiliates by other plaintiffs, including the Federal Home Loan Bank of Seattle, Federal Home Loan Bank of Boston, Federal Home Loan Bank
of Chicago, Cambridge Place Investment Management, Inc., HSH Nordbank AG (and affiliates) and Stichting Pensioenfonds ABP, relating to their
purchases of RMBS. Barclays considers that the claims against it are without merit and intends to defend them vigorously.
The original amount of RMBS related to the claims against Barclays in these cases totaled approximately US$6.8bn, of which approximately US$2.0bn
was outstanding as at 31 December 2011. Cumulative losses reported on these RMBS as at 31 December 2011 were approximately US$0.1bn. If
Barclays were to lose these cases it could incur a loss of up to the outstanding amount of the RMBS at the time of judgment (taking into account
further principal payments after 31 December 2011) plus any cumulative losses on the RMBS at such time and any interest, fees and costs, less the
market value of the RMBS at such time. Barclays has estimated the total market value of the RMBS as at 31 December 2011 to be approximately
US$1.1bn. Barclays may be entitled to indemnification for a portion of any losses.
Devonshire Trust
On 13 January 2009, Barclays commenced an action in the Ontario Superior Court seeking an order that its early terminations earlier that day of two
credit default swaps under an ISDA Master Agreement with the Devonshire Trust (Devonshire), an asset-backed commercial paper conduit trust, were
valid. On the same day, Devonshire purported to terminate the swaps on the ground that Barclays had failed to provide liquidity support to Devonshire’s
commercial paper when required to do so. On 7 September 2011, the court ruled that Barclays early terminations were invalid, Devonshire’s early
terminations were valid and, consequently, Devonshire was entitled to receive back from Barclays cash collateral of approximately C$533m together
with accrued interest thereon. Barclays is appealing the court’s decision. If the court’s decision were to be unaffected by future proceedings, Barclays
estimates that its loss would be approximately C$500m, less any impairment provisions taken by Barclays for this matter.
Other
Barclays is engaged in various other legal proceedings both in the United Kingdom and a number of overseas jurisdictions, including the United States,
involving claims by and against it which arise in the ordinary course of business, including debt collection, consumer claims and contractual disputes.
Barclays does not expect the ultimate resolution of any of these proceedings to which Barclays is party to have a material adverse effect on its results of
operations, cash flows or the financial position of the Group and Barclays has not disclosed the contingent liabilities associated with these claims either
because they cannot reliably be estimated or because such disclosure could be prejudicial to the conduct of the claims. Provisions have been
recognised for those cases where Barclays is able reliably to estimate the probable loss where the probable loss is not de minimis.
In addition, the Bank has been named as a defendant in a number of lawsuits, including class actions, filed in US federal courts involving claims by
purported classes of purchasers and sellers of LIBOR-based derivative products or Eurodollar futures or option contracts between 2006 and 2009;
further details are provided on the following page.
Barclays PLC Annual Report 2011 www.barclays.com/annualreport 249
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