The former owner of Centre Point has launched a £1.5 billion legal claim against Lloyds Banking Group, linking Libor manipulation to the partial collapse of his property empire.
Ardeshir Naghshineh, who in 1992 founded the property investment company Targetfollow, claims he never would have taken on loans from HBOS, which Lloyds rescued in 2009, if he had known about “fraudulent manipulation” of the Libor benchmark.
The Iranian-born entrepreneur, 69, is seeking compensation relating to the 2011 insolvency of two Targetfollow entities. The companies failed after taking out loans of hundreds of millions of pounds alongside interest rate derivative products that were benchmarked to Libor, which set the level at which banks lent to each other.
Libor manipulation involved banks lying about the interest rates they were paying to borrow during the financial crisis so they could pretend to borrow more cheaply than they actually could, giving the false appearance of stability.
An investigation by the BBC suggested such “lowballing” of Libor had been instructed by the Bank of England and government officials. No senior figure was prosecuted but lower ranking traders were jailed for manipulation.
Advertisement
MPs that serve on the Treasury committee, or have done in the past, have called for a new investigation.
Lloyds was fined £105 million in 2014 by the Financial Conduct Authority, the City regulator, for “serious” failings over Libor and other benchmarks. Manipulation and collusion contributed to Libor submissions that did “not fairly reflect the cost of interbank borrowing”, undermining the integrity of the benchmark, the FCA said.
The bank entered a deferred prosecution agreement with the US Department of Justice in 2014 in relation to Libor misconduct.
The case brought by Naghshineh relates to the failure of Targetfollow Property Holdings and Targetfollow Property Investment and Development. He has been given the right to make a claim against Lloyds by liquidators of the companies.
Prior to their failure the companies between them held 27 properties for investment or development, including Centre Point and 70 St Mary Axe in London, as well as properties in Norwich, where Targetfollow is based. The combined value of the portfolio was put at £1.2 billion in 2007.
Advertisement
Naghshineh claims Targetfollow would not have entered into the loans but for “breaches of duty and misrepresentations” such as that the Libor-linked derivatives were “good value”, legal filings show. Lloyds lost £400 million when the companies failed.
Lloyds said: “We do not believe the claim has merit. The parties entered into a settlement more than a decade ago in relation to the same banking products that are subject to this claim. We view the total damages sought in the claim as lacking any credibility, with less than half of the total value explained in any detail in the claim.”
Naghshineh declined to comment.
He is claiming for the servicing and termination costs of the hedging instruments plus alleged losses arriving from the “forced sales” of a number of his properties at what he claimed was a “significant undervalue”.
