(Adds comment by Diamond lawyer)
By Jonathan Stempel
NEW YORK, April 25 (Reuters) - Barclays Plc shareholders may pursue a lawsuit accusing the British bank ofcausing them to lose money because it manipulated the interestrate known as Libor, a federal appeals court decided on Friday,reversing a lower court ruling.
The 2nd U.S. Circuit Court of Appeals in New York saidshareholders presented a "plausible claim" that a 12 percentdrop on June 28, 2012, in the price of their American depositaryshares stemmed from misrepresentations by Barclays and severalofficials, including one-time Chief Executive Robert Diamond.
That decline came a day after Barclays agreed to pay roughly$453 million of fines in settlements with U.S. and Britishregulators, and admitted to having often made artificiallydepressed Libor submissions from August 2007 to January 2009.
Libor underpins hundreds of trillions of dollars oftransactions, and is used to set interest rates on credit cards,student loans and mortgages. U.S. and European regulators havebeen probing whether banks artificially depressed Libor duringthe 2008 financial crisis to appear healthier.
"We're obviously pleased with the decision and look forwardto prosecuting the case," said David Rosenfeld, a partner atRobbins Geller Rudman & Dowd representing investors led by theCarpenters Pension Trust Fund of St. Louis in Missouri and theSt. Clair Shores Police & Fire Retirement System in Michigan.
Barclays spokesman Brandon Ashcraft declined to comment.
Investors claimed that Barclays' share price was propped up artificially from July 2007 to June 2012 because the bank hadunderstated its borrowing costs through false Libor submissionsfrom August 2007 to January 2009.
They also said Diamond, then Barclays' president, deceivedthem on an Oct. 31, 2008, conference call when he deniedBarclays' borrowing costs were higher than those of rivals,saying: "We're categorically not paying higher rates in anycurrency."
Diamond is represented by Cheryl Krause and Andrew Levander,partners at the law firm Dechert. A spokeswoman for the firmdeclined to comment. Diamond became Barclays' chief executive inJanuary 2011 and was ousted 1-1/2 years later.
UNDERSTATED COSTS
U.S. District Judge Shira Scheindlin in Manhattan dismissedthe lawsuit last May, saying any inflation in Barclays' shareprice resulting from Libor manipulation had dissipated by thetime the settlement was disclosed.
Writing for the 2nd Circuit, however, Judge Richard Berman,who normally sits on the same court as Scheindlin, said thedismissal was premature.
"Defendants argue that Barclays' Libor misrepresentationswere 'stale,'" and that the share price drop resulted from thefines rather than any inadequate disclosures, Berman said. "Butdefendants' arguments here involve questions of fact and shouldnot be resolved upon a motion to dismiss."
The 2nd Circuit also said Scheindlin correctly ruled thatBarclays' statements in U.S. Securities and Exchange Commissionfilings about its internal controls were not materially false.It returned the case to her court for further proceedings.
Royal Bank of Scotland Group Plc, Switzerland's UBSAG, Britain's ICAP Plc and Dutch bank Rabobankhave also reached regulatory accords over Libor manipulation.The Federal Deposit Insurance Corp, bondholders and others haveaccused 16 banks in U.S. lawsuits of Libor manipulation.
The case is Carpenters Pension Trust Fund of St. Louis et alv. Barclays Plc et al, 2nd U.S. Circuit Court of Appeals, No.13-2678. (Reporting by Jonathan Stempel in New York; Editing by SteveOrlofsky and Andre Grenon)
Barclays (BARC)