Baltimore and Philadelphia consolidated their class-action lawsuits alleging that eight of the nation’s biggest banks, including Bank of America, JPMorgan Chase, and Citigroup, conspired to fix the prices on floating-rate bonds sold to finance public works, reported Bloomberg Law.
The consolidated complaint, filed May 31 in the Southern District of New York, also claims the banks violated their fiduciary duties to the cities by advising them to sell the variable-rate securities as the yields were being kept artificially high.
In February, Philadelphia accused Bank of America, Barclays, Citigroup, Goldman Sachs Group, JPMorgan Chase, Royal Bank of Canada, and Wells Fargo of secretly manipulating rates for tax-exempt bonds known as VRDOs, or variable-rate demand obligations.
Philadelphia, which stated it issued more than US$1.6 billion of the bonds, claimed the banks colluded to collect hundreds of millions of dollars in fees they did not earn, reducing critical funding for public services such as hospitals, power and water supplies, schools, and transportation.
“The alleged misconduct of the defendants potentially resulted in Philadelphia – and entities across this country -paying above-market interest rates for years,” City Solicitor Marcel Pratt said.