PLAINTIFF's RESPONSE to the BARCLAYS DEFENDANTS' LOCAL RULE 56.1 STATEMENT and COUNTERSTATEMENT of ADDITIONAL MATERIAL FACTS TABLE of CONTENTS Page
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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK In re BARCLAYS BANK PLC SECURITIES : Master File No. 1:09-cv-01989-PAC LITIGATION : CLASS ACTION This Document Relates To: [FILED UNDER SEAL] ALL ACTIONS. x PLAINTIFF'S RESPONSE TO THE BARCLAYS DEFENDANTS' LOCAL RULE 56.1 STATEMENT AND COUNTERSTATEMENT OF ADDITIONAL MATERIAL FACTS TABLE OF CONTENTS Page PLAINTIFF'S RESPONSE TO THE BARCLAYS DEFENDANTS' LOCAL RULE 56.1 STATEMENT 1 I. BACKGROUND .2 A. Barclays ,2 B. Lead Plaintiff Dennis Askelson .4 11. THE SERIES 5 ADS OFFERING .6 A. The Series 5 ADS; Preference Shares 6 B. Events Leading Up to the Series 5 ADS Offering 8 1. November 15, 2007 Update and Conference Call 8 2. February 19,2008 Results Announcement and Conference Call 9 C. Barclays' 2007 20-F 14 III. BARCLAYS' VALUATION PROCESSES; PWC'S AUDIT WORK 18 IV. POST-OFFERING EVENTS 38 PLAINTIFF'S COUNTERSTATEMENT OF ADDITIONAL MATERIAL FACTS 53 I. 2007 20-F 53 II. BACKGROUND 58 A. EquiFirst Acquisition, ASG Joint Venture, and Deterioration of Barclays' Whole Loan Portfolio ,58 B. Barclays' Exposure to NIMs and Post-NIMS 70 C. Barclays' "Workout Portfolio" 70 D. Barclays' Competitors Suffer Large Losses in 3Q07 and 4Q07... 72 E. Barclays Decides to Issue an "Off Cycle" Trading Update 76 F. Analysts and Investors React Positively to the BarCap Trading Update 80 III. THE SERIES 5 OFFERING MATERIALS' MATERIAL MISSTATEMENTS AND OMISSIONS .81 A. Barclays' Exposure to Monoline Insurers 81 1. Background on Monoline Insurers 81 2. Barclays' Exposure to Assets Wrapped by Monolines and Non-Monoline Insurers 82 3. Barclays' Monoline Exposure was Material to Investors... 91 a) Investor Concern Over Monoline Insurers Grows in 2007 and 2008 .91 b) Barclays Internally Recognized the Monolines as an "Area of Concern" .96 c) Barclays' Competitors Issued Extensive Disclosures Regarding Their Monoline Exposures 101 Jg Barclays' 1Q08 Losses and Writedowns 105 Barclays' Capital Plan, Growing RWAs, Declining Capital and Equity Ratios, and Discussions with the FSA 111 D. Barclays' Gross Losses and Exposures 128 jg Barclays' CDO Positions 133 1. Certain of Barclays' CDOs had hit default triggers by the time of the Series 5 offering 133 2. Barclays Had Not Decreased its CDO Positions 134 BGI's Exposure to SIVs 134 IV. BEAR STEARNS 135 V. POST-SERIES 5 OFFERING EVENTS 136 A. 1Q08 Results 136 B. June 2008 Capital Raise 137 C. July 14, 2008 137 D. July 18,2008 138 E. August 14,2008 139 F. September 3,2008 140 G. October 8,2008 141 H. October 10, 2008 144 I. December 19, 2008 144 J. December 22,2008 145 K. January 20, 2009 147 L. January 21, 2009 149 M. January 23, 2009 150 N. February 2, 2009 151 O. March 9,2009 153 p October/November Capital Raise 154 Q. EquiFirst Closing 155 Barclays' Undisclosed Payments to Qatar in Connection with October 2008 Capital Raise 155 ii Pursuant to Rule 56 of the Federal Rules of Civil Procedure and Rule 56.1 of the Local Rules of the United States District Court for the Southern and Eastern Districts of New York, Lead Plaintiff Dennis Askelson, submits his (i) Response to the Local Rule 56.1 Statement in Support of the Barclays Defendants' Motion for Summary Judgment; and (ii) Counterstatement of Additional Material Facts. PLAINTIFF'S RESPONSE TO THE BARCLAYS DEFENDANTS' LOCAL RULE 56.1 STATEMENT 1. Plaintiff objects to Defendants' submission of unsubstantiated facts that are not supported by a citation to admissible evidence, as required by Federal Rule of Civil Procedure 56(e) and Local Civil Rule 56.1(d). 2. Evidence cited by Plaintiff in support or in contradiction of any particular fact or proposition should not be construed as the only evidence supporting or contradicting the fact or proposition in question, and Plaintiff specifically reserves the right to provide additional evidence as is necessary and appropriate. 2. The phrases "do not dispute" and "not disputed" shall not be construed as a concession by Plaintiff that a statement is material, complete, supports the proposition which is cited, would be admissible at trial, or is otherwise relevant. Plaintiff reserves his rights to challenge the admissibility of any statement and any cited materials at trial. Plaintiffs assertion that he "does not dispute" any particular fact or proposition is solely for purposes of Defendants' motion for summary judgment, and Plaintiff reserves all other objections including, but not limited to, his right to object to or contest each of Defendants' assertions of fact at the appropriate time, including the right to challenge such assertions of fact at trial. 1 6. Because Defendants' section headings, if any, are not statements of material undisputed facts, no response is needed or provided as to any such headings. BACKGROUND A. Barclays 1. Barclays was and is a global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management services, headquartered in London. (White Decl. Ex. 1 (Barclays' Annual Report for the fiscal year ended December 31, 2007 filed on Form 20-F) (the "2007 20-F") at 115.) Response: Not disputed. 2. In 2007-2008, Barclays was organized in the following business groupings: UK Banking, UK Retail Banking, Barclays Commercial Bank, Barclaycard, International Retail and Commercial Banking, Barclays Capital, Barclays Global Investors and Barclays Wealth. (White Decl. Ex. 1 (2007 20-F) at 8-9.) Response: Not disputed. In 2007-2008, Barclays Capital was an investment bank based in New York. Barclays Capital was organized in three principal areas: Rates, Credit and Private Equity. (White Decl. Ex. 1 (2007 20-F) at 25.) Response: Not disputed. 4. At year-end 2007, Barclays had assets of £1,227,361 million {i.e., approximately £1.23 trillion), total shareholders' equity of £32,476 million {i.e., approximately £32.5 billion) and total income of £23,492 million {i.e., approximately £23.5 billion). (White Decl. Ex. 1 (2007 20-F) at 160-61.) Response: Not disputed. 2 At year-end 2007, Barclays' "Tier 1 Capital ratio" was 7.8% and its "Equity Tier 1 ratio" was 5.0% under Basel I. Barclays "started managing capital ratios under Basel 11" on January 1, 2008; Barclays' Tier 1 Capital ratio was 7.6% and its Equity Tier 1 ratio was 5.1% under Basel II. (White Decl. Ex. 1 (2007 20-F) at 5.) Response: Not disputed, but Plaintiff respectfully refers the Court to 1321' for Barclays' capital position at the end of each month during the period September 2007 - April 2008. 6. The Tier 1 Capital ratio is total Tier 1 capital over total risk weighted assets, and the Equity Tier 1 ratio is total equity Tier 1 capital over total risk weighted assets. (See White Decl. Ex. 27 ("The Turner Review: A Regulatory Response to the Global Banking Crisis," FSA, March 2009) at 55-56.) Response: Not disputed. In 2007 and 2008, the U.K. regulatory minimum was 4% for the Tier 1 Capital ratio and 2% for the Equity Tier 1 ratio. (White Decl. Ex. 27 ("The Turner Review: A Regulatory Response to the Global Banking Crisis," FSA, March 2009) at 56, 57.) Response: Disputed: (i) the FSA has described these capital ratios as the "absolute minimum," and further noted that "almost all major international banks already have ratios well above these levels, and that regulators already have discretion to require higher levels" (White Decl. Ex. 27 ("The Turner Review: A Regulatory Response to the Global Banking Crisis," FSA. March 2009) at 55); (ii) Barclays maintained internal "target" Tier 1 Capital and Equity Tier 1 ratios in 2007 (7.25% and 5.25% under Basel I, respectively) and 2008 (7.25% and 5.25% under Basel II, respectively) (1321); (iii) prior to the Series 5 offering, the FSA required Barclays to Unless otherwise noted, (i) citations to " are to Plaintiffs Counterstatement of Additional Material Facts, infra, (ii) citations to "Ex. " are to exhibits to the Declaration of Sharan Nirmul, submitted herewith, and (iii) citations to "White Decl. Ex.'" are to exhibits to the Declaration of Thomas C. White, submitted in support of the Barclays Defendants' Motion for Summary Judgment (ECF No. 182). 3 meet its target Tier 1 Capital and Equity Tier 1 ratios (e.g., ^|367); and (iv) Barclays' Tier 1 Capital and Equity Tier 1 ratios were below its targets at all times in 2008 prior to the Series 5 Offering (11321). 8. At all times during 2007 and 2008, Barclays' Tier 1 Capital ratio and Equity Tier 1 ratio were above the regulatory minima. (See White Decl. Ex. 50 (Varley Dep.) at 199-200; White Decl. Ex. 1 (2007 20-F) at 5.) Response: Disputed: (i) the FSA "ha[d] discretion to require higher levels" (White Decl. Ex. 27 ("The Turner Review: A Regulatory Response to the Global Banking Crisis," FSA, March 2009) at 55); (ii) Barclays maintained internal "target" Tier 1 Capital and Equity Tier 1 ratios in 2007 (7.25 and 5.25% under Basel I, respectively) and 2008 (7.25% and 5.25% under Basel II, respectively) (1|321); (iii) prior to the Series 5 offering, the FSA required Barclays to meet its target Tier 1 Capital and Equity Tier 1 ratios by year-end 2008 (e.g., 11367); and (iv) Barclays' Tier 1 Capital and Equity Tier 1 ratios were below its targets at all times in 2008 prior to the Series 5 Offering (1(321). B. Lead Plaintiff Dennis Askelson 9. Dennis Askelson bought 2,400 shares of Barclays American Depositary Shares, Series 5 ("Series 5 ADS") on April 9, 2008 at a price of $25 per share for $60,000.