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TheStreet Open House

Deutsche Bank Raided as Price-Fixing Plot Thickens (Update 1)

Updated to include reports on Tuesday's bank raids by European Commission officials.

NEW YORK ( TheStreet) -- Price-fixing cases involving some of the world's largest banks, including U.S. giants Citigroup (C), Bank of America (BAC), JPMorgan Chase (JPM) have ensnared several other banks, inculding Deutsche Bank (DB), which saw its London offices raided by European Commission officials Tuesday, Reuters reported, citing unidentified sources.

A Deutsche Bank spokesman declined to comment when contacted by TheStreet.

The cases could end up providing the criminal prosecution of high-level bank executives that many critics of the financial services industry have been seeking.

While the cases have received steady coverage, they haven't registered with the public. That's most likely because they involve Libor--an acronym determinedly unsexy and seemingly disconnected from every day concerns--and now Euribor, which is hardly an improvement when it comes to grabbing the attention of regular folks.

But Libor, which stands for the London interbank offered rate, and Euribor--the Euro Interbank Offered Rate--are critical metrics for the banking industry. Set by group of some of the world's largest banks, they reflect the rates at which they are willing to lend to one another. Along with U.S. Treasury rates, they are among the most important metrics for setting prices on a vast number of bonds and loans.

Libor touches everything from multi-billion dollar syndicated loans to your mortgage.

Some of the 16 banks that set the Libor rate in 2007 and 2008 are being investigated for possible manipulation of that market, and investigators are now looking at potentially bringing criminal charges, according to a report in the Financial Times last month. And on Tuesday, The Wall Street Journal reported a related investigation into Euribor, which is set by more than 40 different banks. The story cited Cedric Quemener, a European banking official involved in setting the Euribor rate, saying he isn't worried since Euribor is set by so many banks it is harder to manipulate than Libor.

Last month's FT report states that all 16 banks on the London panel in 2007 and 2008 have been asked to give information to investigators, who are being led by the Commodity Futures Trading Commission and the U.S. Justice Department. Investigators from the UK, Japan and the European Union are also involved in the case, according to the FT report. It isn't clear which of the 16 banks could face criminal charges. While an FT in March stated that Barclays (BCS) was "emerging as a key focus" of the probe, last month's report made no mention of the British bank.

In eyeing criminal charges, investigators are focusing on potential violations of the Commodity Exchange Act which led to criminal settlements and prison terms of up to 14 years when a similar strategy was used against American Electric Power (AEP), Mirant Energy Trading and Williams Power, the FT report states. The law prohibits dissemination of a false report that could affect commodity prices.

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