Barclays Plc (BARC) and four of its former traders denied gaming electricity markets in the Western U.S. and vowed to fight more than $470 million in penalties proposed by the Federal Energy Regulatory Commission.
In a filing with the FERC today, lawyers for the London- based bank said the allegations are “based on an economically irrational theory” and said they would challenge the agency’s investigation in federal court.
“The commission should terminate this proceeding without any further action,” Barclays said in its 40-page filing. If the FERC pursues the case, it “will be unable to prove the alleged violations” in court, it said.
The FERC on Oct. 31 proposed record penalties against Barclays, as well as $18 million in penalties on four of its former traders, for allegedly gaming energy markets in the West from late 2006 to 2008. The bank’s challenge to to the probe may prove to be a test of the commission’s enforcement powers, which Congress enhanced in 2005 to prevent the type of market manipulation that triggered blackouts in California earlier in the decade.
FERC Chairman Jon Wellinghoff has said the agency, which has about 200 employees devoted to policing the markets, is in “full enforcement mode.”
Barclays didn’t have the intent or the ability to manipulate energy markets and its trading was legitimate, lawyers for the bank said in today’s filing.
The five-member commission should reject its enforcement staff’s recommendations, “decline to assess any penalties, and terminate this matter without any further proceedings,” Mark Lane, a Barclays spokesman, said in an e-mail. “If the FERC proceeds, we intend to vigorously defend this matter in federal court.”
Mary O’Driscoll, a FERC spokeswoman, did not respond immediately to e-mail and telephone requests for comment.
To contact the reporter on this story: Brian Wingfield in Washington at email@example.com
To contact the editor responsible for this story: Jon Morgan at firstname.lastname@example.org