Barclays Plc (BARC) failed to pay $488 million in fines and disgorgement demanded by the U.S. Federal Energy Regulatory Commission for rigging California electricity prices, the agency said in a court petition seeking to enforce the July order.
The agency asked a federal judge in Sacramento yesterday to affirm the penalties, as more than 60 days had passed since they were imposed. The regulator alleged the U.K.-based bank and its employees engaged in a “fraudulent scheme to manipulate electricity prices” between 2006 and 2008.
The FERC on July 16 fined Barclays $435 million and ordered it to surrender $34.9 million in profits for gaming energy-markets in the western U.S. It also directed four former traders to pay $18 million, including a $15 million penalty for the alleged ringleader of what the FERC has described as a “coordinated, fraudulent scheme.”
The U.S. move means a judge will review the agency’s justification for the penalties against Barclays for “engaging in a fraudulent scheme to manipulate electricity prices in and around California.”
The court may reduce, or increase, those penalties.
Also named in the petition are ex-Barclays energy traders Daniel Brin, Scott Connelly, Karen Levine, and Ryan Smith. The bank and the traders have denied any wrongdoing.
“We strongly disagree with the allegations made by FERC against Barclays and its former traders,” said Marc Hazelton, a spokesman for the bank, who added that Barclays will fight the petition seeking enforcement of the fine. “The penalty previously assessed by the FERC is without basis.”
The defendants have 21 days to respond to the complaint, according to a court filing today.
Congress in 2005 expanded the FERC’s enforcement powers, allowing the agency to better police energy markets. Under chairman Jon Wellinghoff, the agency has enlarged its enforcement office and investigated trading units of banks including JPMorgan Chase & Co. (JPM) and Deutsche Bank AG for allegedly manipulating markets.
The FERC in January resolved its investigation of Frankfurt-based Deutsche Bank for $1.6 million, and on July 30 settled its probe of New York-based JPMorgan for $410 million. Neither bank acknowledged wrongdoing in the settlements.
In its investigation of Barclays, the FERC’s staff determined that the company’s employees made transactions on fixed-price products in power markets, where electricity is traded, with the intent of moving an index to benefit the bank’s other bets on swaps.
In 2007, multiple participants in energy markets in the western U.S. called the FERC’s enforcement hot line to alert the commission of potentially manipulative trading by Barclays, the agency said in its court petition.
The FERC said its staff reviewed e-mails, instant messages and voice memos among traders as part of its probe.
“The hotline callers alleged Barclays may have been trading electricity uneconomically in physical markets” to affect settlement prices on the Intercontinental Exchange Inc., the agency said.
The case is Federal Energy Regulatory Commission v. Barclays Bank Plc, 13-01158, U.S. District Court for the Eastern District of California (Sacramento).
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