Brent Crude Fixers, Lloyd Internal Probe, SAC: Compliance

Four longtime traders in the global oil market claim in a lawsuit that the prices for buying and selling crude are fixed -- and that they can prove it.

Some of the world’s biggest oil companies including BP Plc, Statoil ASA, and Royal Dutch Shell Plc conspired with Morgan Stanley and energy traders including Vitol Group to manipulate the closely watched spot prices for Brent crude oil for more than a decade, they allege. The North Sea benchmark is used to price more than half the world’s crude and helps determine where costs are headed for fuels including gasoline and heating oil.

The case, which follows at least six other U.S. lawsuits alleging price-fixing in the Brent market, provides what appears to be the most detailed description yet of the alleged manipulations and lays out a possible road map for regulators investigating the matter.

The traders who brought it -- who include a former director of the New York Mercantile Exchange, or Nymex, one of the markets where contracts for future Brent deliveries are traded - - allege they paid “artificial and anticompetitive prices” for Brent futures. They also outline attempts to manipulate prices for Russian Urals crude and cite instances when the spread between Brent and Dubai grades of crude may have been rigged.

Representatives of Shell, Vitol, Morgan Stanley and BP declined to comment on the latest suit.

“It is not uncommon to see these types of private U.S. lawsuits filed following investigations by governmental agencies,” Morten Eek, a Statoil spokesman, said in an e-mail. “We do not want to make further comments.”

The case is McDonnell v. Royal Dutch Shell Plc, 13-cv-07089, U.S. District Court, Southern District of New York (Manhattan). The multidistrict litigation is In Re North Sea Brent Crude Oil Futures Litigation, 13-md-02475, U.S. District Court, Southern District of New York (Manhattan).

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Compliance Action

U.K. Regulators Find No Gas Market Abuse After Yearlong Probe

The U.K. natural gas market wasn’t manipulated by traders in September last year, regulators said after a one-year investigation into buying and selling in Europe’s biggest consumer of the fuel.

A review by the Office of Gas and Electricity Markets and the Financial Conduct Authority into trading on Sept. 28, 2012, found no evidence of market manipulation, Ofgem said today in a statement. It was alleged that trades were made below the best bid before 4:30 p.m. London time, when publishers produce a benchmark index for the day, Ofgem said.

Price-reporting agency ICIS, a unit of Reed Elsevier Plc, reported irregular trades to Ofgem in October 2012 after former reporter Seth Freedman flagged what he suspected was an attempt to manipulate assessments in the $480 billion market. Ofgem opened a consultation into pricing benchmarks in the energy industry in June.

It was alleged that gas was sold at 58 pence a therm just before 4:30 p.m. on Sept. 28, 2012, below the best bids, Ofgem said. That was the lowest price for day-ahead gas in almost a month, according to broker data compiled by Bloomberg.

Ofgem has the power to monitor, investigate and take action against organizations or individuals who carry out energy market abuse, as part of the European Union’s Regulation of Energy Market Integrity and Transparency, known as Remit. Ofgem is responsible for monitoring the physical gas market, while the FCA regulates the financial derivatives market.

Lloyds Opens Internal Probe Into Potential Currency Manipulation

Lloyds Banking Group Plc, Britain’s largest mortgage lender, opened an internal probe into its currency-trading operations as regulators around the world scrutinize the possible manipulation of foreign-exchange rates.

Lloyds started the inquiry after the Financial Conduct Authority asked the lender to review its trading operations and report any irregularities, said two people with knowledge of the matter who asked not to be identified because they weren’t authorized to speak publicly. The bank isn’t being formally probed by any regulators and no traders have been put on leave, suspended or terminated, said the people.

At least seven banks including Britain’s Barclays Plc and HSBC Holdings Plc have said they are being investigated by authorities examining the $5.3 trillion-a-day foreign-exchange market and are co-operating. Citigroup Inc., JPMorgan Chase & Co. and Barclays have all suspended or put on leave some of their most senior currency traders amid the inquiry. No one has been accused of wrongdoing.

ING Says Real Estate Capital Suffices Before ECB Test

ING Groep NV, the biggest Dutch financial-services company, said the buffers to absorb losses on its real estate finance loans are sufficient to meet Dutch and European regulators’ scrutiny.

The Dutch central bank is conducting an asset quality review of the nation’s biggest lenders’ commercial real estate books before the European Central Bank takes over supervision of European banks including ING, Rabobank Groep and ABN Amro Group NV next year. The ECB will review loans to small- and medium-sized companies and shipping loans, as well as commercial real estate, Rabobank board member Sipko Schat said in an interview last week. Residential mortgages aren’t included, he said.

ING welcomes the central bank reviews, which “will help the market understand better where we are with these exposures,” Nagel said.

The ECB is running a three-stage probe into the health of the euro-area banking industry as a precondition for taking over supervision. A series of stress tests will be conducted with the European Banking Authority as the final step.

Prices on the Dutch commercial property market have fallen by an average of 15 percent from a market peak before the financial crisis, the country’s central bank said last month.

Courts

SAC Civil Money-Laundering Settlement Approved by U.S. Judge

Steven A. Cohen’s SAC Capital Advisors LP won partial approval of its $1.8 billion settlement with the U.S., as a federal judge said he’ll sign off on an agreement to resolve a civil money-laundering case against the hedge fund.

U.S. District Judge Richard Sullivan said yesterday at a brief hearing in federal court in Manhattan that he’ll sign an order approving the agreement. On Nov. 8, U.S. District Judge Laura Taylor Swain will consider whether to approve SAC’s guilty plea to securities-fraud and wire-fraud charges.

Cohen, 57, wasn’t charged. He faces an administrative action filed by the U.S. Securities and Exchange Commission alleging he failed to supervise his hedge fund’s activities.

The criminal case is U.S. v. SAC Capital Advisors LP, 13-CR-00541, U.S. District Court, Southern District of New York (Manhattan). The civil case is U.S. v. SAC Capital Advisors LP, 1:13-cv-5182, U.S. District Court, Southern District of New York (Manhattan).

Donald Wilson Sued by CFTC Over DRW Investments Swap Trades

Donald R. Wilson and his DRW Investments LLC were sued by the U.S. Commodity Futures Trading Commission over what the agency called “manipulative” futures trades in an alleged $20 million scheme.

Wilson and his Chicago-based investment fund manipulated prices for interest-rate swap futures contracts traded on the Nasdaq OMX Futures Exchange and cleared through the International Derivatives Clearinghouse from January through August 2011, according a complaint the CFTC filed yesterday in Manhattan federal court.

DRW sued the CFTC in September in federal court in Chicago, seeking to block the regulator from its “stated intention to bring an enforcement action.”

The CFTC is seeking unspecified fines and restitution.

The New York case is U.S. Commodity Futures Trading Commission v. Wilson, 13-cv-07884, U.S. District Court, Southern District of New York (Manhattan). The Chicago case is DRW Investments LLC v. U.S. Commodity Futures Trading Commission, 13-cv-06630, U.S. District Court, Northern District of Illinois (Chicago).

Kyrgyzstan Asks to Join SEC’s Global Industries Trading Lawsuit

The Kyrgyz Republic seeks to join a U.S. regulator’s insider-trading lawsuit, claiming trades in Global Industries Ltd. were directed by the son of the Central Asian country’s former leader.

Lawyers for the country filed a request Nov. 5 in federal court in Manhattan asking to intervene in the Securities and Exchange Commission lawsuit in an effort to recover public funds allegedly stolen by Maksim Bakiyev. He is the son of Kyrgyzstan’s former president, Kurmanbek Bakiyev, who was ousted in an April 2010 coup.

The SEC said in a complaint filed in September 2011 that unknown buyers made more than $1.7 million in profit that month by trading on non-public information about Global Industries, a Sulphur, Louisiana-based oil-field construction company. The case was dismissed last month after the agency dropped it without explanation.

A former financial adviser to the Bakiyevs, Eugene Gourevitch, was charged in an indictment unsealed last month in federal court in Brooklyn, New York, with conspiracy and obstruction of justice in the SEC case. He has pleaded not guilty to those charges.

Both Gourevitch and Maksim Bakiyev have been accused by the new Kyrgyz government of theft of public assets, money laundering and other crimes “arising from corruption in the deposed regime,” lawyers for the country said in yesterday’s filing.

The case is Securities and Exchange Commission v. One or More Unknown Purchasers Of Securities Of Global Industries Ltd., 1:11-cv-06500, U.S. District Court, Southern District of New York (Manhattan).

AlphaMetrix Agrees to Order Freezing Assets in CFTC Case

AlphaMetrix LLC, a Chicago-based commodity pool operator accused by the Commodity Futures Trading Commission of misappropriating $2.8 million, agreed to a court order this week freezing its assets and preserving records.

The order, filed Nov. 5 in federal court in Chicago, stems from a lawsuit filed this week by the CFTC accusing AlphaMetrix of breaching an obligation to reinvest at least $2.8 million worth of rebates into pools it was operating. AlphaMetrix doesn’t admit or deny the allegations and agreed to the order “voluntarily,” according to the filing.

“AlphaMetrix agreed to the entry of the order because it is consistent with its efforts to liquidate and return the funds,” the company said yesterday in an e-mailed statement. “AlphaMetrix denies the allegations that it violated the Commodity Exchange Act as alleged in the complaint filed by the CFTC,” the company said.

A hearing is scheduled on the restraining order Nov. 12, according to the filing.

AlphaMetrix, which had about $700 million in client assets as recently as Aug. 31, warned last month that was running short on cash and said last week it would begin closing investment pools.

The case is U.S. Commodity Futures Trading Commission v. AlphaMetrix LLC, 13-cv-07896, U.S. District Court, Northern District of Illinois (Chicago).

Comings and Goings/Executive Pay

Fired Deutsche Bank Rate Traders Win $500,000 in Back Pay

Four Deutsche Bank AG traders who won reinstatement of their jobs after they were dismissed following an internal probe into rate-rigging were awarded almost $370,000 ($500,000) in back pay.

The total monthly pay of the four men, who were fired in February, ranged from 10,833 euros to 22,083 euros on average, according to the written version of the judgment made Sept. 11 and released by the Frankfurt Labor Court yesterday. The men, whose names weren’t disclosed, returned to work on Nov. 4, according to the bank.

The traders included two managing directors, a vice president and a director, according to the ruling. The managing directors were awarded bonuses of 2.7 million euros and 780,000 euros for 2011, while the two more junior bankers were awarded 200,000 euros and 180,000 euros, according to the judgment. Investment bank bonuses are typically paid over several years.

Regulators around the world are investigating whether more than a dozen firms, including Deutsche Bank, colluded to rig benchmark interest rates.

The traders said that before they were dismissed, their bonuses for 2011 were reduced as a sanction for their allegedly inappropriate behavior and that an unidentified Deutsche Bank official said they would be compensated once “the situation had calmed down,” according to the ruling.

Deutsche Bank disputes that account, the document shows. Deutsche Bank is reviewing whether to appeal the rulings, Ronald Weichert, a spokesman for the lender, said.

The court found “indications” that the fired staff wrongfully took derivatives trading positions of colleagues into account when deciding which rates to submit, the judges wrote.

The cases are ArbG Frankfurt am Main, 9 Ca 1551 to 1554/13.

PCAOB Names Economist Zingales to Run Research Center

Luigi Zingales, an economist at the University of Chicago, will direct the newly created Center for Economic Analysis, established by the Public Company Accounting Oversight Board.

The Center was created to study the “role and relevance of the audit in capital formation and investor protection,” the PCAOB said in a statement.

The new group will work to “enhance the relevance and reliability of audits,” James R. Doty, PCAOB chairman, said in the statement.

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