The Federal Energy Regulatory Commission (FERC) has ordered Barclays Bank PLC and four of its traders to pay USD453m in civil penalties for manipulating electric energy prices in California and other western markets between November 2006 and December 2008.
FERC also ordered Barclays to disgorge USD34.9m, plus interest, in unjust profits to the Low-Income Home Energy Assistance Programs of Arizona, California, Oregon, and Washington.
Barclays has vowed to fight the fine stating that FERC’s assessment “does not reflect a balanced and full description of the facts or the applicable legal standard.”
"We intend to vigorously defend this matter," the bank said in a statement on Tuesday.
FERC meanwhile has given Barclays 30 days to pay the penalties. Barclays also has 30 days to distribute the unjust profits, with 19 per cent going to Arizona, 63 per cent to California and nine per cent each to Oregon and Washington.
In the order, FERC finds Barclays, Daniel Brin, Scott Connelly, Karen Levine and Ryan Smith built and then flattened substantial monthly physical index positions at four of the then-most liquid trading points in the western US for the fraudulent purpose of manipulating the index price to benefit Barclays’ financial swap positions. FERC finds that their actions demonstrate an affirmative, coordinated and intentional effort to carry out a manipulative scheme, in violation of the Federal Power Act and FERC’s Anti-Manipulation Rule.
Given the seriousness of the violations and the lack of any effort by Barclays and the traders to remedy their violations, FERC ordered Barclays to pay USD435m in penalties; Connelly to pay USD15m; and Brin, Levine and Smith to pay USD1m each. The Federal Power Act authorises penalties for such manipulative acts of up to USD1m per day per violation.
The action comes after Barclays and the traders responded to a FERC order directing them to answer allegations that they manipulated western electric energy markets. Barclays and the traders opted for a procedure under the Federal Power Act in which FERC may assess a penalty without a hearing before an administrative law judge. If Barclays and the traders do not pay the penalties assessed by FERC, then FERC may seek affirmation of the penalties from a federal district court.