The Federal Energy Regulatory Commission (FERC) Tuesday ordered Barclays Bank and four of its traders to pay $453m 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 $34.9m, plus interest, in unjust profits to the Low-Income Home Energy Assistance Programs of Arizona, California, Oregon, and Washington.
In the order, FERC founds 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 United States for the fraudulent purpose of manipulating the index price to benefit Barclays’ financial swap positions. FERC found 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 $435m in penalties; Connelly to pay $15m; and Brin, Levine and Smith to pay $1m each. The Federal Power Act authorizes penalties for such manipulative acts of up to $1m per day per violation.
These penalties must be paid to the U.S. Treasury within 30 days. Barclays also has 30 days to distribute the unjust profits, with 19% going to Arizona, 63% to California and 9% each to Oregon and Washington.
Barclays spokesperson Marc Hazelton said: 'We believe that our trading was legitimate and in compliance with applicable law. We intend to vigorously defend this matter'.
image: © Elliot Brown