Barclays has pledged to fight a $470m (£300m) penalty for allegedly manipulating electricity prices in California by taking the case through the US judicial system.
Faced with an order by the federal energy regulatory commission (Ferc) to pay a $435m fine and hand $35m of profits to low-income households, Barclays insisted that its trading activities had been legitimate and did not break any laws.
"We intend to vigorously defend this matter in federal court, where the Ferc will have the burden of proving its allegations and we will be able to present a balanced and full presentation of the facts," Barclays said.
The penalty from Ferc is based on allegations about Barclays' trading of electricity for two years to December 2008. It was first mooted in October and late on Monday was upheld by the Washington-based regulator which gave the bank 30 days to pay the fine or appear in court. The proposed penalty is being levied at a time when the bank's new management team, led by chief executive Antony Jenkins, is attempting to rebuild its reputation following the £290m fine for rigging Libor which led Jenkins' predecessor Bob Diamond to quit the troubled bank.
The penalty from Ferc is larger than the Libor rigging fine and led to some concern among bank analysts that it could have an impact on the complex legal agreements struck by Barclays with regulators at the time of the interest rate manipulation case a year ago.
Sandy Chen, banks analyst at Cenkos, said the Ferc fine could trigger a review of the non-prosecution agreement with the department of justice from last July. He cited two elements of the agreement which stated that for two years the bank would "commit no United States crime whatsoever … and bring to the fraud section's attention all criminal or regulatory investigations, administrative proceedings or civil actions brought by any government authority in the US by or against Barclays or its employees that alleges fraud or violations of the laws governing securities and commodities markets".
The allegations by the Ferc date back to 2008 so it was not immediately clear if they fell under the terms of the Libor agreement with the DoJ. Barclays said the allegations by the Ferc were one-sided and did not provide a "balanced and full description of the facts or the applicable legal standard".
Four former Barclays employees, Daniel Brin, Scott Connelly, Karen Levine and Ryan Smith, are required to pay fines – $15m in the case of Brin and $1m each for the others – for building positions in the electricity market to manipulate index prices. In an 85-page document Ferc used emails between the four to set out its case, in which they talked about "propping up" an electricity index. In another Connelly is alleged to have "laughed" at suggestions he risked being reported to the commission about his activities.
Barclays argued that the correspondence had been "cherry picked".
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