RiskFinancial CrimeUS$453m Fine on Barclays for Manipulating US Electricity Prices Upheld

US$453m Fine on Barclays for Manipulating US Electricity Prices Upheld

US regulators have upheld a US$453m fine imposed on Barclays and four of its traders for allegedly manipulating electricity prices. The bank must pay US$435m within 30 days, while trader Scott Connelly must pay US$15m and three others Daniel Brin, Karen Levine and Ryan Smith, were fined US$1m each.

Barclays must also forgo US$34.9m in profits, a sum that will be distributed to low-income aid programmes in the US states of Arizona, California, Oregon and Washington. The group said that it intends to “vigorously defend this matter”.

The fines, initially proposed by staff at the Federal Energy Regulatory Commission (FERC) last October, have now been upheld by the body’s board of commissioners. FERC accused Barclays of manipulating the electricity markets in California and other US states from November 2006 to December 2008.

“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,” the regulator stated.

But the bank said in a statement: “We are disappointed by the action that FERC took today. We believe the penalty assessed by the FERC is without basis, and we strongly disagree with the allegations made.”

Regulators developed their case based on electronic communications between the traders. According to the FERC complaint, the four boasted of their ability to manipulate markets in a series of electronic messages. The FERC also alleged that Connelly attempted to deliberately misdirect a staff member of the Western Power Trading Forum, which published an energy newsletter called the
Friday Burrito
.

News of the fines came shortly after Barclays named Tushar Morzaria as its new finance director, to succeed Chris Lucas, who announced his retirement in February. Morzaria is currently chief financial officer (CFO) for corporate and investment banking at JP Morgan Chase. According to reports, he is likely to start working at Barclays in the autumn, but will not join the board until January 2014.

His appointment is the latest to be announced since Antony Jenkins was promoted to chief executive officer (CEO) of Barclays last August, following the departure of Bob Diamond in the wake of the London Interbank Offered Rate (Libor) scandal. Jenkins welcomed Morzaria’s arrival at the bank and said: “He will bring a welcome new perspective to what is a pivotal role.”

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