Fresh from Libor Scandal, Barclays May Have to Pay Millions in California Energy Market Rigging

Monday, November 05, 2012

The clock is running on Barclays for the bank to show U.S. regulators that it shouldn’t be fined a record $470 million for manipulation of California’s electricity markets.

The Federal Energy Regulatory Commission (FERC) accused Barclays of making trades in the energy market that it purposely lost money on in order to make huge profits on investments in a related derivatives swaps market. Four traders for the bank are also facing fines of $18 million for their role in what is called a “loss-leader” scheme.

The four traders were quoted in bank documents as bragging that they would “crap on” some markets in order to make large profits in others, according to Reuters.

Barclays is contesting the allegations and has 30 days to make its case. FERC is seeking to reclaim around $35 million in profits the bank made, plus $435 million in civil penalties.

FERC also is probing trading by JPMorgan Chase & Co. and Deutsche Bank AG in a stepped up effort to police energy markets after a 2005 meltdown in California related to the Enron scandal. The agency has conducted 11 investigations of alleged manipulation of energy markets since January 2011, one of which resulted in a $245 million settlement with Constellation Energy Group Inc.

It’s been a bad year for Barclays encounters with government regulators. The bank agreed in June to pay fines totaling $450 million to U.S. and British authorities for manipulating the London Interbank Offered Rate (LIBOR), the rate banks charge to loan money among themselves. It is the main benchmark for setting short-term interest rates around the world.

That scandal cost Barclays chief executive Bob Diamond his job.

–Ken Broder


To Learn More:

Barclays May Pay $470 Million to Settle Claims It Manipulated California Electricity Market (by Scott DiSavino and Jonathan Leff, Reuters)

Barclays’ Energy Trading in Record $470 Million U.S. Fine (by Brian Wingfield, Bloomberg Businessweek)

How Barclays Made Money On LIBOR Manipulation (by Simone Foxman, Business Insider)

Feds Threaten to Pull Plug on JPMorgan Trading in Energy Market (by Ken Broder, AllGov California)

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