U.S. FERC sues Barclays over power market manipulation

Reuters

Oct 10 (Reuters) - U.S. federal energy regulators said onThursday they filed a lawsuit in the U.S. Eastern District Courtin California against British bank Barclays Plc torecover $435 million in civil penalties for alleged power marketmanipulation.

Although the U.S. Federal Energy Regulatory Commission(FERC) sought a jury trial, the regulator said the court canaffirm the FERC's July 16 order assessing civil penaltiesagainst the bank and four former traders.

The FERC filing alleged that Barclays and its tradersengaged in a "fraudulent scheme to manipulate electricityprices" in and around California between 2006 and 2008.

Basically, the FERC accused Barclays of losing money onphysical power trades to benefit its financial positions.

In response to the lawsuit, Barclays said: "We stronglydisagree with the allegations made by FERC against Barclays andits former traders in the FERC's petition, and we believe thepenalty previously assessed by the FERC is without basis.

"We intend to vigorously defend this matter in federalcourt, where the FERC will have the burden of proving itsallegations and we will be able to present a balanced and fullpresentation of the facts."

The FERC said its Office of Enforcement startedinvestigating the bank's trading in 2007 following multiplecalls to the Commission's Enforcement Hotline.

In October 2012, the FERC issued a so-called show causeorder requiring the bank and traders to show why they should notbe found to have violated the law and fined.

The bank and the traders elected in November 2012 not tohave an administrative hearing at the FERC and instead chose tohave the case heard in federal district court.

After waiting the legally required 60 days after theCommission affirmed the penalty against the bank in July 2013,the FERC filed the lawsuit in federal district court onWednesday.

PAST FERC FINES

The FERC has issued over $1 billion in fines since theEnergy Policy Act of 2005 significantly increased the penaltythe commission can impose to $1 million per day per violationfrom the previous cap of $10,000 a day.

The FERC imposed the biggest fines on Barclays, JPMorganChase & Co Inc and Constellation Energy over allegationsof power market manipulation. Energy trader Brian Hunter and BPPlc were fined over allegations of natural gas marketmanipulation, and Florida power companies fined over allegedviolations of power reliability standards leading to a blackout.

Constellation is now a unit of Exelon Corp.

BP said it will defend the company against the FERCallegations.

Earlier in 2013, Hunter successfully defended himselfagainst the FERC allegations in federal court. The U.S. Court ofAppeals for the District of Columbia Circuit ruled that theCommodity Futures Trading Commission (CFTC) and not the FERChave the authority to fine him. The CFTC is expected to pursue acase against Hunter in federal court in November.

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