Barclays hit by US$453m fine for manipulating US electricity prices

17 July 2013

Barclays and four of its traders have had a US$453m fine for allegedly manipulating electricity prices upheld by US regulators.

The bank must pay US$435m within 30 days, while trader Scott Connelly must pay US$15m. Three others - Daniel Brin, Karen Levine and Ryan Smith - were fined US$1m each in the latest blow to Barclays’ corporate reputation following the Libor mis-selling scandal.

A profit of $34.9m also has to be foregone by Barclays, with the sum instead distributed to low-income aid programmes in the US states of Arizona, California, Oregon and Washington. The bank still maintains that intends to “vigorously defend this matter”, suggesting further appeals.

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.”

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development