WASHINGTON Barclays Bank PLC (BARC.L) has denied that it manipulated electricity markets and predicted in a tersely worded regulatory filing that the U.S. Federal Energy Regulatory Commission's case, and proposed record penalties, will not hold up in court.
In a filing made late on Friday, a response to a "show cause" order by FERC, Barclays and four of its former traders rejected the commission's charge that they enacted various schemes in the markets in the Western United States to benefit offsetting swaps positions.
FERC's "underlying allegations are inconsistent with the facts and incorrectly rely on erroneous inferences drawn from mere fragments of documents," Barclays said. "Barclays did not violate the Commission's Anti-Manipulation Rule."
The filing followed through on Barclay's earlier vow to fight FERC's allegations in federal court rather than only through the agency's administrative process.
FERC alleged that Barclays and four of its former traders "engaged in a coordinated scheme to manipulate trading" in four major western hubs from late 2006 to 2008. It proposed fines totaling $470 million.
The Barclays case is expected to be a first major test of FERC's enforcement muscle, which was expanded by Congress in 2005 legislation that had its genesis in the Enron power manipulation scandals in the western United States earlier in the decade.
Since 2005, FERC has increased its enforcement division's staff to more than 200 from about a dozen. The team is now led by Norman Bay, a former U.S. attorney from New Mexico who has made other high-profile law enforcement recruits.
Barclays intends to fight back vigorously. The bank said that FERC's allegations are "based on an economically irrational theory," and that the commission should terminate its proceedings without any further action.
Separate filings were made on behalf of the four former Barclays traders - notably Scott Connelly, accused by FERC of being the ringleader of an alleged schemes.
FERC has proposed that Connelly alone pay a $15 million fine. His three colleagues - Daniel Brin, Karen Levine and Ryan Smith - could be on the hook for $1 million each.
The filing on behalf of Connelly described FERC's efforts against the trader as "draconian."
"This crippling penalty is multiples of Mr. Connelly's net worth, and it would simply be unjust to impose this penalty that will essentially ruin him and his family for life financially," the lawyers said. "No federal judge would order such a financial death sentence."
FERC did not immediately respond to requests for a comment.
(Reporting By Ros Krasny; Editing by Maureen Bavdek)
Trending On Reuters
India GDP Data
India's economic growth accelerated to 7.5 percent in the three months through March from a revised 6.6 percent in the previous quarter, government data showed on Friday. Read