Barclays PLC said the US Federal Energy Regulatory Commission’s (FERC) record US$470 million in proposed penalties against the bank for alleged power-market manipulation are unjustified and will not withstand a court challenge.
In filings on Friday with the FERC, Barclays and four of its former traders denied the commission’s charge that they gamed electricity markets in the US from late 2006 to 2008 and vowed to fight the allegations in federal court.
The FERC’s allegations are “based on an economically irrational theory,” London-based Barclays said in its filing. “The commission should terminate this proceeding without any further action.”
When the FERC made the charges against Barclays on Oct. 31, it called for US$18 million in penalties on four of its former traders. The bank’s challenge may test the commission’s enforcement powers, which Congress enhanced in 2005 to prevent the type of market manipulation that triggered blackouts in California earlier in the decade.
The agency alleged that one trader, Scott Connelly, led a “manipulative scheme,” and proposed that he pay US$15 million, with an additional US$1 million each for three colleagues. Connelly’s lawyers disputed the commission’s actions in their filing on Friday.
“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 laywers said. “No federal judge would order such a financial death sentence.”
Barclays did not have the intent or the ability to manipulate energy markets and its trading was legitimate, lawyers for the bank said in on Friday’s filing.
The five-member commission should reject its enforcement staff’s recommendations, “decline to assess any penalties and terminate this matter without any further proceedings,” Barclays spokesman Mark Lane said. “If the FERC proceeds, we intend to vigorously defend this matter in federal court.”
Within the last two years, the agency has made public 13 probes of alleged violations, including investigations of trading units at Barclays, Deutsche Bank AG and JPMorgan Chase & Co.