NEW YORK The U.S. Federal Energy Regulatory Commission (FERC) said on Tuesday Barclays and four of its power traders must pay fines totaling $453 million, confirming the nation's top energy cop will pursue its most ambitious market manipulation case to date.
The record fines, first proposed by the regulator's staff in October 2012 over alleged manipulation of California and other western power markets by the British bank last decade, were upheld in an order after assessment by FERC commissioners.
Tuesday's order said the FERC commissioners agreed with earlier findings by regulatory staff, which said the bank deliberately lost money in physical power markets to benefit its financial positions between 2006 and 2008, and that the Barclays traders knew their activity was unlawful.
"FERC finds that their actions demonstrate an affirmative, coordinated and intentional effort to carry out a manipulative scheme, in violation of the Federal Power Act and FERC's Anti-Manipulation Rule," the regulator said in a statement.
The case will likely now move to federal court where Barclays hopes to defend itself against the allegations that it has long disputed.
"We have cooperated fully with the FERC investigation, which relates to trading activity that occurred several years ago," Barclays spokesman Marc Hazelton said in a statement. "We intend to vigorously defend this matter."
The case is expected to be a major test of FERC's enforcement powers, expanded by Congress in 2005 legislation that had its genesis in the Enron electricity manipulation scandals in the western United States earlier in the decade.
Ron Wyden, the chairman of the Senate's Energy and Natural Resources Committee, said FERC sent a strong message to traders and banks.
"Consumers have the right to heat and power their homes without fear that traders are stacking the deck against them to rack up unjust profits," Wyden said in a release.
The FERC order said the bank must pay $435 million within 30 days, while the managing director of the power trading team, Scott Connelly, must pay $15 million. FERC also ordered Barclays disgorge $34.9 million in "unjust profits" and interest.
FERC said three other traders involved in the scheme must pay fines of $1 million each.
A former FERC enforcement director said that if Barclays refuses to pay the fine, agency staff will likely file an action in a U.S. District Court.
It would be the first time an energy market manipulation case from FERC would be considered in such a venue, said Susan Court, FERC's director of enforcement from 2005 to 2009.
The court "can make its own findings of fact and conclusions of law, and craft a remedy that it sees fit," said Court, who is now a principal at SJC Energy Consultants, LLC.
Since 2005, FERC has increased its enforcement division's staff to more than 200 from about a dozen, led by a number of high-profile law enforcement recruits.