* Proposed penalties would be record for energy regulator
* Barclays says FERC case "inconsistent with the facts"
* Alleged ringleader at Barclays faces "draconian" fine
By Ros Krasny
WASHINGTON, Dec 16 Barclays Bank PLC
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
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
FERC did not immediately respond to requests for a comment.