* FERC previously recommended almost $470 million in fines
* Latest filing said bank failed to address alleged scheme
* Showdown in federal court expected
Jan 29 Regulators correctly found that traders
for Barclays Plc manipulated the California power market from
late 2006 to 2008 and should pay the record penalties proposed
in October, the Federal Energy Regulatory Commission staff said
in a report.
The report, dated Monday but posted on the agency's website
on Tuesday, found Barclays and four of its traders used
losses in physical markets to make gains in financial markets,
and that they knew their activity was unlawful.
The FERC staff's 124-page report was in response to
Barclay's on Dec. 14 denying that it did anything wrong and
saying that FERC's findings were erroneous.
FERC staff is recommending the matter be sent to federal
court, where Barclays previously vowed to vigorously defend
FERC staff said the bank lost about $4.1 million through its
physical cash trades, but "reaped gains of approximately $34.9
million in its financial positions."
The staff said Barclays' manipulative trading scheme cost
other market participants at least $139.3 million.
"We believe that our trading was legitimate and in
compliance with applicable law," Barclays said in an emailed
"The FERC should reject the Office of Enforcement's
recommendations, decline to assess any penalties, and terminate
this matter without any further proceedings."
FERC proposed in October that the bank pay a $435 million
civil penalty and refund its almost $35 million in trading
profits for allegedly engaging in a "coordinated scheme" to
manipulate trading in four major western electricity hubs.
The case is expected to be a first 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.
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.
Barclays in a Dec. 14 document termed the allegations that
are the center of the agency's case "erroneous inferences drawn
from mere fragments of documents."
FERC termed the bank's December response, at over 500 mostly
single-spaced pages, "remarkable."
"In all these pages, Barclays and its individual traders do
not directly address the three-part manipulative scheme
discussed above and detailed in the report," the agency said.