In the order, FERC finds Barclays, Daniel Brin, Scott Connelly, Karen Levine and Ryan Smith built and then flattened substantial monthly physical index positions at four of the then-most liquid trading points in the western United States for the fraudulent purpose of manipulating the index price to benefit Barclays’ financial swap positions. 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.
Given the seriousness of the violations and the lack of any effort by Barclays and the traders to remedy their violations, FERC ordered Barclays to pay $435 million in penalties; Connelly to pay $15 million; and Brin, Levine and Smith to pay $1 million each. The Federal Power Act authorizes penalties for such manipulative acts of up to $1 million per day per violation.
These penalties must be paid to the U.S. Treasury within 30 days. Barclays also has 30 days to distribute the unjust profits, with 19 percent going to Arizona, 63 percent to California and 9 percent each to Oregon and Washington.
Today’s action comes after Barclays and the traders responded to a FERC order directing them to answer allegations that they manipulated western electric energy markets. Barclays and the traders opted for a procedure under the Federal Power Act in which FERC may assess a penalty without a hearing before an administrative law judge. If Barclays and the traders do not pay the penalties assessed by FERC, then FERC may seek affirmation of the penalties from a federal district court. (FERC 7/16/2013)