The Federal Energy Regulatory Commission (“FERC”) imposed a $435 million dollar fine on U.K.-based Barclays bank for allegedly manipulating energy prices in California and other states in the western United States from November 2006 through December 2008. FERC also ordered one Barclays trader to pay a $15 million fine, and ordered three other traders to pay fines of $1 million each. The alleged manipulation of an energy index provided Barclays with the opportunity to enjoy millions of dollars of trading profits. Barclays also was ordered to disgorge $34.9 million in unjust profits. As more and more news continues to come out about various forms of financial fraud and investment fraud on a massive scale, there appears to be no end in sight to financial institutions’ misconduct.
Although Barclays has stated that it intends to appeal the fine, we believe in the old adage that “Where there’s smoke, there’s fire.” In January 2013, FERC fined a Deutsche Bank affiliate for allegedly manipulating California energy prices. And the Barclays fine comes only one year after Barclays, UBS, and the Royal Bank of Scotland were fined a total of $2.6 billion for rigging the London Interbank Offered Rate (“LIBOR”), which is the benchmark for trillions of dollars in loans – including many home mortgages. Other banks, such as Citigroup, JP Morgan Chase, and Deutsche Bank, also are being investigated for their roles in the LIBOR scandal.
But it doesn’t end there. The European Union is investigating oil companies Shell, London-based BP and Statoil ASA (STL), three of Europe’s biggest oil companies, for potential manipulation of prices in the $3.4 trillion-a-year global crude market. (Dimond Kaplan &Rothstein, P.A. is counsel in civil lawsuits filed in the United States courts regarding both the LIBOR manipulation and the manipulation of crude oil prices.)
Barclay’s alleged rigging of energy prices in the Western United States is reminiscent of Enron’s manipulation of energy prices a decade ago. That company imploded and some of its officers were convicted and sent to prison. It appears that banks and financial institutions just don’t learn lessons from past misconduct.
FERC alleged the manipulation of the energy index affected wholesale electricity prices in the western U.S., eventually altering the retail prices paid by tens of millions of customers in the four states. Cities purchasing wholesale electricity may have valid claims against Barclays and any other bank that manipulated energy prices.