Russell Kooistra and Thomas S. DeVita
On November 7, 2017, FERC approved a settlement between FERC’s Office of Enforcement and Barclays Bank PLC (“Barclays”), Daniel Brin, Scott Connelly, and Karen Levine (collectively with Barclays, “Defendants”) that resolves FERC’s claims that Defendants manipulated physical electricity markets. Under the settlement, Barclays is required to pay $105 million in civil penalties and disgorgement, a big reduction compared to the $488 million FERC originally ordered.
In July 2013, FERC ordered Barclays and four of its traders collectively to pay roughly $488 million in civil penalties and disgorgement for manipulation of electricity markets in four trading points around California between 2006 and 2008 (see April 10, 2017 edition of the WER). Specifically, FERC determined that Barclays uneconomically traded day-ahead physical transactions to benefit its financial swap positions for the same locations.
After Barclays and the traders refused to pay the civil penalties, FERC filed a petition to affirm the penalties in the U.S. District Court for the Eastern District of California (“District Court”). Subsequently, Barclays and the traders moved to dismiss FERC’s petition, arguing, among other things, that the U.S. Commodity Futures Trading Commission (“CFTC”) had exclusive enforcement jurisdiction over the alleged scheme. The District Court denied the motion, ruling that the manipulative trades occurred in FERC-jurisdictional physical electricity markets. However, in a later order, the District Court rejected FERC’s arguments that the court was limited to reviewing the case de novo based on the facts in the administrative record, and instead permitted Barclays and the traders to conduct discovery under the Federal Rules of Civil Procedure. Most recently, the District Court dismissed one of the four traders from the action, holding that FERC’s claim against him was barred by the five-year statute of limitations for enforcing civil penalties.
In its order approving the settlement, FERC stated that Barclays will pay a civil penalty of $70 million and disgorgement of $35 million, totaling $105 million in payments. FERC also stated that $15 million of the $35 million disgorgement, plus any amounts of the remaining disgorgement that are not used for remediation efforts, will be paid to low-income energy assistance programs in Arizona, California, Oregon, and Washington. Accordingly, FERC concluded that the settlement is “a fair and equitable resolution of the matters concerned and is in the public interest, as it reflects the nature and seriousness of the conduct and recognizes the specific considerations stated above and in the [settlement].”
FERC’s order can be found in Docket No. IN08-8. A copy of the order is available here.