Business & Real Estate

Sacramento judge declines to dismiss $453 million fine against Barclays Bank

A Sacramento federal judge has rejected a bid by Barclays Bank PLC and four of its employees to escape $453 million in fines for allegedly manipulating electricity markets in California and other Western states.

U.S. District Judge Troy L. Nunley ruled Wednesday that the Federal Energy Regulatory Commission, which sought to impose the fines on Barclays PLC and its four traders in July 2013, “has alleged both a sufficient factual and legal basis to support its claim of manipulation.”

Barclays, the United Kingdom’s second-largest bank, argued that FERC has no legal ground on which to force court-ordered payment because the bank was trading in commodity futures contracts, which did not call for it to receive or deliver electricity. It argued that “market manipulation” is a misnomer in the context of what the bank was doing because the transactions involved real customers and real money, and were subject to regulation by the Commodity Futures Trading Commission.

“Defendants argue that trades which involve willing counterparties made on the open market cannot be actionable,” Nunley wrote in a 34-page order. Citing federal case law, he wrote that, “as a blanket statement, this is not supportable.”

Erica Chase, a spokeswoman at Barclays’ New York offices, declined to comment Thursday on the denial of the bank’s motion to dismiss FERC’s lawsuit.

The suit proceeds and eventually will be resolved through a summary judgment from Nunley, a settlement, or a trial.

On July 16, 2013, after years of investigation, FERC issued an order imposing the civil fine on Barclays. The regulatory agency accused the bank and its traders of “manipulating the energy markets in and around California through the use of a coordinated fraudulent scheme” between November 2006 and December 2008. The agency ordered disgorgement of $34.9 million in profits to which FERC said Barclays was not entitled, but the disgorgement part of the order is not at issue in the Sacramento suit.

At the same time, FERC enforcement staff estimated that the bank’s actions resulted in losses to other market participants of at least $139.3 million.

Barclays balked at paying the fine. FERC then filed its petition to enforce the order on Oct. 9, 2013, in Sacramento federal court, the first time the commission has had to go to court to get the money on an anti-manipulation penalty.

Barclays had also asked, as an alternative to dismissal, that the suit be transferred to New York, but Nunley didn’t like that idea, either. He found that some alleged manipulation of power markets took place in the Sacramento-based Eastern District of California, so Sacramento is a proper venue for the legal fight.

Denny Walsh: (916) 321-1189

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