Barclays told to pay $470m for electricity market manipulation

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Barclays (LSE: BARC.L - news) has been ordered to pay a $470m (£293m) in fines and other penalties by the US energy (NasdaqCM: USEG - news) regulatory after being found to have manipulated the American electricity market.

The US Federal Energy Regulatory Commission (FERC) has provisionally fined Barclays a total of $435m and ordered the bank to repay $34.9m in "unjust profits" as it accused the lender of engaging in a "coordinated scheme to manipulate trading at four electricity trading points in the Western United States".

Four Barclays traders were named by the authorities and fined a total of $18m for taking part in the alleged scheme.

Scott Connelly, managing director of North American power at Barclays, who was described by the regulator as the "leader of the manipulative scheme" and its "highest paid member", was hit with the largest fine and provisionally ordered to pay $15m. Three other traders, named as Daniel Brin, Karen Levine and Ryan Smith, were each fined $1m.

Reporting a third-quarter pre-tax loss on Wednesday of £47m, Barclays warned that it was expecting a fine from the energy regulatory, but added that it intended to fight the allegations "vigorously".

The fines follow an investigation by FERC officials into electricity market trading by Barclays between November (Xetra: A0Z24E - news) 2006 and December 2008.

In one email cited by the regulator, Mr Smith described how he “f***ed with the Palo market,” and “propped up the palo index". He wrote: “Gonna try to crap on the NP light and it should drive the SP (SES: E1:S13.SI - news) light lower.”

FERC's report claims that over 655 trading days, Barclays' alleged manipulation of the electricity market cost other firms $139.3m, as traders on its "West power desk" built up large positions in physical power indices, which it would then use to raise or lower an index according to separate floating rate positions the traders had amassed.

The energy regulator's provisional findings came as Barclays revealed it was facing a corruption investigation in the US related to a 2008 £4.5bn investment in the bank by Middle Eastern investors.

The US Department of Justice and the US Securities and Exchange Commission are looking into the deal to see whether it breached anti-corruption laws.

The investigation comes just months after Barclays admitted it had attempted to manipulate Libor. The Libor scandal has already cost the bank £290m in fines and led to the resignation of its chairman, Marcus Agius, as well as chief executive, Bob Diamond, and chief operating officer, Jerry del Missier.

Barclays new chief executive, Antony Jenkins, oversaw his first set of results since taking over from Mr Diamond in August.

However, the results were overshadowed by the new investigations .

Asked about the new US corruption probe, Mr Jenkins said the American authorities had become "interested" in the case after the Serious Fraud Office and the Financial Services Authority said they were looking into the deal.