Barclays have refused to accept a fine in the sum of $453 million (£299 million), levied by the US Federal Energy Commission following allegations of energy price fixing. FERC allege that Barclays deliberately lost money in the power markets between 2006 and 2008.
This fine, together with $34.9 million in ‘unjust profits’ to be handed back to low income home energy families, exceeds the Libor fine levied by the DoJ against Barclays last year of some £290 million, which in turn followed a fine of £190 million for sanctions busting levied, again by the DoJ, in 2010.
Barclays are fiercely contesting this FERC fine and allegations, and are prepared to fight the case in the federal courts and put FERC to proof.
The bank is secretly being cheered on by many in the City who have tired of ‘bully boy tactics’ used against largely non-US finance houses by American regulators.
Meanwhile, Deutsche Bank has apparently paid out $1.7 million in relation to electricity power markets in California and JP Morgan Chase are reportedly in negotiations about similar energy price fixing with FERC.
A leading US analyst, Sandy Chen of Cenkos Securities, has (according to the Telegraph) apparently advised his clients that the FERC allegations against Barclays may lead to a review by the DoJ of the Libor Deferred Prosecution Agreement signed in 2012.
He quotes two very draconian sections of the Libor DPA: ‘As a result of Barclays’s admission of its misconduct, its extraordinary cooperation, its remediation efforts and certain mitigating and other factors, the department agreed not to prosecute Barclays for providing false Libor and Euribor contributions, provided that Barclays satisfies its ongoing obligations under the agreement for a period of two years.’
Additionally, Mr Chen goes on to quote from the Agreement that Barclays would ‘commit no United States crime whatsoever … and bring to the fraud section’s attention all criminal or regulatory investigations, administrative proceedings or civil actions brought by any government authority in the US by or against Barclays or its employees that alleges fraud or violations of the laws governing securities and commodities markets.’
At the time that Barclays signed the Libor DPA, discussion was raised suggesting that this breached the 2010 sanctions busting DPA, but both the DoJ and Barclays were adamant that this was not the case because the Libor conduct preceded the 2010 DPA.
The FERC allegations will be a real test of DoJ resolve and it will be interesting to see how they react. So far we have not seen any comment by the DoJ in relation to Mr Chen’s concerns.
This situation also underlines the importance of ensuring that one’s house is completely in order before self-reporting and signing a DPA, as failure to do so could mean that something very important could crawl out of the woodwork.