Asset and Resource Hoarding

Barclays traders rigged American electricity prices to boost their own profits and bragged about it in damning e-mails

  • Critics  said the expletive-ridden correspondence provides further evidence of the  ‘rotten culture of casino banking’ that built up under Bob  Diamond
  • Bank faces  $470million fine for allegedly manipulating energy market in  US

By James Salmon

PUBLISHED:21:09 EST, 1  November 2012| UPDATED:21:10 EST, 1 November 2012

Barclays traders toyed with electricity  prices at several major power trading hubs in the western U.S. to boost their  own profits.

The men were caught, and Barclays slapped  with a $470million fine, after they bragged about the price rigging in a series  of damning, foul-mouthed e-mails.

Four traders are accused of conspiring to  sell electricity at a loss to drive prices down   between November 2006 and 2008.

This enabled simultaneous bets on falling  energy prices to reap huge profits, leading to losses of $140million for other  investors and pensions funds.

Emails and phone messages between foul-mouthed Barclays traders in New York reveal how they bragged about rigging energy prices in America to make huge profitsEmails and phone messages between foul-mouthed Barclays  traders in New York reveal how they bragged about rigging energy prices in  America to make huge profits

However, the actions are not believed to have  raised energy prices for consumers.

Critics yesterday said the  expletive-ridden  correspondence provides further evidence of the ‘rotten culture of casino  banking’ that built up under Bob Diamond, the disgraced former CEO of the  British bank.

The price manipulation took place at  four  electricity-trading hubs across the western U.S., according to the  Federal  Energy Regulatory Commission.

The hubs are: Mid-Columbia in  Washington  State, Palo Verde in Phoenix, Arizona and South Path 15 and  North Path 15 in  California.

These hubs are where electricity is  channelled, stored and then distributed around the region.

Barclays and other banks trade in complicated  financial instruments which bet on electricity price movements at these  hubs.

The bank faces a £270million fine by the US Federal Energy Regulatory Commission for allegedly manipulating the energy market across Western America between November 2006 and 2008The bank faces a £270million fine by the US Federal  Energy Regulatory Commission for allegedly manipulating the energy market across  Western America between November 2006 and 2008

The accused Barclays traders – Daniel Brin,  Scott Connelly, Karen Levine and Ryan Smith – face penalties totalling  $18million.

Connelly was described as ‘the leader of the  manipulative scheme’ and the highest paid. He faces a $15million  fine.

The bank was also ordered to pay back  $35million in profits made from the alleged energy manipulation scam.

But, in arguably a more devastating blow to  Barclays, the US regulator  published a series of emails and phone messages sent  by the bank’s  traders.

In a series of messages dated November 3,  2006, Ryan Smith bragged to a colleague that he had managed to manipulate the  energy markets.

He said: ‘I totally f****** with the Palo  market today,’ adding: ‘I just  started lifting the p*** out of the palo.’ Smith  continued: ‘was fun.  Need to do that more often.’

In a separate exchange on December 7, 2006,  he said: ‘I’m going to c*** on the NP light and it should drive the SP light  lower.’

Critics said the crude messages reinforced  the immoral, profit-crazed image  that Barclays has desperately tried to shed  since new chief executive  Antony Jenkins took over in August.

Former Barclays chief executive Bob DiamondFour Barclays traders are accused of conspiring to sell electricity at a loss to drive prices down

Critics say the expletive-ridden correspondence provides  further evidence of the ‘rotten culture of casino banking’ that built up under  disgraced former boss of Barclays, Bob Diamond, left

John Mann, who sits on the Treasury select  committee of MPs, said: ‘This just shows how the rotten culture of casino  banking that was built up under Bob Diamond went all the way through Barclays.  Traders were clearly programmed to do anything to make a profit.’

The emails sent by Barclays’ American traders  have echoes of the brash messages sent by their counterparts in London who  boasted about rigging key interest rates.

These were published in June when Barclays  was fined $470million by UK and US regulators over the scandal. This led to the  departure of Diamond and several other top executives. Liberal Democrat peer  Lord Oakeshott said: ‘The American authorities’ allegations of Enron-style  rigging of electricity prices shows what a toxic trail Bob Diamond left behind  him.’

All four traders accused of rigging the  energy markets are thought to have left the bank, although none are understood  to have been fired.

Barclays has been given 30 days to appeal and  said it intends to do so. It said it ‘strongly disagrees with the allegations’, adding: ‘We believe that our trading was legitimate and above board and intend  to vigorously defend this matter.’

Barclays is likely to argue that it did not  have big enough positions in the energy market to be able to manipulate  prices.

Read more: http://www.dailymail.co.uk/news/article-2226573/Barclays-traders-rigged-American-electricity-prices-boost-profits.html#ixzz2B2Ve1xns Follow us: @MailOnline on Twitter | DailyMail on Facebook

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