Barclays 2014 Annual Report Download - page 309

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29 Legal, competition and regulatory matters continued
FERC
The US Federal Energy Regulatory Commission (FERC) has filed a civil action against BBPLC and certain of its former traders in the US District
Court in California seeking to collect on an order assessing a $435m civil penalty and the disgorgement of $34.9m of profits, plus interest, in
connection with allegations that BBPLC manipulated the electricity markets in and around California. BBPLC and the former traders have filed a
motion to dismiss the action for improper venue or, in the alternative, to transfer it to the Southern District of New York (SDNY), and a motion to
dismiss the complaint for failure to state a claim. The US Attorney’s Office in the SDNY has informed BBPLC that it is looking into the same
conduct at issue in the FERC matter.
Background Information
In October 2012, FERC issued an Order to Show Cause and Notice of Proposed Penalties (Order and Notice) against BBPLC and four of its former
traders in relation to the Group’s power trading in the western US. In the Order and Notice, FERC asserted that BBPLC and its former traders
violated FERC’s Anti-Manipulation Rule by manipulating the electricity markets in and around California from November 2006 to December 2008,
and proposed civil penalties and profit disgorgement to be paid by BBPLC.
In July 2013, FERC issued an Order Assessing Civil Penalties in which it assessed a $435m civil penalty against BBPLC and ordered BBPLC to
disgorge an additional $34.9m of profits plus interest (both of which are consistent with the amounts proposed in the Order and Notice).
In October 2013, FERC filed a civil action against BBPLC and its former traders in the US District Court in California seeking to collect the penalty
and disgorgement amount. FERC’s complaint in the civil action reiterates the allegations previously made by FERC in its October 2012 Order and
Notice and its July 2013 Order Assessing Civil Penalties.
In September 2013, BBPLC was contacted by the criminal division of the US Attorney’s Office in SDNY and advised that such office is looking at the
same conduct at issue in the FERC matter.
In December 2013, BBPLC and its former traders filed a motion to dismiss the action for improper venue or, in the alternative, to transfer it to the
SDNY, and a motion to dismiss the complaint for failure to state a claim. Proceedings on the motion to dismiss are continuing.
Claimed Amounts/Financial Impact
FERC has made claims against the Group totalling $469.9m, plus interest, for civil penalties and profit disgorgement. This amount does not
necessarily reflect the Group’s potential financial exposure if a ruling were to be made against it.
Investigations into LIBOR, other Benchmarks, ISDAfix, Foreign Exchange Rates and Precious Metals
Regulators and law enforcement agencies from a number of governments have been conducting investigations relating to BBPLC’s involvement in
manipulating financial benchmarks and Foreign Exchange rates. BBPLC has reached settlements with the relevant law enforcement agency or
regulator in certain of the investigations, but others, including those set out in more detail below, remain pending.
Background Information
The FCA, the US Commodity Futures Trading Commission (CFTC), the SEC, the DOJ Fraud Section (DOJ-FS) and Antitrust Division (DOJ-AD), the
European Commission (Commission), the SFO, the Monetary Authority of Singapore, the Japan Financial Services Agency, the prosecutors’ office
in Trani, Italy and various US state attorneys general are amongst various authorities that opened investigations into submissions made by BBPLC
and other financial institutions to the bodies that set or compile various financial benchmarks, such as LIBOR and EURIBOR and in connection
with efforts to manipulate certain benchmark currency exchange rates.
On 27 June 2012, BBPLC announced that it had reached settlements with the Financial Services Authority (FSA) (as predecessor to the FCA), the
CFTC and the DOJ-FS in relation to their investigations concerning certain benchmark interest rate submissions, and BBPLC agreed to pay total
penalties of £290m, which were reflected in operating expenses for 2012. The settlements were made by entry into a Settlement Agreement with
the FSA, a Settlement Order with the CFTC (CFTC Order) and a Non-Prosecution Agreement (NPA) with the DOJ-FS. In addition, BBPLC was
granted conditional leniency from the DOJ-AD in connection with potential US antitrust law violations with respect to financial instruments that
reference EURIBOR. Summaries of the NPA and the CFTC Order are set out below. The full text of the CFTC Order and the NPA are publicly
available on the websites of the CFTC and the DOJ, respectively. The terms of the Settlement Agreement with the FSA are confidential, but the
Final Notice of the FSA is available on the FCA’s website.
CFTC Order
In addition to a $200m civil monetary penalty, the CFTC Order requires BBPLC to cease and desist from further violations of specified provisions of
the US Commodity Exchange Act (CEA) and take specified steps to ensure the integrity and reliability of its benchmark interest rate submissions,
including LIBOR and EURIBOR, and improve related internal controls.
DOJ Non-Prosecution Agreement
As part of the NPA, BBPLC agreed to pay a $160m penalty. In addition, the DOJ agreed not to prosecute BBPLC for any crimes (except for criminal
tax violations, as to which the DOJ cannot and does not make any agreement) related to BBPLC’s submissions of benchmark interest rates,
including LIBOR and EURIBOR, contingent upon BBPLC’s satisfaction of specified obligations under the NPA. In particular, under the NPA, BBPLC
agreed for a period of two years from 26 June 2012, amongst other things, to:
Q Commit no US crimes whatsoever;
Q Truthfully and completely disclose non-privileged information with respect to the activities of BBPLC, its officers and employees, and others
concerning all matters about which the DOJ enquires of it, which information can be used for any purpose, except as otherwise limited in the
NPA;
Q Bring to the DOJ’s attention all potentially criminal conduct by BBPLC or any of its employees that relates to fraud or violations of the laws
governing securities and commodities markets; and
Q Bring to the DOJ’s attention all criminal or regulatory investigations, administrative proceedings or civil actions brought by any governmental
authority in the US by or against BBPLC or its employees that alleges fraud or violations of the laws governing securities and commodities
markets.
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