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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. The US Attorney’s Office in the Southern District of New
York (SDNY) has informed BBPLC that it is looking into the same conduct at issue in the FERC matter, and a civil class action complaint was filed in
the US District Court for the SDNY against BBPLC asserting antitrust allegations that mirror those raised in the civil suit filed by FERC.
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 their 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 October 2013, FERC filed a civil action against BBPLC and its former traders in the US District Court in California seeking to collect the $435m civil
penalty and disgorgement of $34.9m of profits, plus interest.
In September 2013, the criminal division of the US Attorney’s Office in SDNY advised BBPLC that it is looking at the same conduct at issue in the
FERC matter.
In June 2015, a civil class action complaint was filed in the US District Court for the SDNY against BBPLC by Merced Irrigation District, a California
utility company, asserting antitrust allegations in connection with BBPLC’s purported manipulation of the electricity markets in and around California.
The allegations mirror those raised in the civil suit filed by FERC against BBPLC currently pending in the US District Court in California.
Recent Developments
In October 2015, the US District Court in California ordered that it would bifurcate its assessment of liabilities and penalties from its assessment of
disgorgement. FERC has filed and BBPLC is opposing a brief seeking summary affirmance of the penalty assessment. The court has indicated that it
will either affirm the penalty assessment or require further evidence to determine this issue.
BBPLC has appealed the bifurcation order to the US Court of Appeals for the Ninth Circuit and has also filed a motion with the US District Court in
California to stay the proceedings pending the outcome of the appeal.
In December 2015, BBPLC filed a motion to dismiss the civil class action for failure to state a claim.
Claimed Amounts/Financial Impact
FERC has made claims against BBPLC and certain of its former traders totalling $469.9m, plus interest, for civil penalties and profit disgorgement.
The civil class action complaint refers to damages of $139.3m. These amounts do not necessarily reflect BBPLC’s potential financial exposure if a
ruling were to be made against it in either action.
Investigations into LIBOR and other Benchmarks
Regulators and law enforcement agencies from a number of governments have been conducting investigations relating to BBPLC’s involvement in
manipulating certain financial benchmarks, such as LIBOR and EURIBOR. BBPLC, BPLC and BCI have reached settlements with the relevant law
enforcement agency or regulator in certain of the investigations, but others, including the investigations by the US State Attorneys General, the SFO
and the prosecutors’ office in Trani, Italy remain pending.
Background Information
In June 2012, BBPLC announced that it had reached settlements with the Financial Services Authority (FSA) (as predecessor to the FCA), the US
Commodity Futures Trading Commission (CFTC) and the DOJ Fraud Section (DOJ-FS) in relation to their investigations concerning certain
benchmark interest rate submissions, and BBPLC agreed to pay total penalties of £290m. The settlement with the DOJ-FS was made by entry into a
Non-Prosecution Agreement (LIBOR NPA) which has now expired. In addition, BBPLC was granted conditional leniency from the DOJ Antitrust
Division (DOJ-AD) in connection with potential US antitrust law violations with respect to financial instruments that reference EURIBOR.
Investigations by the US State Attorneys General
Following the settlements announced in June 2012, a group of 31 US State Attorneys General (SAGs) commenced its own investigation into LIBOR,
EURIBOR and the Tokyo Interbank Offered Rate. The Group has cooperated with the investigation throughout and is in advanced discussions with
the SAGs about potential resolution.
Investigation by the SFO
In July 2012, the SFO announced that it had decided to investigate the LIBOR matter, in respect of which BBPLC has received and continues to
respond to requests for information.
For a discussion of civil litigation arising in connection with these investigations see ‘LIBOR and other Benchmarks Civil Actions’.
Claimed Amounts/Financial Impact
Aside from the settlements discussed above, it is not currently practicable to provide an estimate of the financial impact of the actions described on
the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period.
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