Penalty for attempting to manipulate electricity market comes hours after Tushar Morzaria is appointed as financial director
Barclays and four of its power traders have been ordered to pay a total of $453m (£299m) in fines by the US energy watchdog, which accuses the bank of attempting to manipulate the US electricity market.
The fines were announced just hours after the bank had named a new finance director. First announced last October, the fine by the Federal Energy Regulatory Commission (FERC) relates to allegations for the two years to December 2008.
The FERC told Barclays it had to pay a $435m fine to the US treasury within 30 days; one of its traders must pay a $15m fine, and three other traders $1m each, according to an 86-page order issued on Tuesday night. The bank must also give up $34.9m in profits which will to be distributed to low-income homeowners in California, Arizona, Oregon and Washington to help them pay their energy bills, it said.
"If Barclays and the traders do not pay the penalties assessed by FERC, then FERC may seek affirmation of the penalties from a federal district court," the regulator said.
Barclays said: "We are disappointed by the action FERC took today. We believe the penalty assessed by the FERC is without basis, and we strongly disagree with the allegations made by FERC against Barclays and its former traders in the FERC's order assessing civil penalty. … We believe our trading was legitimate and in compliance with applicable law. The Order Assessing Civil Penalty is by its very nature a one-sided document, and does not reflect a balanced and full description of the facts or the applicable legal standard. We have cooperated fully with the FERC investigation, which relates to trading activity that occurred several years ago. We intend to vigorously defend this matter."
Barclays is also facing another multimillion-pound bill to lure its new finance director, Tushar Morzaria, across the Atlantic from a senior role at a US bank.
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| Barclays said it was disappointed by the action taken by the FERCMorzaria is to receive a yet-to-be-disclosed relocation fee to move to London from New York to take up the key boardroom role, which could potentially pay the 44-year-old more than £6m a year in salary and bonuses. |
In addition the bank, which has embarked on a strategy to become the "go to" bank in the wake of the £290m fine for Libor rigging, will buy Morzaria out of any long-term awards granted by his employer, JP Morgan Chase. Barclays did not disclose the value of the latter but they will be replaced with new awards of Barclays shares that will be disclosed by the bank at a later date and are likely to run to millions of pounds.
The accountant, who was born in Uganda and whose family moved to the UK in 1971, is replacing Chris Lucas who announced his retirement in February and remains under investigation by the City regulator into the way disclosures were made about the bank's 2008 cash call.
Morzaria will receive a salary of £800,000 plus an annual award of shares of potentially 250% of his salary – some £2m – as well as a longer-term bonus scheme under which he can receive up to 400% of his salary – up to £3.2m which would pay out over three years. He will also receive 25% of his salary – £200,000 – in cash in lieu of his pension.
The bank said that deferred and long-term awards which Morzaria forfeits as a result of accepting the role at Barclays "will be replaced with a Barclays share award of equivalent value to the forfeited awards which will vest over the same time period (as closely as possible) as the forfeited awards".
His appointment comes amid an overhaul of the top management team at Barclays in the wake of the Libor-rigging scandal which has led to the departures of the chairman Marcus Agius, chief executive Bob Diamond, chief operating officer Jerry del Missier and the head of the investment bank Rich Ricci.
Antony Jenkins, promoted from running the retail bank after Diamond quit, said he looked forward to working with Morzaria.
"He will bring a welcome new perspective to what is a pivotal role," said Jenkins, who also thanked Lucas for his tenure at Barclays, which began in 2007 just as the banking crisis took hold. Morzaria's experience in investment banking should complement Jenkins's background in retail banking.
Morzaria is expected to start working at Barclays in autumn 2013 but will have a long handover period with Lucas. He will not join the board until January 2014 while Lucas, who has health problems which have not affected his ability to do his job but had a bearing on his decision to retire, will remain in post until the end of February 2014.
At present Morzaria is chief financial officer, corporate and investment banking at JP Morgan Chase, which last year was embroiled in the "London Whale" trading scandal where $6bn (£4bn) of losses were caused by London traders.
Morzaria did not work in the division where the losses occurred. He has worked in various roles since 2005 and been based in New York since 2009. Before that he worked at Credit Suisse, JP Morgan and SG Warburg after starting his career at the accountants Coopers & Lybrand Deloitte.
Morzaria, who has two children, said he was looking forward to returning to the UK. "I am excited at the opportunity to be part of the leadership team which will deliver on the promised change in performance and culture," Morzaria said.
His former bosses at JP Morgan sent a memo to staff praising his "analytical ability, combined with calm, steady demeanour".
Article Source : http://www.guardian.co.uk
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