Regulators Go After Alleged Enron-Style Cheaters

Barclays and four of its traders accused of manipulating energy markets may soon find themselves on the business end of record-breaking fines of $470 million from the U.S. Federal Energy Regulatory Commission. The FERC, heavily involved in investigation of Enron's famous electricity market manipulation, was tipped off to the scheme via its hotline.

What's the strongest comparison to the Enron accounting scandal? One, these folks are accused of cheating in energy markets. Two, the evidence that points to it is in correspondence that includes colorful language. Reuters describes the alleged Barclays scheme:

The team of four traders -- veterans of power merchant Mirant, one of the companies that had been fined hundreds of millions of dollars after the California power scandal a decade ago -- exchanged messages explaining how they would "crap on" certain prices in one market to profit in another.

The traders are alleged to have manipulated power prices -- driving up or down physical power prices to make money with their financial swap positions. That is alleged to have caused losses for rival power traders of $139 million -- and netted the bank gains of $34.9 million.

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BloombergBusinessweek reports that the structure of the fines—mostly on Barclays, but also on the traders themselves—marks a change of tack for the FERC:

“Going after individual traders with civil penalties is not common and represents a more serious and determined attempt by FERC to discipline market traders and bring them into compliance with FERC’s views of conduct in wholesale electric markets,” Alan Isemonger, founder of Energy Market Expertise LLC, a Sacramento, California-based consulting firm, said in an e-mail.

Regulators “have been cracking down on market manipulation whereby companies essentially leverage one market to influence the outcome of another,” said Isemonger, a former market monitor for California’s power-grid operator.

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Continuing the theme of educating ourselves on a basic level about money and how it makes the world go around, it might be a good weekend to watch (or re-watch) "Enron: The Smartest Guys in the Room," which was nominated for a best documentary Oscar in 2006. You can watch it free at hulu or archive.org. Trailer below.

[youtube]http://www.youtube.com/watch?v=1dNZaKLjYbc

Photo via Flickr (cc) user swanksalot.