'I just started lifting the p.ss out of the Palo', Ryan Smith, then a trader for Barclays in New York, wrote in a 2006 instant message, allegedly bragging to a colleague that he had raised the price on an energy hub near Palo Verde, Arizona. In another, he used a profane term for a sexual encounter to describe what he had done to the market.
'Was fun. Need to do that more often', he wrote.
These messages and others have surfaced in filings by the U.S. Federal Energy Regulatory Commission against London-based Barclays and four former traders. The agency, which has expanded its oversight of energy markets since the 2001 failure of Enron Corp., and its enforcement unit are seeking a record $488m in penalties from the bank and its traders, which they are fighting.
Messages among employees are 'like catnip to enforcement authorities', Craig Pirrong, director of the Global Energy Management Institute at the University of Houston, said in a phone interview. 'Traders are typically their own worst enemy. Sometimes they’re just shooting off their mouths'.
The case is the latest example of how instantaneous electronic communications can cause legal headaches years later. In July, Barclays CEO Robert Diamond stepped down, and the bank was fined a record $455m, after regulators released e-mails from traders accused of rigging the London interbank offered rate, or Libor. Last week, U.S. and British regulators fined Royal Bank of Scotland Group Plc $612 million after electronic messages from bank traders allegedly showed they manipulated rates.
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image: © Garry Knight