On January 22, 2013, the Commission issued an Order Approving a Stipulation and Consent Agreement between the Office of Enforcement (“Enforcement”) and DB Energy Trading LLC (“Deutsche Bank”). Enforcement concluded that Deutsche Bank violated the Commission’s Anti-Manipulation Rule at 18 CFR § 1c.2 and violated the Commission’s accuracy requirements at 18 CFR § 35.41 by: (1) trading in physical exports with the intent to benefit a second product, a Congestion Revenue Right (“CRR”) position; and (2) falsely designating physical trading as Wheeling-Through transactions, when these transactions did not meet the required criteria. Deutsche Bank agreed to pay a civil penalty of $1.5 million, disgorge unjust profits of $172,645 plus interest, and implement improved compliance training and procedures.
The Commission previously issued an Order to Show Cause and Notice of Proposed penalty on September 5, 2012, directing Deutsche Bank to show cause why it should not face a civil penalty of $1,500,000 and disgorge $123,198 in profits (see September 14, 2012 edition of the WER). As detailed in the Stipulation and Consent Agreement, Enforcement determined that Deutsche Bank engaged in “cross-product manipulation,” trading in physical exports at the Silver Peak intertie between the California Independent System Operator Corporation (“CAISO”) and Sierra Pacific Power Company control area with the intent to increase the value of its CRR position at Silver Peak. Enforcement determined that Deutsche Bank injected “false and deceptive information into the marketplace” and affected the price and functioning of the physical market and CRR markets at Silver Peak. In addition to “cross-product manipulation,” Enforcement determined that Deutsche Bank violated the accuracy requirements of the Commission’s regulations by submitting inaccurate schedules concerning its exports at Silver Peak and imports at the Summit intertie, characterizing these paired bids as “Wheeling-Through transactions” even though the transactions had no external resource or external Load served, as required by the CAISO tariff.
In the Stipulation and Consent Agreement, Deutsche Bank neither admitted nor denied the violations described by Enforcement, but agreed to the facts recited in the settlement agreement, and agreed to pay the civil penalty assessed, disgorge profits to the CAISO (for distribution to market participants affected by Deutsche Bank’s actions) and improve compliance training and procedures. In order to determine the appropriate sanctions, Enforcement concluded that Deutsche Bank’s conduct was committed with the knowledge of “supervisory personnel,” and “undermined the proper functioning of the CAISO markets.” Enforcement concluded that Deutsche Bank and its employees were cooperative in Enforcement’s investigation, but the company did not have an effective compliance program. Pursuant to the Stipulation and Consent Agreement, Deutsche Bank is required to make an initial compliance monitoring report, followed by semi-annual compliance monitoring reports to Enforcement for one year following the effective date of the Agreement.
A copy of the Commission’s Order is available here.