The new head of Barclays’ Americas unit has a vision problem.
Joseph Gold, who will take over as the head of US operations of the UK bank on May 1, failed to spot and stop an alleged scam by four traders in his unit to run up energy prices in California from 2006 to 2008.
Gold, now the global head of client capital management at the large bank, headed the unit where, according to a federal regulator, four traders manipulated the price of electricity.
Gold’s ascension to the top spot, announced Tuesday, comes almost two years after the bank’s then-CEO, Bob Diamond, resigned after failing to prevent the rigging of interest rates known as Libor.
The traders under Gold and Barclays were fined almost $500 million by the Federal Energy Regulatory Commission.
The scam, masterminded by a trader named Scott Connelly, according to court papers, involved losing money on a small deal in order to pocket profits on another, related trade.
Gold had warned traders against “uneconomic trading activity,” according to the FERC petition in a California federal court.
Compliance documents at the bank said that that kind of trading could be seen as “evidence to manipulate market prices.”
Gold is not among those fined by FERC. Barclays is fighting the fine.
“We strongly disagree with the allegations made by FERC against Barclays and its former traders, and we believe the penalty previously assessed by the FERC is without basis,” Marc Hazelton, a Barclays spokesman in New York, said in an e-mail on Tuesday. “We intend to vigorously defend this matter. We believe that our trading was legitimate and in compliance with applicable law.”
Hazelton declined to make Gold available for comment.
“The commission has spoken,” said Mary O’Driscoll, a FERC spokeswoman.
The scam echoes the Libor debacle that felled Diamond in July 2012.
Traders at the bank rigged the rate so the bank could make more profitable trades. The interest-rate benchmark was used for trillions of dollars of investments, from mortgages to student loans.
Gold is seen as a conservative choice to lead the bank’s Americas unit, according to one former Barclays trader.
Gold will replace Hugh “Skip” McGee, who was part of the team that negotiated the sale of Lehman Brothers to Barclays in 2008.
McGee made headlines in recent years for his lavish compensation package that made him one of Wall Street’s highest-paid bankers, pulling in a $15 million-plus compensation one year.
That excess is no longer in vogue at Barclays.
Antony Jenkins, the bank’s global CEO, in February turned down a 2013 bonus of as much as $4.4 million.
For Barclays, having a head of its US operations with a blemished past — as Gold will have with the FERC action — is nothing new.
In 2009, McGee’s reputation was ripped across Wall Street after he sent a homophobic letter to his son’s private school, excoriating a lesbian teacher for bringing up “nonsense issues that she has no business raising.”