The Way We Are Screwed... And How Come Nobody Goes To Jail ??? [View all]

[WillyT]

Morgan Stanley to pay $4.8 mln, no admission of wrongdoing

* Electricity price-fixing said to cost consumers $300 mln

* Justice Department: Pact sends message to banking industry

* Morgan Stanley declines to comment

By Jonathan Stempel - Reuters

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Aug 7 (Reuters) - A federal judge grudgingly approved Morgan Stanley's $4.8 million settlement of electricity price-fixing charges over activity estimated to have cost New York consumers about $300 million, turning aside claims by a major nonprofit that the accord let the bank off too easily.

The case, which also involved the electricity generator KeySpan Corp, was the first in which the U.S. Department of Justice said it tried to recover improper profit from a financial services company that used derivatives to foster anticompetitive behavior.

Morgan Stanley entered a swap agreement with KeySpan in 2006 that gave it a stake in revenue by Astoria Generating Co, which also operated in New York City. It also entered a related hedge with Astoria.

The government said the arrangement allowed KeySpan to withhold substantial electricity generating capacity from the market, driving prices higher for consumers, and generated $21.6 million of net revenue for Morgan Stanley.

U.S. District Judge William Pauley in Manhattan said he shared the concerns of state officials and the AARP, a nonprofit serving people 50 and older, that any settlement should have reflected the harm to consumers and forced Morgan Stanley to give up the $21.6 million.

"Given the government's stark allegations of manipulative conduct against Morgan Stanley, disgorgement of $4.8 million is a relatively mild sanction," Pauley wrote. "There is a risk that a large financial services firm like Morgan Stanley could view such a modest penalty as merely a cost of doing business.

"But despite this court's misgivings, the government's decision to settle for less than full damages is entitled to judicial deference, particularly in view of the novelty of the government's theory."

The judge also rejected the AARP argument that the $4.8 million be returned to consumers, in part because sending it instead to the U.S. Treasury served the public interest.

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More: http://in.reuters.com/article/2012/08/07/morganstanley-keyspan-antitrust-ruling-idINL2E8J7GL820120807