Grimy Times has learned that Morgan Stanley, a major player in the financial services industry, has agreed to pay $4.8 million for violating antitrust laws by entering into an agreement with KeySpan Corporation that restrained competition in the New York City electricity capacity market.
The agreement, which took place in January 2006, resulted in a price increase for electricity retailers, leading to higher electricity prices for consumers. The Antitrust Division of the U.S. government had previously entered into a settlement with KeySpan that required the company to disgorge $12 million in profits for its role in the agreement.
According to the complaint, Morgan Stanley and KeySpan executed a financial derivative for New York City capacity while Morgan simultaneously entered into an off-setting derivative with Astoria Generating Company, KeySpan’s largest competitor in the capacity market. The agreements effectively transferred to KeySpan a financial interest in Astoria’s capacity, thereby ensuring that KeySpan would withhold substantial output from the capacity market and increase prices.
Morgan Stanley earned revenues by retaining the spread between the fixed prices of the two derivative agreements. The anticompetitive effects of the Morgan/KeySpan agreement lasted until March 2008, when regulatory conditions eliminated KeySpan’s ability to affect the market price of electricity capacity.
The proposed settlement, which requires Morgan Stanley to pay $4.8 million in profits, will be published in The Federal Register. Any person may submit written comments concerning the proposed settlement within 60 days of its publication.
Morgan Stanley is a Delaware corporation with its principal place of business in New York City. The company provides diversified financial services, operating a global asset management business, investment banking services and a global securities business, including a commodities trading division.
Defendant: Morgan Stanley
Criminal Charges: Violation of Antitrust Laws
City and State: New York
Date: January 2006
Sentence or Outcome: Morgan Stanley agrees to pay $4.8 million in profits
Dollar Amounts: $4.8 million
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Key Facts
- State: New York
- Category: Fraud & Financial Crimes
- Source: DOJ Press Release â†â€â€
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