Three former natural gas traders pleaded guilty yesterday in San Francisco to conspiracy to manipulate the price of natural gas in interstate commerce in connection with criminal cases that are the same as federal prosecutors have pursued in Houston against former local traders. This previous post contains information on the Houston cases.
The three former traders admitted in their plea agreements that they conspired to report fictitious trades to Inside FERC, a natural gas industry newsletter, from roughly July 1, 2000 through Nov. 1, 2000 in an attempt to manipulate the published index prices of natural gas in the direction that would benefit their companies — Atlanta-based Mirant and Cincinnati-based Cinergy — natural gas positions in the market at the time. All three defendants entered into cooperation agreements with the Department of Justice and face up to five years in prison.
The guilty pleas resolve three more of over a dozen cases that the Justice Department has been pursuing in San Francisco and Houston in regard to alleged manipulation of natural gas trading indexes, which are used to value billions of dollars in gas contracts and derivatives. Industry publications such as Inside FERC use data from traders to calculate the index price of natural gas, which affects the level of profits that traders can generate. However, in each of these cases, it remains unclear in what context the allegedly false information was transmitted or whether the publication even used any false information. The government’s theory of criminal liability is that it needs only to prove that fake trades were reported to the publications and not that the trades were actually published or affected the markets.
Most of the traders charged in these cases have pled guilty under cooperation agreements with the DOJ, but several others are fighting the charges and currently awaiting trial, including former Dynegy trader Michelle Valencia and former El Paso trader Greg Singleton. Jury selection in the case against Valencia and Singleton is currently scheduled to begin on July 5, 2006 at 9 a.m. in U.S. District Judge Nancy F. Atlas’ court in Houston.