This Tom Fowler/Houston Chronicle article reports on the trial that begins Monday in U.S. District Judge Nancy Atlas’ federal court in which former Dynegy trader Michelle Valencia and former El Paso trader Greg Singleton (previous posts here) face charges of conspiracy and fraud under the rarely-used Commodities Exchange Act for allegedly submitting false gas trading data and withholding data to trade publications between 2000 and 2002.
The criminal case against Valencia and Singleton is the highest profile case of over a dozen of such cases that the Justice Department has been pursuing in Houston and San Francisco against former natural gas traders over alleged manipulation of natural gas trading indexes, which the trading industry uses to 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 can affect the level of profits that traders can generate. However, one of the key issues in in each of these cases is in what context the allegedly false information was transmitted or whether the publication even used any the 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 Valencia and Singleton have been fighting the charges from the beginning, so no last-minute plea deal is expected.