Cinergy Pays CFTC $3M to Settle False Price Reporting Charges
Cinergy Marketing & Trading LP paid $3 million to the Commodity Futures Trading Commission (CFTC) last Tuesday to settle allegations that it falsely reported information and natural gas prices to energy trade publications.
However, the company neither admitted nor denied the allegations in agreeing to the settlement. The settlement, which is among many similar agreements that have been reached this year with energy companies and the CFTC, was released simultaneously with an administrative order on Tuesday.
The CFTC said that Cinergy reported false trade information to Platts' Gas Daily and Inside FERC publications from August 2000 through July 2002. Specifically two traders on Cinergy's natural gas trading desks knowingly reported the "false, misleading and knowingly inaccurate" trading information, including prices and volumes, to the publications, the administrative order said.
According to the order, the false reports, which were submitted via e-mail and over the phone, contained both fictitious trades and certain of Cinergy's actual trades in which the prices and/or volumes were altered, as well as selected trades observed in the market, all of which were represented to be Cinergy's actual trades.
The CFTC order finds that such actions were in violation of the Commodity Exchange Act (CEA). The trade publications use price and volume information in calculating indexes of natural gas prices at various hubs throughout the United States. Participants in the gas markets use the indexes to price and settle commodity transactions, and natural gas futures traders refer to the published indexes for price discovery and for assessing price risks. As a result, the false information reported to publications' surveys by Cinergy was market information that could have affected the price of natural gas in interstate commerce if the publications actually used the false information.
In addition to imposing civil penalties, the CFTC order requires the Cinergy to cease and desist from further violations of the CEA and CFTC regulations, and further requires the company to cooperate with the CFTC in other investigations.
In the past two years, CFTC's enforcement division investigated more than 40 energy companies for false reporting, wash trades and market manipulation, and also investigated several individuals involved. To date, the agency has filed 24 actions and collected more than $218 million in monetary penalties for its investigations. In none of the actions has the CFTC said that the false prices actually were used in the surveys nor stated what effect they had on the price of gas.
The Cinergy settlement follows similar settlements by Coral Energy ($30 million); El Paso Merchant Energy LP ($20 million); Dynegy Marketing and Trade ($5 million); EnCana Corp.'s former U.S.-based energy trading division, WD Energy Services Inc. ($20 million); Williams Energy Marketing and Trading ($20 million); Enserco Energy Inc. ($3 million); Duke Energy Trading and Marketing ($28 million), Aquila Merchant Services ($26.5 million), Xcel Energy Inc. affiliate e prime Inc. ($16 million), Entergy Koch Trading LP ($3 million), ONEOK Energy Marketing and Trading Co. LP ($3 million), Calpine Energy Services LP ($1.5 million), Western Gas Resources ($7 million) Reliant Energy Services Inc. ($18 million), CMS Marketing Services & Trading and CMS Field Services ($16 million) and Enron Corp. ($35 million). Former Enron trader Hunter Shively also paid $300,000 to settle charges that he engaged in a scheme to manipulate the Henry Hub natural gas spot and futures markets on July 19, 2001 using Enron Online, the company's electronic trading system.
Meanwhile, there are two pending false price reporting and attempted market manipulation cases against American Electric Power and NRG.