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CFTC Attempts to Compel Platts to Release Trade Data

The Commodity Futures Trading Commission (CFTC) said Thursday that it is seeking a court ruling to compel McGraw Hill to turn over natural gas transaction data. The agency filed an application with the U.S. District Court for the District of Columbia seeking enforcement of a subpoena it issued in April.

The CFTC said that as part of an energy investigation it subpoenaed McGraw-Hill for the data, but the publishing company refused to provide "certain categories of responsive documents" by an April 28 deadline.

According to the application, the CFTC determined that certain traders at an undisclosed energy company submitted false natural gas trade data to McGraw-Hill subsidiary Platts, which uses trade data to publish natural gas price indexes. The CFTC said the energy company's gas trading records along with testimony from its traders provided evidence that false gas transaction information was sent to Platts for inclusion in its index calculations.

However, the energy company did not retain the false transaction data. As a result, the CFTC subpoenaed McGraw-Hill to obtain the data. In its subpoena, the CFTC also sought additional details from McGraw-Hill, including documents explaining how Platts' used the data in compiling its indexes. McGraw-Hill refused to provide these documents based on what is called the "qualified reporter's privilege," said Tony Mansfield, chief trial attorney at the CFTC.

The commission said in its "Memorandum of Points and Authorities In Support" of its application that based on the information McGraw-Hill agreed to provide, it was unable to "confirm the universe of the trade data the energy company submitted to Platts, its accuracy, receipt by Platts and how Platts used the trade data to compile its indices.

"...Despite the energy company's voluntary waiver of any confidentiality that may apply to the information the company's traders submitted to Platts, McGraw-Hill refuses to turn over the documents," the agency told the court.

The CFTC previously sought enforcement of a subpoena for similar documents from Platts related to other energy companies but also was rebuffed. "As in this action, McGraw-Hill claimed that the information sought by the CFTC is privileged," the agency said. The CFTC noted that a motion on the matter was filed two years ago with the Federal District Court in the Southern District of Texas but has yet to be decided.

"There is a fundamental disagreement over the applicability of this qualifying reporter's privilege, and even if there is a privilege that attaches, on whether it is appropriately invoked in this circumstance," said Mansfield in an interview with NGI.

Platts spokesman James Keener said the publishing company is reviewing the CFTC's latest attempt to compel it to produce trading data and other documents. "We have consistently cooperated with regulators' request for information in a manner consistent with our First Amendment protections," he said. "We share the same goal as the CFTC in enhancing transparency and openness in the energy markets."

The CFTC has charged 27 companies and 21 individuals over the last few years with violations of the Commodity Exchange Act, including submitting false gas trading information to publishers in an attempt to manipulate indexes on which purchase and sale agreements are based. Since 2002, the CFTC has won $298 million in civil penalties as part of settlements with 30 individuals and companies, including Enron Corp., American Electric Power Co. and Calpine Corp.

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