Three former Mirant and Cinergy Corp. natural gas traders pleaded guilty last week to conspiring to report bogus trades to an industry publication between July and November 2000 in an attempt to manipulate gas price indexes.
Christopher Joseph McDonald, 38, Paul Atha, 29, and Michael Whalen, 36, entered their guilty pleas in U.S. District Court for the Northern District of California San Francisco Division. The three, who had been charged with one criminal count each, acknowledged they had conspired to report fictitious trades to Inside FERC. McDonald of Atlanta, GA, was a supervisor for Mirant. Atha, who lives in Houston, was a trader for Mirant. And Whalen, also of Houston, was a gas trader for Cinergy who had previously worked for Mirant.
The men, who will be sentenced later this year, each face up to five years in prison, three years of supervised release and a $250,000 fine.
The indictment was filed April 13 by U.S. Attorney Kevin V. Ryan (No. CR 06 0265), alleging that beginning in July 2000 and continuing to about November 2000, McDonald, Whalen and Atha "did knowingly and intentionally engage in a conspiracy to commit an offense against the United States, specifically manipulation of the price of natural gas..."
According to the criminal indictment, on July 27, 2000, McDonald telephoned Whalen to have Whalen identify Cinergy as the counterparty to false Mirant trades reported to Inside FERC for the August 2000 index. McDonald and Whalen agreed on the false gas reporting information and prices to benefit Mirant's and Cinergy's positions at the Permian Basin and the Houston Ship Channel, the indictment charged.
The following day, according to the government, McDonald and Whalen, in a recorded telephone call, agreed to include false trades proposed by Cinergy on Mirant's revised August 2000 report to Inside FERC. Also on July 28, 2000, Whalen and Atha, in a recorded call, confirmed the false trades, including price and volume, to be included in the report. On July 31, 2000, the indictment said Atha, under McDonald's supervision, transmitted a spreadsheet from Mirant's offices in Atlanta to Inside FERC containing the false trade data.
On Sept. 29, 2000, the government said McDonald called Whalen to make sure Whalen would falsely identify Cinergy as the counterparty for the inaccurate trade data submitted by Mirant for the Inside FERC October 2000 index. That same day, Whalen apparently spoke by telephone to an editor at InsideFERC and verified the false Mirant-Cinergy trading prices and volumes.
McDonald, Whalen and Atha were originally charged last year by the Commodity Futures Trading Commission (CFTC) in a sweeping set of civil charges against 15 former energy traders (see NGI, Feb. 7, 2005). The CFTC, in its charges against the three men, detailed a phone conversation in which Whalen allegedly said to McDonald, "Hey, do you want to fax me...exactly what you guys are going to write down so it's more believable...? I'll just write the exact opposite."
The CFTC complaint, which has not been dismissed, was filed in the U.S. District Court for the Northern District of Georgia. It asks for a civil monetary penalty of up to $120,000 per violation of the Commodity Exchange Act (CEA), permanent injunctions against future violations of the CEA and disgorgement of any ill-gotten gains.
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