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FERC Rejects Amaranth Settlement

FERC Thursday rejected the uncontested joint settlement entered into by its own Office of Enforcement staff with affiliates of collapsed hedge fund Amaranth Advisors LLC and two of its natural gas traders accused of manipulating the market to influence natural gas futures prices.

"Having considered the gravity of the alleged violations, the potential remedies for those violations if proven to have occurred and the remedies offered in the settlement, the Commission concludes that the settlement is not in the public interest," the Federal Energy Regulatory Commission (FERC) order said (IN07-26).

Commission Administrative Law Judge (ALJ) Carmen Cintron had certified the settlement offer to FERC in early December, saying approval was in the public interest (see NGI, Dec. 8, 2008). Details of the settlement were not disclosed at the request of the participants.

Pursuant to a show cause order issued a year earlier, FERC in mid-July ordered an ALJ hearing to determine whether certain gas futures trading activities by Amaranth Advisors, affiliates and ex-traders Brian Hunter and Matthew Donohoe violated the agency's anti-manipulation regulations (see NGI, July 21, 2008). Hearing procedures were suspended while the parties worked on a settlement.

Amaranth and others had been accused of manipulating the New York Mercantile Exchange (Nymex) natural gas futures contract, which settles at the Henry Hub and has a direct bearing on physical gas prices over which FERC has jurisdiction (see NGI, July 30, 2007). Amaranth and its one-time traders have challenged the charges at FERC and in the courts. The Commission sought to assess civil penalties and require the disgorgement of profits totaling $291 million for Amaranth's activities that occurred in February, March and April 2006.

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