A market manipulation case brought against Total Gas & Power North America Inc. (TGPNA) by FERC's enforcement staff "suffers from multiple infirmities" and doesn't include documentary evidence of intent to manipulate any market, according to the company.
The Federal Energy Regulatory Commission should throw out the proceeding, TGPNA said in a 200-page response to an Office of Enforcement (OE) show cause order, which included allegations of natural gas market manipulation against the company and two of its trading managers (see Daily GPI,May 3). The order recommended civil penalties of nearly $226 million.
If FERC elects to proceed with the case, "it should do so in an action in federal district court," TGPNA said -- a position the company established in May, when it took its defense against the OE allegation of three years of natural gas trading manipulation in the Southwest to a federal district court in Texas (see Daily GPI, May 10). The Total SA unit contends that the federal courts are the only place where alleged violations of the federal Natural Gas Act (NGA) can be sorted out.
"This is likely the first market manipulation case ever brought by the Federal Energy Regulatory Commission in which neither the show cause order nor the staff report presents a single piece of documentary evidence showing that the respondents intended to manipulate any market," TGPNA said in its response to OE. "Without documentation of the key legal element of manipulative intent, on this ground alone, enforcement staff's case against Total Gas & Power North America, Inc., Aaron Hal, and Therese Tran should be summarily dismissed."
In addition, TGPNA said OE erred by accepting "unfounded, contradictory, and unreliable allegations from two ex-employees of TGPNA," and compounded that error "with a superficial analysis of incomplete and unrepresentative trading data..."
"When analyzed in the proper context, an impartial assessment of all of the relevant data shows that TGPNA executed a legitimate trading strategy, consisting entirely of legitimate, open-market transactions that were clearly not manipulative."
The trades allegedly took place at four Southwest locations between June 2009 and June 2012. FERC staff first issued a notice of the ongoing investigation in September 2015 (see Daily GPI, Sept. 22, 2015).
Separately, in December 2015, TGPNA forged a settlement with the Commodity Futures Trading Commission (CFTC) in which the company agreed to pay $3.6 million in civil penalties for attempting to manipulate gas prices.
Whistleblowers were involved in both the CFTC and FERC cases, with former TGPNA traders filing complaints. While FERC's enforcement staff is citing trading activity covering the three-year period beginning in June 2009, the CFTC settlement only pertained to the period starting Aug. 15, 2011.
TGPNA attorneys are arguing that the "long-established practice" of Congress has been to grant to the federal district courts authority over alleged NGA violations.
TGPNA claims that four different constitutional provisions -- the Appointments Clause, Article III, and the Fifth and Seventh Amendments -- require adjudication in federal district court based on the nature of the enforcement actions of FERC and the manner in which FERC judges are appointed.