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Five Former Gas Traders Indicted for Reporting Bogus Trades

February 20, 2006
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Five Former Gas Traders Indicted for Reporting Bogus Trades

Five former natural gas traders who had worked at El Paso Corp., Dynegy Inc. and Reliant Energy Inc. were indicted last week by the U.S. Attorney's Office in Houston for reporting bogus trades to industry newsletters to affect the price of natural gas.

At a press conference, U.S. Attorney Michael Shelby, who heads the Corporate Fraud Task Force, announced the unsealing of four indictments charging the four men and one woman. All pleaded not guilty last week.

Michelle Marie Valencia, 34, a former Dynegy trader, and former El Paso Merchant Energy traders Donald E. Burwell, 44; James P. Phillips, 45; and Greg Singleton, 37, were charged with conspiracy, false reporting, and wire fraud related to the transmission of allegedly inaccurate trade reports to industry newsletters. Jerry A. Futch Jr., 41, a former Reliant gas trader, was charged with four counts of reporting false trades.

Singleton and Valencia were indicted together for conspiring to transmit and knowingly causing the transmission of reports which included inaccurate volume and price data for natural gas trades by Dynegy and El Paso. Singleton was also charged with three counts of false reporting and two counts of wire fraud. Valencia was previously charged with three counts of false reporting and wire fraud while she worked at Dynegy, but her trial has been stayed pending an appeal in the case by prosecutors (see NGI, Oct. 11).

According to the indictment, Valencia and Singleton contacted one another in August 2000, and agreed to transmit false reports from Dynegy and El Paso to both Inside FERC in Washington, DC. and Natural Gas Intelligence in Portland, Oregon on Aug. 31, 2000. Allegedly, the transmitted false reports lowered the volume weighted average price of all Southern California border baseload natural gas trades reported to the two industry newsletters in late August 2000 by more than 15 cents.

Burwell, Phillips and Futch are each accused in separate indictments of knowingly causing the transmission of reports that included inaccurate volume and price data for natural gas trades by their companies to Inside FERC. Burwell is accused of sending an email to Inside FERC in Washington, DC, on July 31, 2000, which inaccurately purported to describe fixed-price physical natural gas trades by El Paso Merchant Energy. The reports allegedly included false volume and price data for individual trades at various price hubs, including NGPL LA (Natural Gas Pipeline Co. - Louisiana), NGPL TXOK (Natural Gas Pipeline Co. - Texas/Oklahoma), PEPL (Panhandle Eastern Pipeline - Texas/Oklahoma - mainline) , ANR OK (ANR Pipeline Co. - Oklahoma), NNG Ventura (Northern Natural Gas Co., Ventura, Iowa), NNG Demarc (Northern Natural Gas Co.; Demarcation), Reliant East (Reliant Energy Gas transmission company), Trunk Louisiana (Trunk Line Gas Co.), NGPL Midcon (Natural Gas Pipeline Co. of America).

Burwell is alleged to have known the transmitted list was inaccurate because the listed trades were not fixed-price physical natural gas trades. Burwell is charged with one count each of conspiracy, false reporting, and wire fraud.

Phillips is accused of falsely reporting inaccurate trades to Inside FERC on Jan. 31, 2001, and Feb. 28, 2001. The indictment alleges Phillips sent an email on these dates, each of which purported to describe fixed-price physical natural gas trades by El Paso Merchant Energy, and included volume and price data for individual trades at the Houston Ship Channel and Waha price hubs. Phillips allegedly knew the list was inaccurate because the listed trades were not fixed-price physical natural gas trades. Phillips is charged with one count of conspiracy, two counts of false reporting, and one count of wire fraud.

Futch is accused of sending a total of four emails to Inside FERC.: two on Nov. 29, 2000, and one each on Dec. 27, 2000 and Jan. 2, 2001, each of which purported to describe fixed-price physical natural gas trades by Reliant, and included volume and price data for individual trades at the Columbia Gas Appalachian and Transco Zone 6 price hubs. Futch allegedly knew the information was inaccurate because reported trades were not fixed-price physical natural gas trades. Futch is charged with four counts of false reporting.

Each count of reporting inaccurate market information affecting or tending to affect the price of natural gas carries a maximum punishment of five years in prison and a fine of $500,000. Each count of conspiracy and wire fraud carries a maximum punishment of five years in prison, and a fine of $250,000.

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