The federal government obtained a record of more than $630 million in civil penalties, restitution and disgorgement of unjust profits in fiscal year (FY) 2008 from companies and traders that engaged in fraud, manipulation and other misconduct in the futures markets, including energy futures, the Commodity Futures Trading Commission (CFTC) reported last Thursday.
Of that amount, CFTC spokesman Dennis Holden estimated that $137 million was civil penalties paid by energy companies.
The CFTC's Division of Enforcement filed 40 new actions during FY 2008, which ended Sept. 30, including 13 actions against hedge funds/pool operators/trading advisors, and two cases charging attempted manipulation and/or manipulation in the energy markets involving a former trader for BP Products North America Inc. and Optiver Holding BV, affiliates and employees.
BP was ordered to pay a $125 million civil penalty for manipulating the price of propane in February 2004. And under a deferred prosecution agreement with the Department of Justice (DOJ), BP was required to pay a $100 million criminal penalty plus $25 million into a consumer fraud fund, as well as make payments into a restitution fund (see NGI, Oct. 29, 2007). Optiver, a trading fund headquartered in the Netherlands, two affiliates and three employees were charged with manipulation and attempted manipulation of light sweet crude oil, heating oil and gasoline futures.
With respect to old energy-related cases resolved in FY 2008, Dallas-based Energy Transfer Partners LP and three subsidiaries in March were ordered to pay $10 million as part of a settlement reached with the CFTC on charges that they attempted to manipulate natural gas prices at the Houston Ship Channel (see NGI, March 24).
The three Energy Transfer subsidiaries included Energy Transfer Co. of San Antonio and Houston, TX; Houston Pipeline Co. of Houston; and ETC Marketing Ltd. of San Antonio and Houston. Energy Transfer and its subsidiaries were accused of attempting to manipulate the October 2005 and December 2005 Houston Ship Channel monthly index prices of natural gas published by Platts in its Inside FERC Gas Market Report (see NGI, July 30, 3007). Similar charges are pending against Energy Transfer at the Federal Energy Regulation Commission.
The CFTC said since December 2002 it has charged a record 42 companies and 31 individuals in the energy sector with manipulation, attempted manipulation, false reporting and wash trade violations under the Commodity Exchange Act, collecting $445 million in civil penalties.
The CFTC said it has cooperated with the DOJ in the criminal prosecution of 47 traders and energy companies over the six-year period.
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