Former Dynegy Inc. trader Michelle Valencia -- who was convicted in August of seven counts of wire fraud for reporting false trade data to gas price index publishers (see Daily GPI, Aug. 7) -- was denied her request for acquittal or a new trial in a Dec. 14 judge's order.
Former El Paso Merchant Energy trader Greg Singleton, who was tried with Valencia and convicted on one count of wire fraud, was denied his request for acquittal on Nov. 3. Sentencing for Valencia and Singleton is scheduled for 10 a.m. March 2 in the Houston courtroom of U.S. District Judge Nancy Atlas.
Each count of wire fraud is punishable by up to five years in prison, "but because of all the stacking issues, I wouldn't even venture a guess" as to what Valencia's sentence might be, said her attorney, Chris Flood. "We're hoping the court will consider this case for what it is...I'm just hoping for justice at sentencing, that's all."
Among other things, Valencia had challenged the sufficiency of the evidence on which she was convicted. She was convicted of submitting false data to McGraw-Hill's Platts Inside FERC's Gas Market Report and to Natural Gas Intelligence (NGI), a publication of Intelligence Press Inc. The majority of data submissions on which Valencia's convictions were based were submissions to Inside FERC. Part of Valencia's argument challenging her convictions asserted that because neither she nor Dynegy made any trades using Inside FERC's Malin or SoCal indexes, it was wrong to convict her on the basis of false reports sent to that publication.
However, in reviewing the case Atlas found that Valencia's false reporting to each publication could be viewed collectively.
"There was sufficient evidence, however, from which the jury could find that Valencia hoped to influence both indices each month -- even though only one index was generally used at each location -- because she believe that if both indices moved in [a] similar manner, the index in which Valencia was primarily interested gained enhanced credibility," Atlas wrote.
"Rather than there being, as Valencia contends, one scheme to send false data to Inside FERC and a separate, unrelated scheme to send false data to NGI, the government asserted and the jury was entitled to find that the scheme involved sending reports of similar, if not identical, false trades to both publications regardless of which publication's index the industry typically used for a particular location."
Flood told NGI Tuesday that it was not proven that Valencia needed her reports to Inside FERC and NGI to be consistent. In fact, he said that in its case against El Paso's Singleton, the government proved that El Paso sent different reports to the two publications.
"There's no evidence to support that [need for the reporting to each publication to be consistent]," Flood told NGI. "You can make that allegation all day long. You can make the allegation that she had to send it to both [publications] because otherwise her mother was going to say something to the government, but there's no evidence to support it."
Flood would not comment on whether there will be an appeal.
During the trial much was made of the idea that while some reported trades were not actual transactions, they were "representative" of the market, according to the Valencia and Singleton defense teams. Atlas rejected this, saying, "...Valencia knowingly participated in a scheme to defraud Dynegy trading partners by submitting or causing others to submit 'representative' Dynegy trade data (rather than accurate data of actual trades) to Inside FERC in order to influence the index prices."
The judge also wrote that Valencia was "apparently aware" of the practice of NGI and Inside FERC of throwing out outlying trades when computing indexes. "...[F]or that reason, [Valencia] submitted reports of trades at prices within the 'high' and 'low' for the day for the location being reported."
Valencia also asserted that she did not benefit personally from false reporting as, in some instances, reported trades would have moved indexes in a direction contrary to the interests of her own trading book. However, during the four-week trial there was much testimony that Valencia and others on Houston's gas trading floors were told by higher-ups to "report the bias" (i.e. report trades in a manner favorable to the company's position).
"While her personal book of physical trades may have not benefited from a higher Inside FERC index at San Juan that month, the jury was entitled to consider Valencia's role in 'reporting the bias' her boss perceived would aid Dynegy's net position based on the many trades made by her boss, and others under his direction," Atlas wrote.
The judge also rejected assertions by Valencia's defense that it was not given ample access to evidence it says was entered late and that one witness' testimony was mischaracterized.
In October, one of the first traders to be indicted for false trade/price reporting was sentenced by Atlas to two years in prison (see Daily GPI, Oct. 6). Former El Paso trader Todd Geiger was arrested in December 2002, and he pleaded guilty a year later to reporting inaccurate information under the Commodity Exchange Act to Inside FERC's Gas Market Report (see Daily GPI, Dec. 12, 2003; Dec. 5, 2002). Geiger, who was not fined but will be on probation for two years following his release, had faced up to five years in prison and a fine of up to $500,000. However, his sentencing was delayed several times while he cooperated with federal authorities in their investigation into other ex-energy traders.
Although Valencia and Singleton were also indicted under the Commodity Exchange Act, the jury did not find them guilty on any of these counts, deadlocking on some and finding not guilty in others.
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