The 5th U.S. Circuit Court of Appeals is considering arguments this week on the constitutionality of the federal law used to charge a former Dynegy Inc. energy trader with making false natural gas trades. Michelle Valencia was charged last year with reporting false energy trading information, and prosecutors are appealing a ruling by a Houston judge that narrowed the language prosecutors may use to prove her guilt (see Daily GPI, Nov. 18, 2003).

Valencia and a former El Paso Corp. trader, Todd Geiger, were both charged in a wide ranging federal investigation. Valencia is charged with four counts of wire fraud and three counts of false reporting, and she is the only one on trial at this point. Geiger pleaded guilty last December to one count of false reporting of energy data and is cooperating with authorities (see Daily GPI, Dec. 12, 2003).

At issue is a ruling by U.S. District Judge Nancy Atlas. During pretrial hearings, Atlas threw out some of the charges against Geiger and Valencia, ruling that the government’s allegations, under the federal Commodity Exchange Act, were overbroad and unconstitutional (see Daily GPI, Aug. 29, 2003). Atlas later reinstated some of the charges but not all of the language, and ruled that prosecutors had to prove Valencia’s guilt under a provision of the Act concerning “knowingly inaccurate reports.”

Prosecutors appealed the ruling to the Circuit Court. Valencia’s attorneys cross-appealed, and they also have asked the court to throw out the charges.

Valencia’s defense team, led by Houston attorney Chris Flood, argued that the Act, as it stands, is misleading. Because of the way the Act is written, he said, a television weatherman could be charged with delivering “false and misleading” information for not providing an accurate forecast. For instance, if the weatherman did not correctly forecast a freeze in Florida, the “false and misleading” forecast could affect the price of orange juice.

Assistant U.S. Attorney Kathlyn Snyder countered that the Act does not have to have include “knowingly” for the charges to stand. “Congress wanted to make sure nothing slipped through the cracks,” Snyder told the court.

The court has not indicated when it will make a final ruling.

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.