The U.S. Court of Appeals for the District of Columbia Circuit will review former Amaranth natural gas trader Brian Hunter’s appeal of FERC’s order denying rehearing of claims that he manipulated the natural gas market.
Hunter filed the petition on Monday for review of the Federal Energy Regulatory Commission’s Nov. 18 order, which upheld an earlier order affirming an administrative law judge’s (ALJ) initial decision that Hunter engaged in trading practices that violated the Natural Gas Act. The judge levied a $30 million penalty.
In his rehearing request before FERC, Hunter argued that “Section 4A of the NGA [Natural Gas Act] 1) does not authorize the Commission to police manipulation occurring in the futures market; 2) does not permit enforcement actions against natural persons; and 3) vests the federal district courts with exclusive jurisdiction to adjudicate alleged violations,” said the Nov. 18 order.
As for Hunter’s claims that the Commission overstepped its jurisdiction, FERC contends that Hunter’s manipulation of the gas futures market took a toll on physical gas contracts over which the FERC has sole jurisdiction.
In his January 2010 decision ALJ Carmen Cintron said evidence in the case demonstrated violations by Hunter “were serious, willful and harmful” (see Daily GPI, Jan. 26, 2010). Hunter had been the head gas trader at Amaranth, which made a number of wrong-way trades that led to more than $6 billion in gas trading losses and the collapse of Amaranth Advisors LLC in September 2006 (see Daily GPI, Sept. 22, 2006).
In August 2009 collapsed hedge fund Amaranth, seven affiliates and former trader Matthew Donohoe entered into settlements with FERC enforcement staff to resolve all claims that they manipulated the market to influence gas futures prices [IN07-26]. Hunter remains the only holdout, dueling with FERC and the courts (see Daily GPI, Aug. 13, 2009).
Hunter and Donohoe were alleged to have engaged in a scheme that included the sale of large amounts of natural gas futures contracts that were then sold during the New York Mercantile Exchange settlement periods in February, March and April 2006, with the aim of driving down the settlement price to benefit derivatives whose values rose as the settlement prices fell.
The Commission imposed the maximum penalty on Hunter, who was reportedly uncooperative during the investigation, failing to appear at a deposition and refusing to give sworn testimony.
In its initial show cause order in mid-2007, FERC sought civil penalties and disgorgement of profits totaling $291 million for Amaranth’s activities (see Daily GPI, July 27, 2007).
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