A trader for Golden, CO-based Enserco Energy has pleaded guilty to one count of wire fraud in connection with the reporting of false natural gas price and volume information to manipulate a price index published by Platts’ Gas Daily.

Darrell Danyluk, a Calgary, Alberta-based trader for Enserco Energy, struck a deal with the U.S. Attorney’s Office in Colorado, promising to completely cooperate with federal authorities in their investigation of related cases and to testify at any subsequent grand jury or trial proceedings as part of the plea agreement. Prosecutors said another Enserco gas trader in the Colorado office participated in the bogus price reporting scheme.

Danyluk faces up to five years in prison and a maximum fine of $250,000, plus three years of supervised release, according to documents filed in the U.S. District Court for the District of Colorado.

“The defendant knowingly participated in a scheme to defraud or to obtain money or property by means of material false or fraudulent pretenses,” the court papers said. “[His] intent was to falsely influence the Gas Daily’s published index price at [a] specific hub in hopes of improving Enserco’s financial position when the transaction settled at the published index price.”

Danyluk was primarily responsible for trading natural gas in the Northwest United States and Canada, including locations in Northern California, Oregon and Washington, for Enserco, a subsidiary of Black Hills Corp. based in Rapid City, SD.

The court papers said another unidentified trader in the Colorado office was involved in the illegal activity with Danyluk. “Danyluk and a trader in the Golden office engaged in a coordinated scheme where each would submit fictitious trade information for not only those hubs within his geographic region, but for the hubs within the other’s region. Danyluk and the other trader referred to this scheme as ‘double dipping’ because it resulted in the false reports having double the impact on the volume-weighted index.”

Asked if any other Enserco traders were being investigated by the U.S. Attorney’s Office, Black Hills spokesman Dale Jahr said, “Not that I’m aware of.”

The wire fraud charge was based on the fact that Danyluk submitted false reports via telephone from his office in Calgary to Gas Daily representatives in Houston, TX, and he also participated in daily calls from Calgary to Colorado to coordinate his false reports with a trader in Enserco’s Golden office, the court papers said.

“It is the defendant’s position that many of his voluntary reports to Gas Daily were not fraudulent. However, enough of Danyluk’s reports were false…to constitute a conscious scheme,” federal prosecutors said.

In August 2003, the Commodity Futures Trading Commission (CFTC) penalized Enserco $3 million for reporting bogus prices on gas trades to published indexes. The agency found that from May 2000 through at least June 2002, three former Enserco traders from its Colorado and Canadian offices routinely delivered separate, coordinated reports to published indexes, for the same delivery points, to increase significantly the likelihood that they could affect the published index prices.

At the time, Black Hills had called it a “regrettable episode,” and said the company had moved swiftly to prevent further abuses.

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