A dismissed Dynegy Corp. trader was indicted last week on charges that she reported fake natural gas trades on three separate occasions in late 2000 and early 2001 to an energy publication for use in calculating its index price for gas. She was the second trader to be indicted by a federal grand jury in Houston for bogus trades.

Michelle Marie Valencia, 32, a former employee of Dynegy Marketing and Trade, was indicted on three counts of knowingly causing the transmission of false trade reports to Inside FERC Natural Gas Market Report, and four counts of wire fraud.

After the indictment was unsealed Monday, she was arrested at her home in Houston by agents with the Federal Bureau of Investigation on the felony charges. She pleaded not guilty during a hearing before U.S. Magistrate Judge Calvin Botley. Bond was set at $100,000, of which she posted the required 5%, according to The Houston Chronicle. A hearing has been scheduled for March.

The indictment alleged that Valencia, who had worked on Dynegy’s “West desk,” reported price and volume information on 43 bogus gas trades over a four-month period, said the U.S. Attorney’s Office in Houston.

The indictment accused her of carrying out three fictitious trades in November 2000, 33 bogus trades in January 2001 and seven sham trades in February 2001. Valencia also is alleged to have conducted telephone conversations with an editor of Inside FERC “in furtherance of her scheme to affect the price of natural gas,” prompting the wire fraud charges.

She faces a maximum of five years in prison and a fine of $500,000 for each report of false market information “affecting or tending to affect the price of natural gas.” She also could be sentenced to five years in prison and fined $250,000 if convicted of wire fraud.

Dynegy said Valencia was one of seven employees dismissed by the company since Oct. 18, after an internal investigation uncovered evidence indicating that false information on gas trades was reported to various energy publications. The company also disciplined seven other employees for their involvement in the activity, it noted.

Valencia’s indictment was the second for federal prosecutors investigating energy trader activities. Todd Geiger, a former El Paso Corp. energy trader, was indicted in early December on charges he reported 48 bogus gas trades to the Inside FERC price survey, although the publisher says it did not use the bogus trades in computing its index. He faces up to 10 years in prison and $500,000 in fines (See NGI, Dec. 9, 2002)). He has pleaded not guilty; his trial is scheduled for March 24 in Houston.

A Platts’ spokesman last week said no one from Inside FERC has been subpoenaed to testify against Geiger or Valencia.

In December, Dynegy Marketing and Trade agreed to pay a $5 million fine to the Commodity Futures Trading Commission to resolve charges that it and another Dynegy affiliate colluded to manipulate gas prices over a two-year period by reporting bogus trading information to energy publications that publish gas price indices. Dynegy neither admitted nor denied any wrongdoing (See NGI, Dec. 23, 2002).

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