For anyone who was keeping score, it seemed the Commodity Futures Trading Commission (CFTC) was collecting far more money from energy companies in penalties and settlements than the Federal Energy Regulatory Commission over the past year. But that’s not what the totals show. FERC, in fact, obtained over $100 million more from energy firms than the CFTC, according to the Department of Justice’s (DOJ) review of the second-year performance of the president’s Corporate Fraud Task Force.

FERC over the past year has carried out numerous investigations into the manipulation of natural gas and electricity markets, resulting in settlements valued in excess of $500 million, the DOJ review said last week. This compares to the $35 million that the Commission brought in on behalf of energy consumers during the first year of the task force (see NGI, July 28, 2003).

In addition, the Commission last Thursday ordered Enron Corp. to forfeit $32.5 million in unjust profits it made from wholesale power sales during the western energy crisis in 2000-2001. FERC directed Enron to pay the amount in 30 days.

In contrast, the CFTC obtained $382 million during the task force’s second year, mostly from energy companies, including $315 million in civil penalties and more than $67 million in restitution and disgorgement. The CFTC’s penalty total for the July 1, 2003-June 30, 2004 period was up nearly 137% from the $238 million that it netted during the first year the task force was in operation.

FERC has entered into settlements with Reliant Energy Services, Duke Energy and Trading, Williams Power Co., Dynegy Inc., Portland General Electric, El Paso Electric, Avista Corp., Cleco Corp., Nicor Gas, Natural Fuel Gas Co. and Center Point Gas Transmission Co., the DOJ reported. The Commission still is pursuing refunds of up to $3 billion for overcharges to California energy consumers, as well as additional disgorgement of profits from sellers who are found to have violated FERC tariffs, it said.

The CFTC’s enforcement activity over the past year centered around the energy markets, the DOJ noted. Specifically, it “focused on the widespread practice by energy companies…of falsely reporting the prices and quantities of natural gas or electricity transactions to reporting services, often to influence the prices reported by these services and to consequently benefit energy derivative positions held by these companies.”

The CFTC in the past year brought 68 enforcement actions, a 17% hike over the prior year, against 193 defendants. It obtained permanent injunctions against 58 defendants and restraining orders to freeze assets and preserve books and records against 77 defendants. It also issued cease and desist orders against 51 respondents in administrative proceedings, the DOJ said.

Both FERC and the CFTC, along with seven other federal agencies, are members of the Corporate Fraud Task Force, which is chaired by Deputy Attorney General James B. Comey.

During the second year of the task force, federal prosecutors began trying a number of high-profile cases involving corporate fraud, including the case against a Dynegy trader for his role in disguising the company’s finances within a transaction dubbed “Project Alpha,” which hid $300 million in debt. The trader, Jamie Olis, was sentenced to 24 years in prison in March.

Since the inception of the task force two years ago, DOJ prosecutors have obtained over 500 corporate fraud convictions or guilty pleas; charged over 900 defendants and over 60 corporate CEOs and presidents with some type of corporate fraud crime in connection with more than 400 filed cases; obtained charges against 31 Enron defendants, including 21 former Enron executives; obtained the convictions of 11 Enron defendants, including former CFO Andrew Fastow and ex-Treasurer Ben Glisan Jr.; and seized over $161 million for the benefit of victims of the massive Enron fraud. Fastow’s wife, Lea Fastow, entered a Houston prison earlier this month after pleading guilty to filing a false tax return.

The Securities and Exchange Commission (SEC) collected far more for Enron victims, over $432 million, according to the DOJ review. Overall, the SEC filed 350 enforcement actions, 72 of which involved financial fraud or reporting, during the Oct. 1, 2003-June 21, 2004 period, it said. Thirty-two companies have been suspended from trading, and the SEC has sought asset freezes against individuals and companies in 36 cases. The agency also taken action to bar 110 corporate executives and directors from again serving in publicly traded companies.

In addition, the SEC in the past year obtained the largest civil penalty in its history ($2.5 billion) — against WorldCom.

The Department of Labor in May filed settlements, which must be approved by the court, to restore at least $66.5 million to the Enron savings and employee stock ownership plans and to restrict the ability of certain corporate officers, directors and administrative committee members from future service as fiduciaries under the Employee Retirement Income Security Act.

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