The Commodity Futures Trading Commission on Tuesday filed a complaint in federal district court in Columbus, OH, charging the ex-chief of AEP Energy Services Inc.’s Gulf trading desk with directing his natural gas traders to submit misleading or knowingly inaccurate information on trades to two Platts publications, Gas Daily and Inside FERC’s Gas Market Report (IFERC).
The complaint, filed in U.S. District Court for the Southern District of Ohio, charged that Joseph P. Foley directed those he supervised to knowingly submit “thousands of purported trades” to the Platts’ energy publications between November 2000 and September 2002 with the intent of skewing published gas price indexes to their benefit. Gas Daily publishes a daily index of gas trades, while IFERC issues a monthly index of trading transactions at various gas hubs.
The former AEP gas trader faces civil penalties of $110,000 for each knowingly bogus trade submitted before Oct. 23, 2000 and $120,000 for violations occurring on or after Oct. 23, 2000, or triple the monetary gain to Foley for each violation, according to the court complaint. He also would be required to pay back the funds he received as a result of the false trades. Foley would be barred from trading in the future as well.
The CFTC estimated that Foley received more than $2 million personally in 2002 under a bonus compensation plan called the “Phantom Equity Plan” that was based on the income of AEP Energy Services’ parent company, American Electric Power Corp. (AEP), including income from natural gas trades. Foley was fired for his role in the false reporting of gas trades in October 2002.
“As part of [Foley’s] scheme, the Gulf Desk, at defendant’s direction, maintained computer spreadsheets named ‘IFERC Bogus’ and ‘Joe Mama’ to record defendant’s index-based trades for the purpose of preparing reports to Gas Daily and IFERC containing false or misleading or knowingly inaccurate transaction information,” the complaint said.
“From at least November 2000 through October 2002, at the defendant’s direction, [AEP’s] Gulf Desk submitted 22 spreadsheets to IFERC, reporting thousands of natural gas trades purportedly made during bidweek. Each spreadsheet submitted to IFERC contained data for purported trades at the natural gas hubs that the Gulf Desk traded, including the Henry Hub, which defendant knew to be false or misleading or knowingly inaccurate,” the CFTC charges.
In January of this year, Ohio-based American Electric Power and AEP Energy Services were ordered to pay a civil penalty of $30 million and cooperate with the CFTC’s continuing investigation into gas trading abuses [see Daily GPI, Jan. 27). The judgment and order were entered by the U.S. District Court for the Southern District of Ohio. AEP Energy Services also agreed to pay a penalty of $30 million to the Department of Justice to avoid criminal prosecution for similar activities.
The CFTC reported that so far it has collected nearly $300 million in penalties for activities related to false reporting by energy companies and energy traders.
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