The “long, national nightmare is over” into investigations of price manipulation and false trading within the energy merchant industry, said Michael Gorham, the former director of market oversight at the Commodity Futures Trading Commission (CFTC), echoing comments made by FERC’s William Hederman this week (see Daily GPI, Oct. 13).

Gorham, who paraphrased a statement by President Gerald Ford during the Watergate era, said the scandal, which rippled through the industry for more than two years, will “soon become a point of history.”

Gorham was appointed the first director of CFTC’s Division of Market Oversight in June 2002, a division set up in part to regulate market surveillance during the investigation of energy wash trading and price manipulation. He recently left the commission to return to the Illinois Institute of Technology’s Center for Financial Markets as director, and he spoke Tuesday at Platts Power Marketing Conference in Houston.

“There’s no doubt that you guys got picked on in the last couple of years,” Gorham said, but he added that most of the problems uncovered during the lengthy investigations have abated. In the past two years, CFTC’s enforcement division investigated more than 40 energy companies for false reporting, wash trades and market manipulation, and also investigated several individuals involved. To date, CFTC has filed 22 actions and collected more than $215 million in monetary penalties for its investigations.

With humor and seriousness, Gorham said, “everybody’s probably learned from the past,” and “I don’t expect to see a whole lot of energy cases in the future.”

However, the enforcement division at CFTC still must work to ensure market integrity, Gorham said. “The world of electronic trading is now easier to police, but there also are new ways to cheat the market.” Even with heightened scrutiny, Gorham admitted that people who report problems to the CFTC make a huge difference in combating problems. “Tips are actually often an important source of information. Some things that we just couldn’t see that others see make a big difference.”

Asked about CFTC’s possible investigation of future gas market volatility, and whether investigations could be expected if there are price spikes, Gorham said the CFTC will continue to play a “very limited role on the physical markets.” What warrants an investigation by the enforcement division, he said, is in clear cases where there appear to be “problems” with artificial pricing in the futures market. He added, “The CFTC doesn’t care about volatility [in the markets], only if there is artificial price manipulation. Volatility is part of the process.”

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