Todd Geiger, the former El Paso Corp. natural gas trader accused of reporting bogus data to an energy trade publication in an attempt to manipulate gas price indexes, pleaded guilty Thursday to one count of false reporting and agreed to cooperate with the federal prosecution. In exchange for the guilty plea, one wire fraud count was dropped against him.
Geiger, 38, appeared before U.S. District Judge Nancy Atlas of the Southern District Court of Texas in a Houston courtroom in a brief hearing. He will be sentenced on March 19. Geiger faces from probation up to five years in prison and fines of up to $500,000.
The former vice president at El Paso was first indicted a year ago on two counts, the wire fraud and one count related to reporting inaccurate natural gas price information to one of Platt’s publications, Inside FERC’s Gas Market Report (see Daily GPI, Dec. 5, 2002). According to the federal indictment, Geiger allegedly fabricated 48 natural gas trades and provided the false prices and volumes during one trading period in 2001.
Geiger, who is a Houston resident, had traded for El Paso’s Canada desk The 48 trades, said investigators, were transactions at the Sumas trading hub, a delivery point on the border of British Columbia and Washington state. Although the indictment did not include an explanation as to why Geiger made the false reports, a document filed with the U.S. District Court in Houston this week provided additional details. The federal prosecutors also said they have evidence that false price reports for trades at Sumas were submitted to other publications, including NGI’s Weekly Gas Price Index and Gas Daily.
Prosecutors alleged that Geiger’s portfolio of trades at El Paso stood to gain nearly $32,500 for every penny that the Dec.1, 2001 index was lowered at the Sumas hub. However, Inside FERC rejected those trades. If the trades had not been rejected, prosecutors charged that the Sumas index price would likely have been 14 cents lower as a result and would have generated a “fraudulent profit” for El Paso of about $455,000.
“Geiger believed Inside FERC‘s monthly Sumas index price could be, and had been, manipulated by other traders,” prosecutors said in the document. They also noted that Geiger had called the publication in June 2001 to report that it was “obvious” there was manipulation at the Sumas point. The document also cited an email sent by Geiger in August 2002 that apparently stated, “cash market manipulation + lying to index publications = jail time. Any questions?”
During the hearing, Geiger admitted to Atlas that he had instructed someone else at El Paso to create the bogus trades report and to send them to the publications. “The index was used to price natural gas people bought,” Geiger said in explaining to Atlas what the importance of the index was.
“We plan to work with Mr. Geiger as we continue our investigation into false reporting at trade journals,” Assistant U.S. Attorney John Lewis told Atlas. In a statement submitted to the court, Lewis indicated that there was an “agreement” between Geiger and other unnamed El Paso traders to report false trades “for the purpose of favoring El Paso’s trading positions.” The statement indicated that “El Paso traders reported many hundreds of fictitious trades to Inside FERC, NGI and Gas Daily and other publications.”
Lewis declined comment on the targets of the continuing investigation. Prosecutors have one false reporting case pending against ex-Dynegy Inc. trader Michelle Valencia (see Daily GPI, Nov. 24). Her case is expected to proceed in January, according to the court.
Geiger declined commenting following the hearing and he will remain free on bond pending his March sentencing. However, George Murphy, his attorney, called the past year “agonizing” for Geiger and his family. “He’s shown tremendous personal dignity facing overwhelming adversity,” Murphy said of his client. Murphy also said that while Geiger cannot deny the bogus reporting, he indicated that details of “another story” will be revealed during the sentencing process.
Murphy said Geiger had felt a “tremendous sense of frustration” about the way the price indexes were being calculated, and he indicated that Geiger had a documented history of calling Inside FERC to complain about index manipulation.
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