A U.S. district court judge in Houston this week denied a motion by a former Enron Corp. trading executive that sought to dismiss charges by the Commodity Futures Trading Commission (CFTC) last year that he manipulated or attempted to manipulate the wholesale natural gas market.

Judge Melinda Harmon on Wednesday denied the motion by Hunter Shively, formerly a vice president of Enron, who was charged by the CFTC last year for allegedly engaging in a scheme with other Enron traders to manipulate the price of natural gas in the Henry Hub next-day gas spot market traded on EnronOnline, Enron’s former electronic trading platform (see Daily GPI, March 13, 2003). Shively was the trading desk manager for Enron’s Central Desk from May 1999 through December 2001, when the company declared bankruptcy.

According to the complaint, the scheme involved a plan to purchase an extraordinarily large amount of Henry Hub spot market gas within a short period of time on July 19, 2001, causing prices to rise artificially. The complaint further alleges that immediately following the pre-arranged buying spree, Enron began unwinding its position, and prices declined in that market while Enron unwound its position.

According to the complaint, Shively took various actions, including agreeing to cover trading losses of, and directing a payment from an account he controlled to, other traders involved in the scheme. The CFTC alleged that the manipulation “had a direct and adverse effect on the New York Mercantile Exchange August 2001 natural gas futures contract, including causing prices in Nymex Henry Hub futures to become artificial.”

Shively sought to dismiss the manipulation charge because, he argued, it failed to state a claim upon which relief could be granted. The court refused to dismiss the claim, holding that for the purposes of Shively’s motion, the CFTC had sufficiently alleged facts showing that Enron had the ability to influence prices in the spot market and in the Nymex Henry Hub Futures Market; artificial prices existed in those markets on July 19, 2001; Shively was the proximate cause of the price artificiality; and Shively intended to manipulate prices on the date alleged.

The court further upheld the CFTC’s ability to go forward with its alternate claim against Shively for attempted manipulation.

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