A federal judge has ordered The McGraw-Hill Companies Inc., a publisher of energy price indexes, to appear in a Houston courtroom on June 2 to show cause why it should not be forced to turn over subpoenaed documents to the Commodity Futures Trading Commission (CFTC) as part of an investigation into the reporting of bogus prices and other trade data to energy publications.

The CFTC on Monday petitioned the court to compel McGraw-Hill to produce the documents that it subpoenaed from the company on Feb. 7 of this year. The administrative subpoenas were issued as part of a broad probe of energy trading practices, including published news reports that the false reporting of trade data to McGraw-Hill and the possible manipulation of its indexes were widespread throughout the natural gas industry, the agency said.

“McGraw-Hill claims that it is cooperating with government regulators. Unfortunately, its definition of cooperation falls far short of the meaning of cooperation,” said Gregory G. Mocek, director of the CFTC’s Division of Enforcement. “We are trying to wrap up [this] investigation in the most cost-efficient manner and McGraw-Hill is slowing down that process,” he told NGI. McGraw-Hill possesses documents from a “large number of energy companies” that are critical to the CFTC’s probe, he said.

But Platts, a division of McGraw-Hill, said it has “consistently responded” to CFTC requests, supplying more than 900 pages of documents and other information to the agency. “We have had numerous discussions with the CFTC on how we can provide additional information in a manner that would not violate our First Amendment rights as publishers. We are confident that an understanding can be reached.”

Platts publishes Gas Daily and Inside FERC’s Gas Market Report, as well as a number of power trade publications. It compiles price indexes for both natural gas and electricity, which are used by the industry as a guide to set prices for energy transactions. Mocek declined to say whether any other energy trade publishers of price indexes were being targeted by the CFTC.

McGraw-Hill has refused to comply with the CFTC’s demand for documents, claiming that it was protected by “qualified reporter’s privilege and that the subpoenas [were] overbroad,” the agency told the court in its application seeking the show-cause order.

The CFTC disputed McGraw-Hill’s claim of reporter’s privilege. “First, the process by which [McGraw-Hill] receives trade data and calculates its indexes does not involve news gathering or commentary and, therefore, does not invoke the privilege. Second, in many instances, since the trade data [McGraw-Hill] received and used in its calculation is not confidential, the privilege does not apply,” it said in court documents.

The agency told the court that a number of companies already have admitted publicly they reported false data to energy publications to skew the index prices, which it contends renders McGraw-Hill’s claim of privilege moot. Those companies include Dynegy Marketing & Trade, American Electric Power, Williams Cos., CMS Energy Corp. and El Paso Merchant Energy LP. Both Dynegy and El Paso have agreed to pay a total of $25 million in penalties to settle the charges with the CFTC.

To ease the confidentiality concerns of the publisher, the commission further noted it sought waivers on McGraw-Hill’s behalf from several energy companies so that it could comply with the subpoenas. “Yet, [it] still refuses” to turn over the “relevant documents.”

The CFTC said it is seeking documents that: 1) contain price and volume information; 2) were submitted by certain named energy companies to McGraw-Hill to be included in its indexes; 3) McGraw-Hill excluded from its index calculations; and 4) relate to any complaints received by McGraw-Hill or any conversations dealing with “false, inaccurate or incorrect reporting of price and volume information or manipulation.”

The publisher’s “refusal to produce all of the relevant documents demanded in the subpoenas is impeding the Commission’s ability to investigate allegations of false reporting and manipulation by a large number of power marketing and energy trading firms,” the CFTC said.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.