Mirant Corp. subsidiary Mirant Energy Trading LLC said last Thursday that it has agreed with the U.S. Department of Justice (DOJ) on a resolution of the seven-year investigation into the knowing submission of inaccurate natural gas trade reports in 2000 by traders of former subsidiary Mirant Americas Energy Marketing LP (MAEM). Under terms of the agreement, Mirant Energy Trading is to pay an $11 million penalty to the U.S. Treasury.

According to the DOJ, Mirant Energy Trading has “accepted and acknowledged” responsibility for the actions of MAEM’s former employees, and is required by the agreement to cooperate fully with the government’s investigation. As part of the deal, the DOJ has agreed not to file criminal charges stemming from the investigation for a 15-month period due, in part, to the bankruptcy reorganization of the company, the company’s cooperation and the payment of fines to the U.S. government. The DOJ said it can charge Mirant Energy Trading with delivering knowingly inaccurate reports concerning the commodities market for natural gas if Mirant Energy Trading fails to comply fully with the terms of the agreement during that 15-month period.

“We are pleased to reach this settlement and put behind us matters that happened several years ago, before the company entered and then emerged from bankruptcy,” Mirant said in a statement. “The Department of Justice acknowledges in the deferred prosecution agreement Mirant’s cooperation with the government’s investigation of this matter and the remedial actions Mirant has previously taken, including self reporting the matter to the Department of Justice and to the Commodity Futures Trading Commission.” The company added that it reviewed and amended its external reporting process in 2002.

According to a statement of facts listed in the agreement, traders at MAEM’s natural gas trading desks between February 2000 and December 2000 knowingly submitted inaccurate trade data, including fictitious trades, incorrect volumes and/or prices, and incomplete trade reports to industry publications for the purpose of benefiting MAEM’s natural gas trading positions. Natural gas traders use the published index prices to price and settle certain physical and over-the-counter financial derivative natural gas transactions. Certain MAEM traders also attempted to conceal the false nature of these submissions by providing misleading and inaccurate information to industry publications in response to requests to confirm reported trade information. Mirant management alerted government authorities after discovering the false reporting.

Three former MAEM traders — Christopher McDonald, Michael Whalen and Paul Atha — pleaded guilty in the Northern District of California last year to conspiracy to violate the Commodity Exchange Act (see NGI, June 26, 2006).

“The Justice Department’s efforts to combat corporate fraud are focused on ensuring honesty and integrity in the marketplace, in this case in the natural gas markets,” said Assistant Attorney General Alice S. Fisher. “This agreement properly recognizes the company’s comprehensive disclosure of violations and its written commitment to deterring illegal conduct in the future. I thank the criminal and antitrust prosecutors who worked on this case, along with agents of the FBI and representatives of the Commodity Futures Trading Commission.”

“The provision of false information by Mirant employees in the natural gas trading markets gave an unfair and illegal advantage to the company and disrupted the appropriate functioning of those markets,” said U.S. Attorney Scott Schools of the Northern District of California. “This deferred prosecution agreement, with an $11 million fine and a mechanism for future cooperation with authorities, promotes a culture of compliance within the corporation and hopefully deters other corporations from engaging in similar illegal conduct that disrupts essential energy markets.”

Atlanta-based Mirant produces and sells electricity in the United States and the Caribbean. It owns or leases approximately 11,350 MW of generating capacity globally. The company operates an asset management and energy marketing organization.

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