CFTC Sues 15 Gas Traders for Alleged Manipulation

Ten energy traders from Shell Trading, Mirant America, and Duke Energy, along with five others, were sued by the Commodity Futures Trading Commission (CFTC) for allegedly submitting bogus trading information and trying to inflate gas prices between 2000 and 2002. The suits filed February 1 by the CFTC in federal district courts in Texas, Georgia, Oklahoma, and Colorado seek injunctions against the 15 traders under the Commodities Exchange Act. The lawsuits also seek monetary damages of up to $120,000 per violation of the act, restitution, and disgorgement of profits from all the traders, including five employed by Enserco Energy Services and CMS Field Services. Claims brought against six traders from Shell subsidiary Coral Energy assert they knowingly delivered tainted information between October 2001 and June 2002 about trades that occurred at at least nine locations, including the Permian Basin, the San Juan Basin, Topock, and Malin. The suit comes several months after Coral settled with the CFTC. Under last July's deal, the commission reserved the right to sue individual traders. "A violation is a violation," said Dennis Holden, CFTC spokesperson. Three Mirant traders allegedly conspired to pull the wool over gas index publishers' eyes regarding reported trades made between January 2000 and early 2001. Mark Singer, Coral spokesperson, said it was "inappropriate" to comment on the suit between the CFTC and individuals. He said that Coral was going to cover the legal fees of the traders "at this point in time." Three of them still work for the Shell subsidiary. According to Duke, one trader, who no longer works for the firm, was on his own given the September 2003 settlement with the CFTC over gas manipulation allegations. "?It is a matter between [him] and the CFTC," said Pete Sheffield, Duke spokesperson. He said that when the gas reporting problems were revealed in 2002, Duke made "significant changes to its reporting," including requiring its risk managers instead of its traders to validate the information. Gary Ackerman, Western Power Trading Forum executive director, took issue with the filing of individual suits after settling with their employers. It "forces all traders to ask the question 'What am I doing today that might be declared illegal tomorrow,'" he said. Prior to the latest round of complaints filed over the last three years, 24 investigations of suspicious trades were launched by the CFTC. Nearly $300 million in penalties have been assessed. In those investigations, four individuals were targeted. In addition to the current crop of cases, there is one pending case that involves NRG Energy. "Our enforcement actions send a clear signal that market abuses will not be tolerated," said CFTC acting chair Sharon Brown-Hruska.

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CFTC Sues 15 Gas Traders for Alleged Manipulation

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