For Release: October 25, 2007
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the entry of a consent order by the Honorable Ruben Castillo of the Northern District of Illinois (Order) settling charges brought against BP Products North America Inc. (BP), a corporate entity based in Warrenville Illinois, for manipulating and attempting to manipulate the price of TET propane in February 2004, for cornering the market for TET propane in February 2004, and for attempting to manipulate the price of TET propane in April 2003. The CFTC commenced this civil action against BP on June 28, 2006 (see Commodity Futures Trading Commission v. BP Products North America, Inc., 1:06-cv-03503 (N.D. Ill.) and CFTC Press Release 5193-06, June 28, 2006).
“This case demonstrates that the CFTC will aggressively combat manipulation in the nation’s energy markets. Disrupting the energy markets hurts American consumers, and traders who engage in such misconduct face serious consequences. This announcement marks the largest manipulation settlement in CFTC history and requires the return of approximately $53 million to victims of the company’s misconduct,” said CFTC Acting Chairman Walt Lukken. “BP engaged in a massive manipulation – the magnitude of this settlement reflects that the Commission will not tolerate trading abuses in our open and competitive markets.”
In a related filing, the Criminal Division, Fraud Section of the United States Department of Justice (DOJ) also announced the simultaneous filing of an information and entry into a deferred prosecution agreement with BP America Inc. based upon the same underlying conduct.
The October 25, 2007 CFTC consent order requires that BP pay a $125 million civil monetary penalty to the CFTC, establish a compliance and ethics program, and install a monitor to oversee BP’s trading activities in the commodities markets. The consent order also recognizes the payment of approximately $53 million by BP into a restitution fund for victims.
The DOJ deferred prosecution agreement requires BP America to pay a $100 million criminal penalty, plus $25 million into a consumer fraud fund, as well as payments to the restitution fund and installment of the monitor as noted above.
Accordingly, the total monetary sanction that BP is required to pay to resolve the civil and criminal aspects of the unlawful conduct in the TET propane market is approximately $303 million.
The TET propane market refers to propane that is deliverable at the TEPPCO storage facility in Mont Belvieu, Texas or anywhere within the TEPPCO pipeline system. The TEPPCO pipeline runs from Mont Belvieu, Texas up through Ohio, into New York, Pennsylvania and Illinois. The TEPPCO pipeline is the only pipeline that transports propane from Mont Belvieu to the Northeast and Midwest regions of the United States.
“Although this case was difficult, our professional staff used strategic techniques during thousands of hours of investigation to uncover BP’s misconduct. They effectively rooted out evidence of the defendant’s intentions. This settlement shows that BP has decided to take positive steps to rectify the situation and provide relief to those who were impacted by BP’s misdeeds,” said Gregory Mocek, CFTC’s Director of Enforcement.
The Order finds that in February 2004, BP employees sought to, and did, corner the TET propane market for the purpose of dictating prices to other market participants in order to obtain a significant trading profit. The Order finds that by engaging in this conduct, BP employees violated the Commodity Exchange Act’s prohibitions against manipulating the price of a commodity and cornering a commodity market. The Order finds that BP employees attempted to manipulate the price of TET propane in April 2003 by engaging in similar conduct.
The CFTC would like to thank the Department of Justice and U.S. Postal Inspection Service for their cooperative enforcement assistance in this matter.
The following CFTC Enforcement Division staff are responsible for the case: Joseph Konizeski, Deputy Director Joan Manley, Judy Lee, Charlotte Ohlmiller, and Associate Director Paul Hayeck.
Last Updated: October 25, 2007