For Release: July 31, 2003
ENSERCO ENERGY, INC. PAYS $3 MILLION TO SETTLE COMMODITY FUTURES TRADING COMMISSION CHARGES OF ATTEMPTED MANIPULATION AND FALSE REPORTING
Enserco Energy, Inc., a wholly owned subsidiary of Black Hills Corporation, Settles CFTC Claims That It Intentionally Reported False Natural Gas Trade Information To Energy Reporting Firms In An Attempt To Manipulate The Price Of Natural Gas Contracts
WASHINGTON, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) announced today that it filed and simultaneously settled an administrative action involving charges of attempted manipulation and false reporting by Enserco Energy, Inc. (Enserco), a natural gas marketing company with headquarters in Golden, Colorado and a Canadian office in Calgary, Alberta.
The CFTC settlement order (order) finds that from at least May 2000 through at least June 2002, Enserco reported false natural gas trade information, including price and volume information, to certain reporting firms. The order further finds that traders from Enserco’s Colorado and Canadian offices routinely delivered separate, coordinated reports to a reporting firm, for the same delivery points, to increase significantly the likelihood that they could affect the published index prices.
Gregory Mocek, the Commission's Director of Enforcement, noted: "I am proud of the Division staff for their hard work. Due to their efforts, the Commission collected $43 million for taxpayers this week. The settlements with EnCana, Williams, and now Enserco, are the result of diligent and professional investigations by the government's best derivatives litigation experts."
According to the order, price and volume information is used by the reporting firms in calculating published indexes of natural gas prices for various hubs throughout the United States. The order states that natural gas futures traders refer to the published indexes for price discovery and for assessing price risks. The order finds that Enserco knowingly submitted false information to the reporting firms in an attempt to skew those indexes for its financial benefit, and that Enserco’s false reporting conduct violated the Commodity Exchange Act (CEA).
The order also finds that Enserco specifically intended to report false or misleading or knowingly inaccurate market information concerning trade prices and volume of trading in an attempt to manipulate the price of natural gas in interstate commerce, and that Enserco’s provision of the false reports and failure to report true market information were overt acts that furthered the attempted manipulation. According to the order, Enserco’s conduct constituted an attempted manipulation under the CEA, which, if successful, could have affected prices of NYMEX natural gas futures contracts.
The CFTC order provides for the following sanctions:
In consenting to the entry of the order and the findings in the order, Enserco neither admitted nor denied the findings of the order. Upon the recommendation of the Division of Enforcement, the CFTC afforded substantial weight to Enserco’s level of cooperation in its decision to accept Enserco’s settlement offer.
According to Enforcement Deputy Director Richard Wagner, “The Commission would have sought a significantly higher civil penalty but for its recognition that the company stepped forward and provided exceptional cooperation.”
The following CFTC Division of Enforcement staff were responsible for this case: Ted Dowd, Kim Bruno, Stephen M. Humenik, Gretchen L. Lowe and Richard Wagner. The CFTC also appreciates the assistance of the President’s Corporate Fraud Task Force in bringing this action.
To see a copy of the settlement order, go to the following Internet web address http://www.cftc.gov.
Media Case Contacts, CFTC Division of Enforcement:
Gregory G. Mocek, Director