Release: 4840-03
For Release: September 17, 2003


Duke Energy Trading and Marketing, L.L.C. Charged With False Reporting and Attempted Manipulation in Violation of the Commodity Exchange Act

WASHINGTON, D.C. - The U.S. Commodity Futures Trading Commission (CFTC) announced today the issuance of an administrative order (order) filing and simultaneously settling charges of false reporting and attempted manipulation by Duke Energy Trading and Marketing, L.L.C. (DETM), an affiliate of Duke Energy Corporation.

In commenting on this matter, CFTC Chairman James E. Newsome said:

"The Commission has committed significant resources to seek out and prosecute such wrongdoing and, by doing so, is sending a clear message that such illegal conduct will not be tolerated. This case was a result of the collaborative efforts of the Commission and other members of the President’s Corporate Fraud Task Force and demonstrates how government agencies can work together to ensure that America’s energy markets are fair and competitive.”

CFTC Chairman Newsome added:

“The CFTC’s ongoing energy investigations reflect its commitment to ensure the integrity of those markets over which the Commission has jurisdiction.”

The order finds that from at least January 2000 through August 2002, the Houston offices of DETM reported false information, including price and volume information, concerning natural gas cash transactions, to certain reporting firms. According to the order, price and volume information is used by the reporting firms in calculating published surveys or indexes (indexes) of natural gas prices for various hubs throughout the United States.

The order finds that DETM knowingly reported trades that did not occur and reported certain trades at false prices and/or volumes in an attempt to skew the indexes to benefit DETM’s trading positions. According to the order, natural gas futures traders refer to the published indexes for price discovery and for assessing price risks. The CFTC found that DETM’s false reporting conduct violated the Commodity Exchange Act (CEA).

The order further finds that DETM specifically intended to report false or misleading or knowingly inaccurate market information concerning, among other things, trade prices and volume of trading in an attempt to manipulate the price of natural gas in interstate commerce, and that DETM’s false reports were overt acts that furthered the attempted manipulation. According to the order, DETM’s conduct constituted an attempted manipulation in violation of the CEA, which, if successful, could have affected prices of New York Mercantile Exchange (NYMEX) natural gas futures contracts. In consenting to the entry of the order and the findings in the order, DETM neither admitted nor denied the findings in the order.

The CFTC order requires DETM to pay a civil monetary penalty of $28 million as well as cease and desist from further violations of the CEA and CFTC regulations. The CFTC order further requires DETM and Duke Energy Corporation to comply with an undertaking to cooperate with the CFTC in this and related matters. The order recognizes the cooperation of DETM and Duke Energy Corporation in the investigation of this matter.

Richard Wagner, Deputy Director of the Division of Enforcement, said:

“This is the sixth case filed by the Commission alleging false reporting and attempted manipulation of the energy markets, and we will continue to investigate and seek to sanction, as appropriate, others who engaged in this type of conduct.”

The Commission appreciates the cooperation of the President’s Corporate FraudTask Force and the National Futures Association in this matter and in the Commission’s ongoing energy investigations.

This case reflects the work of the following individuals: Stephen M. Humenik, Michael Otten, Kurt Windeler, James Garcia, Lacey Dingman, Kathleen M. Banar, Michael Solinsky, Gretchen L. Lowe, Richard B. Wagner, and Vincent A. McGonagle.

To see a copy of the settlement order, go to the following Internet web address

Media Case Contact, CFTC Division of Enforcement
Vincent A. McGonagle, Senior Deputy Director
CFTC Division of Enforcement
(202) 418-5387

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