U.S. COMMODITY FUTURES TRADING COMMISSION IMPOSES A TOTAL OF
$50 MILLION IN CIVIL PENALTIES ON SIX ENERGY TRADING FIRMS
WASHINGTON D.C. - The U.S. Commodity Futures Trading Commission (CFTC) announced today the issuance of five administrative orders filing and simultaneously settling charges of wrongdoing against six energy firms.
Aquila Merchant Services (AMS), a subsidiary of Aquila, Inc. (Aquila), agreed to pay $26.5 million and e prime, Inc. (eprime), a wholly-owned subsidiary of Xcel Energy Inc. (Xcel Energy), agreed to pay $16 million to settle charges of false reporting and attempted manipulation of natural gas prices. ( AMS order e prime order)
The CFTC also settled with several other energy companies on charges of false reporting only: Entergy Koch Trading, L.P. (EKT), a subsidiary of Entergy Koch LP (EKLP), and ONEOK Inc. and ONEOK Energy Marketing and Trading Company, L.P. (OEMT) together, will each pay $3 million; and Calpine Energy Services, L.P. (Calpine Energy), a wholly owned subsidiary of Calpine Corporation (Calpine) will pay $ 1.5 million to settle the charges. (EKT order; OEMT Order; Calpine Order)
CFTC Chairman James Newsome stated:
"As I have stated on numerous occasions during the energy investigations, we will investigate and punish wrongdoers as expeditiously as possible and move forward. I commend our Enforcement Division for their good work."
Commenting on these matters, CFTC Director of Enforcement Gregory Mocek said:
"With today's aggregate $50 million in settlements, the Enforcement Division is bringing to a close a number of the energy company investigations it commenced in mid-2002. Almost all of these companies decided to cooperate and pay penalties for their alleged misconduct. However, for those that fail to take notice, the Division of Enforcement, in order to protect the integrity of the commodity markets, will continue to bring similar investigations when market events and conduct require our attention."
CFTC Finds that AMS and e prime Falsely Reported Trade Information to Reporting Firms In Attempt to Skew Prices To Their Benefit
The CFTC order against AMS finds that from at least January 1999 through June 2002, AMS, acting through several regional desks, delivered false reports to the reporting firms. The reports, submitted using faxes and the email, contained nonexistent trades, as well as certain actual trades in which the price and/or volume was altered.
The AMS order also finds that during the relevant period, AMS trading desks knowingly delivered false trade information to reporting firms in an effort to skew the indexes to benefit the AMS’ trading positions. By such conduct, the order finds that AMS engaged in false reporting and attempted to manipulate the price of natural gas, in violation of the Commodity Exchange Act (CEA). The order requires AMS to pay $26.5 million as a civil penalty.
The CFTC order naming e prime similarly finds that from at least April 2000 through September 2002, e prime, located in Denver, Colorado, through its employees, 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 e prime’s trading positions. The CFTC order finds that, by such conduct, e prime engaged in false reporting and attempted to manipulate natural gas prices, in violation of the CEA. The order requires e prime to pay $16 million as a civil monetary penalty.
According to each of the CFTC orders entered today, price and volume information is used by the reporting firms in calculating published indexes of natural gas prices for various pipeline hubs throughout the United States. Natural gas futures traders refer to the published indexes for price discovery and for assessing price risks. If successful, AMS’s and e prime’s conduct could have affected prices of New York Mercantile Exchange (NYMEX) natural gas futures contracts.
The AMS and e prime orders recognize the cooperation of respondents and their parent corporations in the investigation of this matter.
CFTC Settles Charges of False Reporting By Entergy Koch Trading, L.P., ONEOK Energy Marketing and Trading Company, L.P. and ONEOK, Inc. and Calpine Energy Services, L.P.
The CFTC today entered orders against EKT, Oneok, OEMT and Calpine Energy finding that each company knowingly submitted false trade information concerning natural gas transactions to reporting firms in violation of the CEA.
The CFTC order against EKT finds that from at least February 2001 through October 2002, EKT traders knowingly reported, as EKT trades, trades that did not occur at EKT, and knowingly reported false prices and/or volumes. The CFTC order requires EKT to pay a civil penalty of $3 million.
The CFTC order against OEMT, and its parent, Oneok, both based in Tulsa, Oklahoma, finds that from at least July 2000 through October 2002, OEMT and Oneok knowingly reported certain trades that did not occur and certain other trades at false and/or misleading prices and/or volumes. The CFTC order requires OEMT and Oneok to pay a civil penalty of $3 million.
The CFTC order against Calpine Energy finds that from at least September 2001 through October 2002, one former Calpine Energy trader knowingly reported certain actual trades at false price or volumes as well as trades that did not occur. The CFTC order requires Calpine Energy to pay a civil penalty of $1.5 million.
Each order finds that price and volume information affect or tend to affect the market price of natural gas, including prices of NYMEX natural gas futures contracts.
The orders recognize the cooperation of EKT, EKLP, OEMT and Oneok in the investigation of these matters.
In addition to imposing civil penalties against the six settling companies, the CFTC orders require each respondent to cease and desist from further violations of the CEA and CFTC regulations, and further require each respondent and its parent corporation to comply with certain undertakings, including providing future cooperation with the CFTC.
In consenting to the entry of the orders and the findings in the orders, the settling energy companies neither admitted nor denied the findings in the orders.
The Commission appreciates the cooperation of the President’s Corporate Fraud Task Force and the National Futures Association in these matters and in the Commission’s ongoing energy investigations.
In connection with the proceeding filed against Aquila, the Commission wishes to recognize the outstanding efforts by the FBI field office in Kansas City, Missouri.
The above matters reflect the work of the following CFTC and NFA staff: Judith Hutchison, Ted Dowd, Maura Viehmeyer, Meredith Wade, Kathleen Banar, Anthony Mansfield, Joseph Konizeski, Kim Bruno, James Garcia, Kurt Windeler, Robert Hildum, Mary Kaminski, Timothy Mulreany, Paul Hayeck, Gretchen L. Lowe, Joan Manley, and Richard B. Wagner.
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