U.S. COMMODITY FUTURES TRADING COMMISSION LAUNCHES MULTIPLE FEDERAL ACTIONS AGAINST A TOTAL OF 15 ENERGY TRADERS, CHARGING THEM WITH FALSE REPORTING AND ATTEMPTED MANIPULATION
CFTC Names Former Traders of Enserco Energy, Inc., Mirant Americas Energy Marketing, Cinergy Corp., Duke Energy Trading and Marketing, CMS Field Services Inc., and Coral Energy Resources, LLP
CFTC Also Charges Concord Energy LLC, Founded by the Former Enserco Traders
WASHINGTON, D.C. - The United States Commodity Futures Trading Commission announced today the filing of five federal civil injunctive actions against a total of 15 individuals, alleging false reporting and attempted manipulation in violation of the Commodity Exchange Act (CEA). All the individual defendants are or were natural gas traders working for various energy companies. Also charged was Concord Energy, LLC, a company founded by former traders from Enserco Energy, Inc. Two of the cases were filed in the same federal court in Texas, and the other three were filed in federal courts in Georgia, Colorado and Oklahoma. The traders are charged with submitting reports to various natural gas price compilers, including Gas Daily, Inside FERC (IFERC), Natural Gas Intelligence (NGI), Btu Daily and Natural Gas Week, that contained false information such as fictitious trades or the alteration of price or volume for actual executed trades, all in an attempt to manipulate prices.
CFTC v. Whitney
The first action, filed in the U. S. District Court for the Southern District of Texas, charges that Michael Whitney, formerly an energy trader with Duke Energy Trading and Marketing, LLC (DETM), submitted or caused to be submitted false or misleading or knowingly inaccurate price and volume information to Gas Daily and Enerdata, Ltd. concerning natural gas transactions he executed on behalf of DETM between June 2001 and approximately August 2002. As alleged, Whitney submitted the false trade information in an attempt to manipulate the price of natural gas in interstate commerce. In one incident alleged in the complaint, Whitney and a trader from DETM’s Calgary office submitted price and volume information for the same transaction to Enderdata with the Calgary trader submitting accurate information and Whitney submitting false information.
CFTC v. Bradley and Martin
The second action, filed in the U. S. District Court for the Northern District of Oklahoma, charges that between January 2001 and October 2002, Jeffrey A. Bradley, formerly the manager of marketing for CMS Field Services, Inc., knowingly submitted false, misleading or knowingly inaccurate transaction information regarding hundreds of natural gas transactions to multiple natural gas reporting firms, including but not limited to Gas Daily, Btu Daily, NGI and Natural Gas Week, by reporting fictitious trades as if they were bona fide transactions, by altering the prices and volumes for actual trades, or by reporting non-fixed price trades as if they were fixed price trades. As alleged, on at least one occasion, Robert L. Martin, formerly the director of gas supply for the same company, conspired and coordinated with Bradley, and caused reports to be submitted to the same natural gas reporting firms. According to the complaint, one telephone conversation between the two openly discussed a plan to “make up some numbers and turn them in [to the reporting firms].”
CFTC v. Atha, McDonald and Whalen
The third case charges Georgia residents Paul Atha and Christopher McDonald and Texas resident Michael Whalen, all formerly Mirant Americas Energy Marketing, L.P. energy traders, with false reporting and attempted manipulation of the natural gas markets between January 2000 and late 2000 or early 2001. As charged, Whalen departed Mirant in May 2000 and his alleged violations occurred during his subsequent employment with Cinergy Corporation in Texas. The complaint alleges a series of revealing telephone calls between the Mirant traders and Whalen wherein they conspire about how they should report to IFERC to benefit their positions and discuss how to make their reports believable. For instance, as alleged, Whalen says to McDonald, “hey, do you want to fax me ... exactly what you guys are going to write down so its more believable...I’ll just write the exact opposite.” The action was filed in the U.S. District Court for the Northern District of Georgia.
CFTC v. Johnson, Moore, Tracy, Harp, Dizona and Dyer
The fourth case, filed in the U.S. District Court for the Southern District of Texas, charges Denette Johnson, Courtney Cubbison Moore, Robert Harp and Anthony Dizona of Texas and John Tracy and Kelly Dyer of California with knowingly delivering dozens of reports containing knowingly inaccurate fixed-price, physical, baseload trade information for at least nine locations in the Western United States between October 2001 and June 2002. The complaint also alleges that defendants attempted to manipulate the price of natural gas in interstate commerce by reporting biased information to price reporting companies. Specifically, the complaint alleges that defendants regularly circulated an e-mail with directions to the traders to report prices in such a way that it would benefit their positions. The complaint charges that all these activities occurred while defendants were employed by energy company Shell Trading Gas and Power Company in providing services for Coral Energy Resources, L.P.
CFTC v. Reed, Danyluk, McLaughlin and Concord Energy, LLC
The final case charges that between May 2000 and October 2002, Matthew Reed, Darrell Danyluk and Shawn McLaughlin engaged in false reporting and attempted manipulation while employed by Enserco Energy Services. McLaughlin engaged in this conduct while acting asPresident of Enserco. The complaint further alleges that Reed continued the false reporting and attempted manipulation scheme while employed by Concord Energy LLC, which is also charged with liability for his acts. As alleged, while at Enserco, with McLaughlin’s knowledge and consent, Reed, located in Enserco’s Colorado office, and Danyluk, located in Enserco’s Calgary office, coordinated on an almost daily basis how they wanted to report fictitious trades to numerous reporting firms, including Gas Daily, and Natural Gas Intelligence, to benefit trading positions they held. According to the complaint, Reed and Danyluk called this their “double-dipping” scheme and perpetrated their scheme on reporting firms by portraying the Colorado and Calgary offices as separate trading operations when they were not.As President of Enserco, McLaughlin also is charged with controlling person liability for the acts of Reed and Danyluk. The action was filed in the United States District Court for the District of Colorado.
The CFTC thanks the President’s Corporate Fraud Task Force and the National Futures Association for their assistance in these cases.
The following CFTC enforcement staff were responsible for these filings: Richard Wagner, Joan Manley, Gretchen Lowe, Paul Hayeck, Rick Glaser, John Dunfee, Michael Solinsky, Kathleen Banar, Ted Dowd, Laura Gardy, Joseph Konizeski, James Garcia, Kim Bruno, Michael Otten, Judy Lee, Allison Lurton, Anne Termine, and Lacey Dingman.
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