U.S. COMMODITY FUTURES TRADING COMMISSION CHARGES FORMER HEAD OF NATURAL GAS TRADING DESK AT AEP ENERGY SERVICES, INC. WITH ATTEMPTED MANIPULATION AND FALSE REPORTING
Joseph P. Foley Allegedly Directed the Submission of Thousands of False Reports About Natural Gas Trades to Skew Natural Gas Indexes
WASHINGTON, D.C. - The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing of a complaint in federal district court in Columbus, Ohio, charging Joseph P. Foley, a former natural gas head trader at AEP Energy Services, Inc. (AEPES), with violations of federal commodity law for attempted manipulation and false reporting of natural gas prices. AEPES is a subsidiary of American Electric Power Corporation, Inc. (AEP).
The complaint charges that between November 2000 and September 2002, Foley directed those he supervised to submit false reports of natural gas trading, including false prices and volumes, to index reporting firms that compile energy price surveys or indexes (indexes), such as Platts. According to the complaint, price and volume information is used by Platts and others in calculating indexes of natural gas prices for various hubs throughout the United States. The complaint alleges that Foley knowingly directed the delivery of false information to firms such as Platts in an attempt to skew those indexes for his and his company’s financial benefit. According to the complaint, Foley knowingly directed those he supervised to deliver thousands of purported natural gas trades to the energy price indexes. The complaint alleges that, of those trades, a substantial number were false or misleading or knowingly inaccurate. Foley went so far as to direct the creation of a computer spreadsheet titled “IFERC Bogus” to record certain false trade information Foley wanted submitted, according to the complaint.
According to the complaint, Foley’s conduct constitutes an attempted manipulation under the Commodity Exchange Act, which, if successful, could have affected prices of NYMEX natural gas futures and options contracts.
The CFTC is seeking permanent injunctive relief against Foley, civil monetary penalties, a permanent trading ban, and other and further remedial and ancillary relief.
Gregory G. Mocek, Director, CFTC Division of Enforcement, said:
“This case represents the Division of Enforcement’s ongoing vigilance in seeking to punish those who attempt to compromise the integrity of the natural gas markets. As this action demonstrates, the CFTC continues its unwavering determination to ensure transparency in our markets.”
On January 26, 2005, a Final Judgment and Consent Order was entered in the U.S. District Court for the Southern District of Ohio in a lawsuit filed by the CFTC for activities involving false reporting of natural gas trades to energy index firms. Under the agreement, AEP and AEPES were required to pay a civil monetary penalty of $30 million and cooperate with the CFTC’s continuing investigations. AEPES also agreed to pay a penalty of $30 million to the Department of Justice for similar activities.
The CFTC to date has been awarded nearly $300 million in penalties for activities related to false reporting by energy companies and energy traders.
The Commission appreciates the cooperation of the President’s Corporate Fraud Task Force in this matter and the assistance of the United States Attorney’s Office for the Southern District of Ohio, Eastern Division, in Columbus, Ohio.
The following CFTC Division of Enforcement staff members are responsible for this case: Gregory Compa, Michael C. McLaughlin, David W. MacGregor, Lenel Hickson, Jr., Stephen J. Obie, and Richard Wagner.
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