Release: 5258-06

For Release: November 17, 2006

U.S. Commodity Futures Trading Commission Settles Natural Gas False Reporting and Attempted Manipulation Lawsuit with Two Energy Traders

Defendants Christopher McDonald, a Former V.P. of West Trading at Mirant Americas Energy Marketing, L.P. (Mirant), and Michael Whalen, a Former Trader at Cinergy Corporation (Cinergy), Ordered to Pay a Total of $550,000 in Civil Monetary Penalties

Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today that it has entered in to separate consent orders (orders) with defendants Christopher McDonald of Atlanta, Georgia, and Michael Whalen of Houston, Texas, settling charges that defendants falsely reported and attempted to manipulate natural gas prices.

The orders, which were entered today by the Honorable J. Owen Forrester of the United States District Court for the Northern District of Georgia, require McDonald to pay $350,000 and Whalen to pay $200,000 in civil monetary penalties. The orders also permanently enjoin McDonald and Whalen from applying for registration, engaging in any activity requiring registration, or acting as a principal as defined by the National Futures Association.

The orders arise from a CFTC lawsuit filed on February 1, 2005, charging that between January 2000 and late 2000 or early 2001, McDonald repeatedly submitted, and directed others to submit, false natural gas trading information, including fabricated price, volume and counterparty information, to certain firms that compile natural gas price indexes (See CFTC Press Release 5045-05, February 1, 2005).

The CFTC complaint charged that during the summer and fall of 2000, Whalen, in concert with McDonald and another Mirant trader named in the complaint, submitted false natural gas trading information to a natural gas price index. The complaint further charged that McDonald, Whalen and their co-defendant knowingly submitted, and worked actively in concert to submit, the false natural gas trade information to companies that calculated natural gas price indexes including Inside FERC Gas Market Report, Gas Daily, and Natural Gas Intelligence, in an attempt to skew that index at multiple natural gas delivery locations to benefit their trading positions.

Comment by CFTC Enforcement Director Gregory G. Mocek

Commenting on the settlement, CFTC Director of Enforcement Gregory G. Mocek stated:

“We continue to use our professional resources and expertise to uncover trading misconduct in the energy markets. A strong enforcement presence is one of the best deterrents to manipulation. Furthermore, the defendants here have done the right thing by resolving these claims as opposed to forcing the government to spend additional taxpayer dollars in litigation.”

The orders resolve the CFTC’s lawsuit as to McDonald and Whalen. The CFTC’s lawsuit against the remaining defendant in that action continues.

McDonald and Whalen Sentenced After Entering Pleas of Guilty to Felony Charges Based on Similar Conduct

Previously, on June 19, 2006, in the U.S. District Court for the Northern District of California, McDonald, Whalen and their co-defendant each entered a plea of guilty to felony charges of conspiracy to manipulate the price of a commodity in interstate commerce, in violation of 18 U.S.C. § 317. The criminal charges were based upon some of the same conduct alleged in the CFTC’s complaint. Whalen was sentenced on October 30, 2006 to three year’s probation and a $5,000 fine. On November 13, 2006, McDonald was sentenced to three years probation, nine months of home confinement, and a $5,000 fine. Their co-defendant, also sentenced on November 13, received three year’s probation, six months of home confinement, and a $5,000 fine.

The following CFTC Division of Enforcement staff members are responsible for this case: Kathleen Banar, Michael Otten, Laura Gardy, Anne Termine, Lacey Dingman, Richard Wagner, and Richard Glaser.

Media Contacts
Alan Sobba

Dennis Holden

Last Updated: April 22, 2010