Posted on 01/27/2003 11:22:00 AM PST by FourtySeven
HOUSTON (AP) - A fired Dynegy Inc. trader has been indicted on federal charges of wire fraud and reporting false trade information that could have influenced the price of natural gas. Michelle Marie Valencia, 32, was arrested Monday morning at her Houston home. She pleaded innocent before U.S. Magistrate Judge Calvin Botley, who set her bond at $100,000. She surrendered her passport and trial tentatively was set for March 10.
The indictment, unsealed Monday, alleged Valencia reported 43 fake natural gas trades on three occasions from November 2000 to February 2001 to an industry newsletter, "Inside FERC Gas Market Report."
U.S. Attorney Michael Shelby said Valencia also was charged with four counts of wire fraud.
The newsletter uses such information submitted each month to calculate index prices for the subsequent month and movement in index prices often affects the level of profits traders can generate.
"There is no purpose in providing false information except to influence the market in some way," Shelby said.
He wouldn't say if the trades she reported actually were used to calculate gas prices.
If convicted, Valencia faces up to five years in prison and a fine of $500,000. She also faces up to five years in prison and fines ranging from $200,000 to $250,000 on the wire fraud charges.
Valencia, accompanied by her attorney, Chris Flood, was being processed for posting bond at midday Monday. Neither was available for immediate comment.
Valencia is the second former trader in a Houston energy company to be indicted for reporting fake trades.
Todd Geiger, a 38-year-old former vice president of El Paso Corp., was indicted in December for reporting 48 fake trades to the same publication. He faces trial March 24.
In December, Dynegy agreed to pay $5 million to settle a Commodity Futures Trading Commission investigation into fake trades reported to industry publications.
The company agreed to pay the fine without admitting or denying the panel's findings.
Evidence from that investigation, however, was turned over to the Justice Department and led to Valencia's indictment and arrest Monday, Shelby said.
"You'll be seeing others," he said, adding that investigations were continuing.
Since October, Dynegy has said it fired seven traders, including Valencia, and disciplined seven other workers after an internal investigation found they reported false trade information to various industry publications.
"The past actions by these employees were in violation of the company's policies outlined in its 'Code of Business Conduct,'" Dynegy said in a statement, adding that the company would continue cooperating with authorities.
Dynegy, which Shelby said was cooperating with authorities, is exiting the trading business, which has shriveled since the collapse of industry leader Enron Corp. in 2001.
In midday trading on the New York Stock Exchange, Dynegy shares were down 12 cents at $2.10.
AP-ES-01-27-03 1348EST
I mean, it's lying, but I don't think that reporters have any expectation of not being lied to.
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"There is no purpose in providing false information except to influence the market in some way,"
Yea, no harm done...unless you happen to be a user/purchaser of natural gas.
I hear their is a big demand for fake natural gas to burn in fake power plants in California.
To the extent that these fake trades may have raised the index, operators were overpaying royalties.
It remains to be seen what effect, if any, these "fake trades" had, or whether they were willfully misrepresented or just innocent mistakes.
It should be a simple thing to prove that trader X reported a fictitious price which got published and then party B used that information to set royalties (or fuel allowances or whatever...)
After two years, the best lawyers in California have not been able to find any such connection or demonstrate any cause and effect relationship at all. Let alone prove any intent to defraud.
The Californians haven't been able to argue the facts, nor have they been able to argue the law, so now they are just pounding the table.
If the traders were changing the price of one index and other indices were not being impacted, one would think that this anomoly would be faily easy to spot and that market forces would (in the long term) change the are from which they purchased natural gas, so that the impact of the fake trades would be temporary.
Unless the 43 trades were spread among several index points,this looks like somebody trying to do something that probably wouldn't have much of an impact.
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