Former El Paso Traders May Face U.S. Charges
As many as 10 former El Paso Corp. traders and supervisors could face charges of manipulating natural gas prices as the scope of a grand jury investigation into the matter expands, sources close to the case said Wednesday.
The U.S. attorney’s office in Houston began sending letters last week to potential defendants alerting them that they were targets in a probe that so far has netted a single guilty plea from a former trader, according to the sources, who had seen the letters and spoke on condition of anonymity.
The former trader, Todd Geiger, pleaded guilty in December to reporting fake trades to an industry publication that uses the data to calculate the index price of natural gas.
He agreed to cooperate with prosecutors in the ongoing investigation.
Geiger, 39, was charged in December 2002 with wire fraud and reporting fake trade information for falsely reporting 48 trades in November 2001 to the Inside FERC Gas Market Report. The newsletter uses such information to calculate index prices for the subsequent month, and movement in index prices often affects traders’ profits.
Bogus trades artificially drove up California’s natural gas rates to about six times the national average during the state’s energy crisis in 2000-01.
In Geiger’s case, the newsletter didn’t include his fake trades in its calculations. But under federal law, the government needs to prove only that fake trades were reported -- not that they were published or affected the markets.
The sources said the other targeted former employees could face similar charges of wire fraud, conspiracy and manipulating commodity prices.
In January 2003 -- a month after Geiger was charged -- Assistant U.S. Atty. John Lewis told U.S. District Judge Nancy Atlas in a hearing in Houston that Geiger was part of a conspiracy to supply the market with fraudulent information. Lewis said at that hearing that although Geiger was not charged with conspiracy, prosecutors believed his actions were part of a coordinated effort that went back two years.
Lewis declined to comment Wednesday.
El Paso shares fell 10 cents to $7.55 on Wednesday on the New York Stock Exchange.
