Federal indictments were unsealed Monday accusing five former natural gas traders at three Houston-based energy companies of reporting fake trades to industry publications.
Three of the men named in the latest charges announced by the Justice Department in Houston worked at El Paso Corp., where five former traders already have pleaded guilty to reporting fake trades.
New charges were filed against Michelle Valencia, 34, a former Dynegy Inc. trader, who has a nearly 2-year-old indictment on another set of false reporting charges on hold pending an appeal to the U.S. 5th Circuit Court of Appeals.
Monday’s indictments also named former El Paso traders Donald E. Burwell, 44; James P. Phillips, 45; and Greg Singleton, 37. They face charges of wire fraud, false reporting and conspiracy. A former Reliant Energy Inc. trader, Jerry A. Futch Jr., 41, was indicted on four counts of making false reports.
All five pleaded not guilty to the charges and were freed on $50,000 bond. Their trials were set for January and February but probably will be postponed, most of their lawyers said.
Earlier this year as many as 10 former El Paso traders and supervisors received letters from the U.S. attorney’s office in Houston alerting them they could face charges of manipulating natural gas prices as the scope of a grand jury investigation into the matter expanded.
“The deeper we dig, the more that we will find of this misconduct,” U.S. Atty. Michael Shelby said Monday. “Our markets depend on the truthfulness of the information that fuels them.”
The penalty for conspiracy and wire fraud on each charge is up to five years in prison and a $250,000 fine. Each charge of false reporting carries up to five years and up to a $500,000 fine.
According to the indictments, Valencia and Singleton allegedly contacted each other in August and September 2000 and agreed to report fake trades to industry publications Inside FERC Gas Market Report and Natural Gas Intelligence. Under federal law, the government must prove that fake trades were reported, not whether they were published or affected markets.
“The people the government charged today are not criminals,” said Chris Flood, who represents Valencia and Burwell. “This is no Enron, and we expect the government will owe these people and the energy industry an apology when all is said and done.”
Singleton’s lawyer, Paul Nugent, also was confident his client would be exonerated.
Futch’s lawyer, Gene Tausk, declined to comment.
“We’re very interested to see what evidence the government has to support these allegations,” Phillips’ lawyer, David Adler, said.