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First Silver Reserve starts holding its cash in silver
"Conspiracies rarely exist."
-- Dennis Gartman in The Gartman Letter, September 14, 2004
* * *
4 Ex-Traders Plan to Enter Guilty Pleas;
False Gas Data at El Paso Corp. Led to Charges
By Tom Fowler
Houston Chronicle
Wednesday, October 6, 2004
http://www.chron.com/cs/CDA/ssistory.mpl/business/2834535
Four former El Paso Corp. employees have agreed
to plead guilty to reporting false natural gas trades
and will help prosecutors in ongoing investigations.
The defendants, who all worked for El Paso Merchant
Energy, are accused of one count of false reporting
for e-mailing false data during 2000 to Inside FERC's
Gas Market Report, a trade publication. That data
was then used to create price indexes, which others
would use to set prices.
U.S. Attorney Michael Shelby called false data
reporting "an epidemic" in the natural gas industry in
years past, and indicated other individuals and
companies are under investigation. The men, who
appeared before a magistrate judge Wednesday,
include Christopher Bakkenist, 41; William Ham, 45;
Dallas Dean III, 60; and Donald Guilbault, 51.
The four were among a group of as many as 15
former traders who received letters from Shelby's
office in August, telling them they were targets of
an investigation. They were warned they could face
charges of COMMODITY PRICE MANIPULATION, CONSPIRACY,
and WIRE FRAUD, a set of charges identical to those
faced by Todd Geiger, a former El Paso trader who
entered a guilty plea last year and is cooperating
with the investigation.
With the four agreeing to cooperate, pressure is
likely to build against the others who received the
target letters. A grand jury has met several times
regarding index reporting and other issues at El
Paso.
The four turned themselves in to the U.S. marshal's
office downtown Wednesday morning and appeared
before Magistrate Judge Stephen Smith in the
afternoon. They were not indicted but rather waived
their right to appear before a grand jury.
Assistant U.S. Attorney Belinda Beek told the judge
that the men agreed to enter guilty pleas but had not
yet done so. They are expected to enter into plea
agreements where they trade cooperation for the
chance of a lighter sentence.
El Paso has not been charged in the case and is
cooperating with Shelby's office and other
investigators, including the Commodity Futures Trading
Commission and the U.S. Postal Inspection Service.
El Paso was one of several companies that have paid
$215 million in fines to the CFTC for false data
reporting.
The false trading data could have moved natural gas
prices either up or down, but Shelby said the impact
was that consumers weren't paying prices that
accurately reflected the true market. He noted that
Beek and fellow prosecutor John Lewis are working
on a model to determine how much the prices were
moved by false data.
The charges don't claim that the men personally
received any direct financial benefit from the allegedly
false data, but Shelby noted that someone would not
attempt to manipulate prices "without a personal or
corporate purpose."
A judge last summer determined that the section of
the Commodity Exchange Act underlying the charges
was overly broad and unconstitutional. In the case
against former Dynegy gas trader Michelle Valencia,
Judge Nancy Atlas threw out some of the charges
but later allowed prosecutors to reinstate narrower
charges.
The 5th Circuit Court of Appeals heard arguments
Monday on an appeal by prosecutors trying to get
the charges fully reinstated, while Valencia's
attorney argued for dismissal.
Despite the status of the law underlying the charges,
Shelby said he believed his office's interpretation
would prevail.
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