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United States v. Mark Radley, et al. - Court Docket Number: 4:08-cr-00411
On September 17, 2009, Judge Gray H. Miller, United States District Judge for the Southern District of Texas, granted the defendants’ motions to dismissing all charges against Mark David Radley, James Warren Summers, Cody Dean Claborn, and Carrie Kienenberger, former employees of a subsidiary of BP America Inc. (BP America), contained in a 26-count superseding indictment, filed on January 29, 2009, stemming from a scheme to manipulate and corner the February 2004 TET propane market and to sell TET propane at an artificially inflated index price. The superseding indictment alleged violations of the Commodities Exchange Act (CEA). The case had been transferred from the Northern District of Illinois to the Southern District of Texas, on convenience grounds, in July 2008. Copies of Judge Miller’s Memo and Order Dismissing the Indictment and the Final Judgment are posted below.
The court dismissed the price manipulation charges (Counts 2-19) based on its finding that the transactions alleged fit within the exception of Section 2(g) of the Commodity Futures Modernization Act of 2000 (CMFA) and, therefore, were not covered by the CEA. In dismissing the commodity cornering charges (Counts 18-19), the court found that, even if the defendants’ actions had been covered by the CEA, the superseding indictment failed to properly allege the elements of a corner. In dismissing the wire fraud counts (Counts 20-26), the court found that the superseding indictment failed to allege a scheme to defraud because it failed to allege any misrepresentations of material facts.
According to the superseding indictment, from February 5, 2004, through at least March 29, 2004, the defendants conspired to manipulate and corner the market for February 2004 TET propane in order for BP to profit and to know that in the future they could “control the market at will.” The conspirators allegedly carried out their strategy by buying large quantities of February 2004 TET propane to become the dominant long holder, withholding propane from the market, and causing prices to be artificially inflated by accumulating such a large portion of the available supply so that they had pricing power and could cause prices to be artificially inflated. By the end of February 2004, BP held almost the entire physical inventory of TET propane available. The superseding indictment further alleged that the defendants manipulated the industry benchmark index price for TET propane by becoming the dominant long holder, using specific bidding techniques, and purchased even more propane at the end of the month, all with the purpose of artificially increasing the price of propane and inflating the industry benchmark index price. The superseding indictment alleged the defendants defrauded counterparties who purchased propane from BP at the fraudulently inflated index price. As charged, the defendants’ conduct resulted in the price of TET propane in the commodities market was artificially inflated during the latter part of February and early March 2004, and as a result, wholesale purchasers of TET propane during this time paid a higher price than would have available but for the defendants’ conduct.
Previously, on June 28, 2006, Dennis N. Abbott, a former trader at BP, pleaded guilty to a one-count information charging him with conspiracy to manipulate and corner the propane market. Furthermore, on October 27, 2007, BP America entered into a deferred prosecution agreement in which it accepted responsibility for conspiring to manipulate the price and corner February 2004 TET propane, and paid approximately $303 million restitution as well as criminal and civil penalties.
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