WASHINGTON – Mirant Energy Trading LLC has entered into an agreement with the U.S. government resolving an ongoing federal investigation into the submission of knowingly inaccurate reports by former traders of former subsidiary Mirant Americas Energy Marketing, LP (MAEM), concerning the commodities market for natural gas, Assistant Attorney General Alice S. Fisher of the Criminal Division and U.S. Attorney Scott Schools of the Northern District of California announced today.
Mirant Energy Trading – a Delaware corporation that is a wholly owned subsidiary of Mirant Corporation and successor to MAEM – will pay an $11 million penalty to the U.S. Treasury under the terms of the deferred prosecution agreement.
Mirant Energy Trading has accepted and acknowledged responsibility for the actions of MAEM’s former employees, and is required by the agreement to cooperate fully with the government’s investigation. The Department of Justice has agreed not to file criminal charges stemming from the investigation for a 15-month period due, in part, to the bankruptcy reorganization of the company, the company’s cooperation and the payment of fines to the U.S. government. The Department of Justice can charge Mirant Energy Trading with delivering knowingly inaccurate reports concerning the commodities market for natural gas if Mirant Energy Trading fails to comply fully with the terms of the agreement during that 15-month period.
According to a statement of facts that accompanied the agreement, between February 2000 and December 2000, traders at MAEM’s natural gas trading desks submitted knowingly inaccurate trade data, including fictitious trades, incorrect volumes and/or prices, and incomplete trade reports to industry publications, for the purpose of benefiting MAEM’s natural gas trading positions. Natural gas traders use the published index prices to price and settle certain physical and over-the-counter financial derivative natural gas transactions. Certain MAEM traders also attempted to conceal the false nature of these submissions by providing misleading and inaccurate information to industry publications in response to requests to confirm reported trade information. Mirant management alerted government authorities after discovering the false reporting.
Three former MAEM traders – Christopher McDonald, Michael Whalen and Paul Atha – pleaded guilty in the Northern District of California last year to conspiracy to violate the Commodity Exchange Act.
“The Justice Department’s efforts to combat corporate fraud are focused on ensuring honesty and integrity in the marketplace, in this case in the natural gas markets,” said Assistant Attorney General Fisher. “This agreement properly recognizes the company’s comprehensive disclosure of violations and its written commitment to deterring illegal conduct in the future. I thank the criminal and antitrust prosecutors who worked on this case, along with agents of the FBI and representatives of the Commodity Futures Trading Commission.”
“The provision of false information by Mirant employees in the natural gas trading markets gave an unfair and illegal advantage to the company and disrupted the appropriate functioning of those markets,” said U.S. Attorney Schools. “This deferred prosecution agreement, with an $11 million fine and a mechanism for future cooperation with authorities, promotes a culture of compliance within the corporation and hopefully deters other corporations from engaging in similar illegal conduct that disrupts essential energy markets.”
The Justice Department’s investigation into the Mirant matter is being conducted by the Fraud Section of the Criminal Division, the United States Attorney’s Office for the Northern District of California, and the Federal Bureau of Investigation. The investigation was also supported by the Antitrust Division of the Department of Justice and the Commodity Futures Trading Commission.
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