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Former Dynegy Trader Indicted on Charges of Reporting False Data

U.S. attorney says fired employee fabricated trades from pipelines that were, in a majority of cases, in California.

January 28, 2003|From Times Staff and Wire Reports

A former top energy trader for Dynegy Inc. was arrested Monday on charges that she reported fictitious natural gas transactions for California and other Western hubs to an industry publication.

The indictment of Michelle Marie Valencia, 32, is the second in a widening investigation into whether energy companies cheated investors and energy ratepayers.

Several energy firms, including Dynegy, have revealed that employees lied to trade publications that assemble indexes of natural gas and electricity prices, which were used by regulators to help set electricity prices during California's electricity crisis and its aftermath.

Valencia, who ran Dynegy's gas-trading desk for the Western U.S., pleaded not guilty Monday after being indicted by a Houston grand jury on charges of giving false data on 43 trades to the Inside FERC newsletter. FERC is an acronym for the Federal Energy Regulatory Commission, the agency that regulates the wholesale power industry.

Valencia reported "fabricated trades from natural gas pipelines that were, in the majority of the cases, in California," said Michael Shelby, U.S. attorney in Houston. "We will hold accountable anyone who intentionally deceives the investing public."

Valencia was charged with three counts of knowingly making false price reports and four counts of wire fraud from November 2000 to March 2001. If convicted on all charges, she could face up to 35 years in prison and fines of as much as $2.5 million.

Federal prosecutors, along with investigators from the U.S. Commodity Futures Trading Commission and the Justice Department, have been looking into allegations of false price reports since the middle of last year. Their efforts are part of a broader inquiry stemming from the California energy crisis in late 2000 and early 2001 and the collapse of Enron Corp., once the largest energy trader.

Shelby's office in early December charged a former El Paso Corp. trader, Todd Geiger, with providing to a trade publication information about 48 trades that never occurred.

Houston-based Dynegy agreed in December to pay $5 million to settle charges by the Commodity Futures Trading Commission that its traders provided false prices.

Other companies that have acknowledged providing false reports include American Electric Power Co., CMS Energy Corp. and Williams Cos.

Valencia was one of seven employees fired by Dynegy since Oct. 18 after an internal company review, the Houston-based company said in a separate statement.

Dynegy's shares fell 15 cents, or 6.7%, to $2.07 on the New York Stock Exchange.

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