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Gas Company to Pay $77.2M for Price-Fixing

Posted on: Thursday, 23 February 2006, 09:01 CST

By Josh Richman, STAFF WRITER

One of the nation's largest-volume transporters of natural gas has agreed in federal court in San Francisco to pay a $77.2 million penalty for manipulating gas prices by giving bogus price data to trade publications.

That price tag includes a $50 million penalty paid by Williams Power Company Inc. to the U.S. Treasury in order to stave off charges in a lengthy criminal investigation, and $27.2 million more to settle civil claims in California, Nevada and New York.

WPC, a wholly owned subsidiary of the Tulsa, Okla.-based Williams Companies Inc., also must cooperate fully with the Justice Department's ongoing investigation; if it doesn't, the Justice Department after 15 months can file criminal charges.

A statement of facts filed with the agreement says that between June 1998 and October 2002 traders at WPC's East and West natural gas trading desks submitted knowingly inaccurate trade data -- including fictitious trades, incorrect volumes and/or prices, and incomplete trade reports -- to industry publications in order to manipulate prices to benefit WPC.

Natural gas traders use published index prices to price and settle certain physical and over-the-counter financial derivative natural gas transactions.

This gave WPC an unfair and illegal market advantage while disrupting the markets' proper functioning, said U.S. Attorney Kevin Ryan, Northern California's top federal prosecutor. "This agreement serves a dual purpose of sending a message of deterrence through a $50 million fine, and ensuring a mechanism for future cooperation with authorities and remedial actions."

The statement also says certain WPC traders also tried to hide the data's falsity by giving misleading and inaccurate information to industry publications in response to confirmation requests.

Two former WPC traders, Brion Scott McKenna and Thomas J. Pool, have pleaded guilty to manipulation of natural gas prices.

WPC in 2003 agreed to pay a $20 million fine to settle federal regulators' claims it tried to manipulate the gas indexes, and reached a $417 million settlement with California in 2002.

"Under the agreements we've reached we have acknowledged that the behavior that took place was a mistake," said Kelly Swan, spokesman for Tulsa-based Williams, told Bloomberg News. "This is a matter of simply resolving a legacy issue."

Wire services contributed to this report.

Contact Josh Richman at jrichman@angnewspapers.com.

Source: Oakland Tribune

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