This was released today. ETP is not denying wrongdoing on the manipulation but rather challenging jurisdictional authority of the FERC before the deadline of the show cause order. In addition, the CFTC is after them which has not been discussed much. This does not send a good message to me as an investor, I can find good returns with much less risk elsewhere. Furthermore, this does not directly answer the show cause order. It is trying to delay it by circumvention. I am shorting it.
Here is the article:
649--ETP seeks its day in court in gas market manipulation case
Washington (Platts)--29Aug2007/1248 pm EDT/1648 GMT
Energy Transfer Partners on Tuesday challenged the US Federal Energy Regulatory Commission's authority in its high-profile market manipulation case, insisting that only the federal courts, not FERC, are empowered to pursue civil penalties.
The company offered a jurisdictional argument in seeking rehearing of a July 26 show-cause order that essentially charges ETP with unlawfully gaming the physical gas market at the Houston Ship Channel through the use of gas futures trading schemes. FERC has proposed more than $167 million in penalties and disgorgement of "unjust profits," but ETP said civil penalties of this type must be adjudicated in federal district court.
Noting that FERC's civil penalty authority was added to the Natural Gas Act as part of the Energy Policy Act of 2005, ETP said "the process and procedures for exercising this authority thus have never been tested in a contested proceeding."
The commission "stands at the dawn of a new age in its enforcement authority, now possessing the authority to seek extremely high levels of civil penalties, in appropriate circumstances, for violations of its three organic statutes"--the NGA, the Natural Gas Policy Act and the Federal Power Act.
All three statutes, ETP continued, "expressly provide for ... federal district court adjudication of potential civil penalty liability," ETP said. What's more, due-process requirements of the Fifth Amendment to the US
Constitution "dictate a federal court forum," the company added.
ETP also said that FERC seems to have made up its mind regarding the company. The language of the show-cause order, along with press releases and press accounts, "not only creates the appearance that the commission has prejudged the outcome of this case, but supports a finding of actual prejudgment," the company said, adding that the order "reads much more like an advocate's brief than an order impartially launching a tentative inquiry."
FERC would "only exacerbate" these due process concerns by "shrugging aside" Congress' choice of a federal court forum. The commission "should not be the prosecutor and judge in civil penalty proceedings," ETP said, insisting
that only a trial before a federal district court "will ensure that the ommission's new enforcement approach comports with constitutional and statutory requirements, firm but fair and beyond procedural reproach."
--Chris Newkumet, email@example.com
--Platts Natural Gas Alert--
And this is out today! If the McGraw Hill records indicate that ETC's trades set the index based on record, I don't see anyway out of this for them.
30 Aug 2007 17:28 EDT DJ US Court Orders McGraw-Hill To Comply With CFTC Subpoena
WASHINGTON (Dow Jones)--A U.S. federal court has ordered McGraw-Hill Cos. (MHP) to comply with a subpoena order by the Commodity Futures Trading Commission to hand over energy-related documents, the CFTC said Thursday.
The order relates to an investigation into whether energy companies manipulated the price of natural gas at the Houston Ship Channel.
The D.C. federal court ordered McGraw-Hill, which publishes Platts energy indexes, to produce "certain disputed energy-related documents" requested in a subpoena issued by the CFTC to McGraw-Hill in December 2006. McGraw-Hill's refusal to produce certain responsive documents resulted in the CFTC's April 26, 2007, filing of an application to enforce the subpoena.
The CFTC said it was investigating whether the energy companies submitted trade data reflecting manipulated prices to Platts for use in calculating the index prices of natural gas published by Platts in its monthly Inside FERC's Gas Market Report, in order to benefit the energy company's financial trading positions "tied to the very same index."
The CFTC said the subpoena sought, and the court ordered McGraw-Hill to produce, among other things, "documents concerning Platts' receipt and use of the energy company's trade data in calculating the Inside FERC price indices that Platts disseminates."
Press officers with McGraw-Hill didn't immediately return calls for comment.
The CFTC said the court's ruling was the fourth time that McGraw-Hill has been compelled by a federal court, overcoming McGraw-Hill's claim of privilege, to comply with CFTC subpoenas directed to McGraw-Hill for similar documents relating to three different energy companies.
-By Ian Talley, Dow Jones Newswires, 202-862-9285, firstname.lastname@example.org
(END) Dow Jones Newswires
August 30, 2007 17:28 ET (21:28 GMT)
Copyright (c) 2007 Dow Jones & Company, Inc.
Pancake and Anonymous....you two trying to "manipulate" the unit price? And Anonymous...how is your short position lately? Other than the entertainment value of your post and clear bias against ETP (details as to WHY would be interesting....), what you offer this board is essentially worthless.
I am on your side Pancake. The gov spent about a year investigating ETP before these charges were brought, and must have quite a case between the CFTC and FERC.
Most of these guys are blinded by their love of this stock.
Here is another article that isn't good for them:
616--US court says Platts must submit data for CFTC's case against ETP
Washington (Platts)--28Aug2007/224 pm EDT/1824 GMT
Platts must provide the US Commodity Futures Trading Commission with several years' worth of data about natural gas trades at the Houston Ship Channel, Katy and Waha hubs as part of the agency's market-manipulation case against Energy Transfer Partners, a federal judge ruled late Monday.
But US District Court for the District of Columbia Judge Ricardo Urbina also ruled that the CFTC cannot compel Platts to supply any records about complaints its reporters and editors received about ETP's trading from market participants or ETP's competitors.
After receiving complaints from several traders, Platts in a September 2006 article detailed a trading strategy in which ETP's midstream operation, Energy Transfer Co., sold physical gas at below-market value at the Houston Ship Channel in an attempt to benefit from a large short position in the financial basis swap market.
The company's trading activity led to investigations by the Texas attorney general, the Federal Energy Regulatory Commission and the CFTC, which filed a civil complaint against ETP on July 26 seeking fines of $130,000 per violation and the triple any profits the company made from the allegedly improper trading schemes. FERC on the same day issued an order directing ETP to show why its trading practices did not violate commission rules and seeking penalties of $167 million.
Urbina's ruling marks the latest in a series of judicial decisions that have held that the government's need for data to complete its prosecutions outweighs Platts' protections under the First Amendment.
"Inhabiting the respective roles of the agency charged with enforcing fair trading in the natural gas market [CFTC] and the primary news source for the energy market [Platts], the parties are no strangers to battle over the legal landscape of the reporter's privilege," Urbina said.
"Because the court concludes that the commission successfully demonstrates its need for all but one of the requested documents in its subpoena," Urbina ordered Platts to supply trading records from Ship Channel, Katy and Waha for the August through December period in 2003, 2004, 2005 and 2006.
Urbina rejected the CFTC's request that Platts provide any evidence of complaints it received about ETP's alleged manipulation, calling it "an unlicensed fishing expedition into McGraw-Hill's records...precisely the sort of abuse from which the privilege shields reporters."
Nonetheless, Urbina ruled that in addition to trading data--volumes, prices, and dates--from the three hubs over four years, Platts will have to supply its instructions for reporting trades and its methodology for determining the price index. But those disclosures would remain under a protective order and are not to be shared with other agencies as the CFTC requested, Urbina ruled.
Platts officials could not be reached for immediate comment.
--Bill Holland, email@example.com
I am not an attorney but I do not like the sound of what seems to now be an expanded review of ETE/ETP practices for these time periods.
Please be aware that near the close of the FERC investigation and as part of the investigation, numerous senior managers and officers were deposed. Based upon their findings and those depositions, FERC and CFTC started their persuit.
For all you 'shorts' out there...please bear in mind that when a distribution is made the distribution is deducted from your 'short'trading account.
I am sorry to hear that ETP is dragging this out. Bad Move! We are all supposedly 'partners' and the silence is deafning.
Question...Since ETP was formed in January 2004 and was private before that time...If there is a judgement stemming from a prior period action...who pays? ETP when privately held did not have to conform to GAAP or Sarbanes Oxley requirements.
how do you sell below market value with any kind of price control that lasts more than 15 minutes. What if they had a reverse hedge; then I am sure the FERC would be after them for with holding sales to pump up the price... don't the regulators understand the trading world....
my, my, people do actually try to win their bet; but by controlling the market??? that's another wild perception...
I am sure all the oil/gas guys are accused of controlling the market... maybe the FERC should sue OPEC... makes more sense.
ETP has a legal right to defend themselves in the proper venue--raising the issue of proper jurisdiction is not "skirting the charges".
M* Dividend Investor Analysts were initially taken aback by the charges but do not seem to have changed their thesis after further review. They like ETP, continue to recommend it.
I'm not selling. Nevertheless, if you are not comfortable, you should sell. But I think shorting would be foolish, at least based on this info.
If you own ETP/ETE, you should sell if you don't like what you are seeing. Your short will be a loser. And they will be responding to the Show Cause by the end of September. The information you posted indicates they are going to aggressively defend themselves in all venues using all aspects of the law. And how about the basic legal principal of innocent until proven, in a court (not a government bureaucracy with political mandates) guilty?
Perhaps the strategy is to respond after the next quarterly earings/distribution release? They could simply say that they have increased their reserve to X on this issue and in spite of this reserve, increase the distribution slightly and make all the 'simple' minds smile.
It sounds like you've been lucky enough to have always escaped jury duty. Good for you. What I mean is that questions of law are much different than questions of supposed right and wrong.
The arguments must always be fought based on the dictates of the relevant legislation and earlier precedents. Generally speaking this is what determines who wins and who loses. It's by having a knowledgable command of the relevant legislation argued by a competent attorney in a battle of wit against the opposition that really determines the outcome of a case.
Right now it's a "he said...she said" type of argument, and legally that's not any kind of argument at all. Based solely on the article you've included above it appears that ETP's legal counsel is simply presenting the most straightforward legal aspects of the case and seeking to have it dismissed as easily as possible. A sensible idea if you're the representing counsel for ETP.
It's easy to pass judgement, but what actually wins the case is a matter of law and the relevant legislation, preceding cases, and mountains of evidentiary documents interpreted under some pretty strict guidelines. Consider the OJ Simpson trial as a case in point. It may have seemed obvious he was guilty to millions of people, but that's not how the jury saw it. And this is because they had to follow the rule of law.
Maybe that's a rather extreme analogy but it still illustrates my point of how law, and not common opinion, is how legal conclusions are reached.
Likewise with ETP. It's the rule of law and the skill of their legal counsel which will determine the outcome of this argument. Right now it looks as though they're simply trying to be rid of the whole issue in the easiest, least expensive manner possible. It's a completely rational action to take, makes perfect sense from a legal perspective, and only appears shady in the eyes of those who have pre-judged the case without listening to both sides of the argument.
It isn't about the distribution, it is about the inherent risk with these manipulation charges. It is a huge deal that most investors don't fully comprehend. Who cares if your yielding 6% when your underlying shares lose 25%.
Also not understood by investors is that when natural gas prices fall, the company makes less money on the same throughput. We are currently in a supply gut on natty and it will also hurt the future earnings.