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FOR IMMEDIATE RELEASE CRM 

THURSDAY, OCTOBER 25, 2007 (202) 514-2008 

WWW.USDOJ.GOV TDD (202) 514-1888 

FACT SHEET: COMMODITIES FRAUD AND MANIPULATION

 

Cooperative Enforcement Efforts Yield More Than $2 Billion in Fines and Restitution 

WASHINGTON – As members of the President’s Corporate Fraud Task Force, the 

Department of Justice, the Federal Bureau of Investigation, and the U.S. Commodity Futures 

Trading Commission have worked together to eradicate commodities fraud and manipulation 

from the markets. The Justice Department’s Criminal Division, U.S. Attorney’s Offices 

nationwide, the FBI and CFTC have been responsible for at least 165 criminal indictments and 

the filing of more than 275 civil enforcement actions. As a result of these criminal and civil 

proceedings, fines and restitution orders totaling $2,357,472,854 have been levied and prison 

terms ranging from five years to 21 years have been imposed. 

 The Corporate Fraud Task Force has devoted considerable efforts to address 

manipulation of the energy markets, foreign currency fraud, and commodity pool/ hedge fund 

fraud. The Task force is focused on protecting the public and the markets against illegal 

commodity operations and will aggressively continue to seek to halt commodities scams. As 

today’s announcement regarding BP shows, civil and criminal agencies achieve powerful results 

when they work together to protect the investing public by targeting financial wrongdoing. 

Craig S. Morford, Acting Deputy Attorney General and Chair of the Task Force, 

stated: “The Task Force has achieved a strong record in prosecuting abuses of the commodities 

laws. I am very proud of the accomplishments of the Task Force in this area, especially the 

efforts by the FBI and the CFTC. The Task Force continues to be committed to the operation of 

free and financially efficient commodity markets.” 

 

CFTC Director of Enforcement Greg Mocek stated: “The CFTC’s enforcement 

program focuses on the vigorous prosecution of commodities fraud perpetrated on unsuspecting 

Americans and the preservation of the integrity of the commodities markets. We congratulate 

the U.S. Attorney’s Offices, the Criminal Division and the FBI for their work in combating 

criminal violations of the commodities laws and will continue to work closely with members of 

the Task Force to eliminate unscrupulous activity and protect market participants.” 

 

FBI Director Robert S. Mueller, III, praised the work of the Task Force, stating: 

“The FBI remains committed to supporting the highly successful efforts of the Task Force in 

combating fraud in the commodity markets. The accumulated accomplishments of the Task 
Force announced today continue to demonstrate that together, the Task Force truly is greater than 

the sum of its parts.”

Manipulation of the Energy Markets 

The Corporate Fraud Task Force has actively investigated instances of manipulation and 

attempted manipulation in the energy markets by numerous energy companies, including Enron 

and its affiliates, BP, and American Electric Power. The Task Force energy actions have 

resulted in monetary penalties totaling approximately $430 million against 25 companies and 

criminal indictments against 42 individuals and companies. 

Foreign Currency Fraud 

The Corporate Fraud Task Force has devoted considerable resources to combating fraud in 

the foreign currency market, the largest financial market in the world. The Task Force has filed 

almost 100 civil injunctive actions and at least 90 criminal indictments against individuals and 

firms for fraudulent activities in connection with foreign currency trading. These proceedings 

have resulted in fines and restitution orders of more than $1.5 billion. 

Commodity Pool/Hedge Fund Fraud 

The Task Force has filed more than 60 civil enforcement actions and at least 33 criminal 

indictments against individuals and firms that fraudulently operated multi-million dollar 

commodity pools and hedge funds. These actions have resulted in numerous criminal 

convictions and fines and restitution totaling almost $400 million. 

Significant Prosecutions 

 

 The following cases highlight just a sample of the aggressive criminal and civil 

prosecutorial efforts by the Task Force in preserving the integrity of the commodity markets. 

Operation Wooden Nickel: Operation Wooden Nickel was the largest undercover foreign 

currency operation involving the cooperative enforcement efforts of the Task Force. As a result 

of these efforts, the Task Force was able to convict 56 individuals and was successful in 

obtaining fines and restitution totaling more than $100 million. 

AEP: AEP Energy Services, Inc. (AEPES), a wholly owned subsidiary of American Electric 

Power, Inc. (AEP), one of the nation’s largest electric utilities, entered into a deferred 

prosecution agreement in which it admitted that its traders manipulated the natural gas market by 

knowingly submitting false trading reports to market indices. AEPES agreed to pay a $30 

million criminal penalty. In a separate action, AEP agreed to pay the CFTC $30 million to settle 

charges of false reporting and attempted manipulation. 

Bayou: Three principals of Bayou Hedge Funds pleaded guilty to fraud and conspiracy charges 

based on their substantial and prolonged misrepresentation of the value of the assets of the funds, 

to which investors had entrusted over $450 million. Forfeitures netted $106 million for 

distribution to victims. Fines and restitution are pending in a CFTC action. 
Mission LC: William Warren, the principal of Mission, pled guilty to fraudulently operating an 

unregistered commodity pool and misappropriating customer funds. Warren was sentenced to 21 

years in prison and ordered to make restitution of $20 million. 

Dynegy: Three former executives of energy firm Dynegy were convicted of charges stemming 

from an accounting scheme in which they misrepresented the proceeds of $300 million in loans 

as revenue from operations rather than debt. Dynegy agreed to pay the CFTC $5 million to settle 

charges of false reporting and attempted market manipulation. 

El Paso Merchant Energy: El Paso Corporation and six traders of its Merchant Energy 

subsidiary were convicted on charges relating to false reporting of natural gas trading 

information. El Paso Merchant Energy agreed to pay $20 million to the CFTC to settle charges 

of false reporting and attempted market manipulation. 

Midland Euro: Two principals of Midland, a foreign currency firm, were charged with 

defrauding almost 300 investors with losses of approximately $100 million. They received 

prison sentences of 11.4 years and 20 years, and were ordered to pay over $95 million in 

restitution. 

Reliant Energy: Reliant entered into a deferred prosecution agreement and agreed to pay a $36 

million criminal penalty. Reliant also agreed to pay $18 million to settle CFTC charges of 

attempted market manipulation and false reporting. Reliant’s vice president and manager of 

trading of natural gas was convicted of making false trade reports and is serving 57 months in 

federal prison. 

Orion International: Civil fines and restitution orders totaling $150 million were issued against 

Orion and its principals for operating a fraudulent foreign currency Ponzi scam involving over 

$40 million in investor funds. Orion’s principal was convicted of mail and wire fraud and is 

serving 97 months in prison. 

Parish Economics: Parish and its principal were charged by the CFTC for operating a 

commodity pool/hedge fund in which over $50 million was fraudulently obtained from the 

investing public. Parish’s principal, Albert Parish, was indicted for his role in the fraudulent 

enterprise. Civil and criminal trials are scheduled for early 2008. 

Williams Power Companies: Williams entered into a deferred prosecution agreement in which 

it admitted that its traders manipulated the natural gas market by knowingly submitting false 

trading reports to market indices. Williams agreed to pay a $50 million criminal penalty and, in a 

separate action, agreed to pay the CFTC $20 million to settle charges of false reporting and 

attempted manipulation. Three traders pled guilty to commodities fraud and a fourth is awaiting 

trial. 

Brown Investment Services: James Brown, the principal of Brown Investment Services, pled 

guilty to defrauding 350 investors in connection with a foreign currency operation. Brown was 

sentenced to 12 years in prison and ordered to pay $8.3 million in restitution. 
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