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Two Former Energy Traders Are Convicted on Some Counts by Associated Press Wall Street Journal, August 4, 2006

HOUSTON -- Jurors convicted two former energy traders of a handful of wire-fraud charges Friday, but either acquitted them or couldn't reach a verdict on all conspiracy and false-reporting counts.

The outcome baffled defense lawyers as well as the stunned defendants.

"It doesn't make any sense," former Dynegy Inc. trader Michelle Valencia told her attorney, Chris Flood, minutes after U.S. District Judge Nancy Atlas read the roller-coaster verdict.

Jurors, who had struggled with deadlocks for two days before reaching a verdict early Friday, declined to explain their decision and quickly left the Houston federal courthouse without comment.

Ms. Valencia was convicted of seven counts of wire fraud and acquitted of five counts of false reporting and two other counts of wire fraud. Jurors couldn't reach verdicts on a single count of conspiracy and eight other counts of false reporting.

Former El Paso Corp. trader Greg Singleton was convicted of a single count of wire fraud. Jurors acquitted him of two counts of false reporting and two other counts of wire fraud. The panel couldn't reach verdicts on two other counts of wire fraud and a single count of conspiracy against Mr. Singleton.

Sentencing was set for Sept. 11.

Ms. Valencia and Mr. Singleton are accused of reporting fake data in 2000 and 2001 to industry publications that use the information to calculate natural gas index prices. The publications, such as Inside FERC Gas Market Report or Natural Gas Intelligence, calculate price based on information supplied by traders or their companies, which in turn use those prices in trading.

Such indexes are used to price billions of dollars in transactions involving natural gas and electricity in physical and financial markets each year. Companies provide trade data voluntarily, and no governmental agencies regulate how the publications handled the information.

The two defendants acknowledged reporting fake data to the private, for-profit publications, but argued that they did so on orders and didn't know it could be criminal. Prosecutors countered that to convict, jurors simply had to find that the two intended to deceive or cheat through their actions.

Prosecutor Belinda Beek said the government was pleased with the verdict, even though it appeared that jurors, through acquittals or deadlocks on false-reporting and conspiracy counts, rejected the cornerstone of their case. "One government theory was false reporting. The other was wire fraud, which was separate and independent from the false reporting and conspiracy counts," Ms. Beek said without elaboration.

The conspiracy and false-reporting counts stemmed from the Commodity Exchange Act, which hadn't before been used in a criminal prosecution.

"It's bizarre," Mr. Flood said. "We received a fair trial. I'm just puzzled by the verdict."

"It was a very interesting trial," said Paul Nugent, Mr. Singleton's lawyer. "It's interesting how the jury rejected false reporting with Singleton."

Both defendants, who declined comment, are expected to appeal.