Three former El Paso Corp. traders' efforts to manipulate the price of natural gas by reporting false data were driven by greed, prosecutors told jurors Wednesday.
But defense attorneys for James Brooks, Wesley C. Walton and James Patrick Phillips told jurors the ex-traders never submitted false data and were victims of unclear policies on how to report pricing information.
Each defendant is on trial for 49 counts of conspiracy, false reporting and wire fraud related to accusations of reporting bogus trade data used to calculate natural gas index prices. If convicted, each faces up to five years in prison and a fine up to $500,000 for each count.
Natural gas price indexes are used to price billions of dollars in transactions involving natural gas and electricity in physical and financial markets each year. El Paso owns the largest network of natural gas pipelines in the country.
Prosecutor John Lewis told jurors during opening statements that the trio from 2000 to 2002 transmitted 81 reports containing false data to Inside FERC Natural Gas Report and Natural Gas Intelligence, two industry journals.
The journals conduct pricing surveys of natural gas bought and sold in the country by polling traders. The three ex-traders submitted false data to the journals in order to drive up or down the daily price of natural gas, Lewis said.
They reported the bogus trade data in order to earn more profits for their company and as a result get paid bigger work bonuses, he said.
"You can see the potential for abuse and abused this system was," Lewis said.
Brooks, who was El Paso's former head of natural gas trading, was the person most responsible for fraud at the company, Lewis said.
"He ordered (employees) to do it even when employees objected," he said. "Brooks ordered fraud to take place. Walton guided it. Phillips carried it out."
Wendell Odom, Brooks' attorney, told jurors that while his client was a "hard-driving" trader, he didn't submit false data.
"All of the (false) reporting we are accused of doing is going to be within the range of what people actually purchased and sold natural gas for," he said.
Odom denied Brooks or the others earned big bonuses for their work.
"He's a good man," Odom said.
Lewis told jurors that prosecutors would play recordings of business calls in which all three defendants talked and bragged about manipulating prices.
David Gerger, Walton's attorney, said prosecutors are taking the calls out of context.
"They are cursing like a sailor, boasting, bragging," he said. "That horrible language that traders talk is not a crime. What he's accused of, the evidence will show you he didn't do."
David Adler, Phillips' attorney, told jurors his client is a hardworking family man who never got instructions from his company or the trade journals on how to report the natural gas data.
"The information he sent was from actual trades. It's not fake information," Adler said. "Others may have sent fake numbers."
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