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Bloomberg News

NRG Sued by Commodities Board for False Trade Reports (Update3)

July 01, 2004

NRG Energy Inc. (NRG:US), a U.S. power producer that exited bankruptcy protection in December, was accused by federal regulators of falsely reporting natural-gas trades for an index used in setting prices.

Minneapolis-based NRG lied about hundreds of trades to a newsletter that complies the index, the U.S. Commodity Futures Trading Commission said in a federal court complaint. Separately, Denver-based Western Gas Resources Inc. said it settled similar accusations by paying a $7 million civil penalty that lowered second-quarter profit by 9 cents a share.

The commission has collected at least $222 million from Western Resources and other companies accused of lying to industry publications about gas trades. In October, the commission sued American Electric Power Co., the third-biggest U.S. utility owner, for allegedly making 2,800 bogus trading reports.

``Today's complaint targets deceitful conduct that has the potential to harm our natural-gas markets,'' Gregory Mocek, director of the commission's enforcement division, said in a statement about the complaint filed against NRG in U.S. District Court in Minnesota.

Shares of NRG fell 30 cents to $24.50 in New York Stock Exchange composite trading. They have gained 27 percent since they resumed trading on Dec. 2. Western Gas rose 64 cents to $33.12, the highest closing price since the company went public in 1989.

`No Merit'

``The complaint has no merit and we will defend the company,'' NRG spokeswoman Lesa Bader said in an interview.

False or misleading reports that can affect commodity prices are illegal, the commission said. NRG employees lied about the price and volume of trades at least from August 2001 until May 2002, the complaint said.

The commission's request for an injunction barring NRG from making false reports to index compilers is unnecessary because the company has stopped making such reports, Bader said.

Employees of both NRG and Western Gas were accused of providing false reports to Gas Daily, a newsletter published by McGraw-Hill Cos.'s Platts unit. American Electric is being sued for alleged false reports to another Platts newsletter.

Western Resources, which neither admitted nor denied wrongdoing in the settlement, dismissed a manager in its marketing department after disclosing on Sept. 29 that some employees had lied about trades, the company said in a statement.

Two traders reported bogus trades by telephone to Gas Daily at their supervisor's direction to manipulate prices between June 1999 and February 2001, the commission said.

Bloomberg LP, parent of Bloomberg News, competes with McGraw-Hill as a provider of energy-pricing data.

To contact the reporter on this story: Jim Polson in Princeton

To contact the editor responsible for this story: Robert Dieterich at

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