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Proving Intent to Manipulate Markets

Should FERC look to all Securities and Exchange Commission precedent for a model?

Fortnightly Magazine - May 2006

1. Prohibition of Energy Market Manipulation, Order No. 670, 114 FERC ¶ 61,047; FERC Stat. & Reg. ¶ 31,202; 71 Fed. Reg. 4244-58 (Jan. 26, 2006), reh’g denied, 114 FERC §61, 300 (2006). The Final Rule does not reach oil pipeline transportation industry manipulation and fraud. Order 670, Para. (“P”) 24.

2. 18 C.F.R. §§ 1c.1 & 1c.2.

3. Order 670, PP 16, 20, 22 & n.39, 25.

4. Id., PP 45, 52.

5. Id., P 7.

6. 15 U.S.C. § 78u-4(b)(2).

7. Order 670, PP 2, 6, 30.

8. Id., P 31 n.56.

9. Id., PP 32, 48-49.

10. Id., PP 2, 17 & n.30. Issues of prosecutorial discretion certainly can arise, and should be informed by FERC Office of Market Oversight and Investigations access to appropriate technical expertise. See 114 FERC §61, 300, supra, P 9.

11. Id., P 48 n.100.

12. 425 U.S. 185, 193, 201 (1976).

13. Id., at 199. In Ernst & Ernst, the cause of action rested only on a theory of negligent nonfeasance, under which an accounting firm assertedly failed to conduct proper audits of a brokerage firm whose president perpetrated a securities fraud for many years. The complainants specifically disclaimed fraud or intentional conduct by the accountants. Id., at 188-90.

14. In re Alstom S.A., No. 03 Civ. 6595, 2005 U.S. Dist. LEXIS 35641 at *17 (S.D.N.Y. Dec. 22. 2005).

15. Accord Alaska Electrical Pension Fund v. Adecco, S.A., et al., 371 F. Supp.2d 1203, 1216-19, 1221-23 (S.D. Cal. 2005).

16. In re Geopharma, No. 04 Civ. 9463, 2006 U.S. Dist. LEXIS 3342 at *3 & n.4, 17, 25-28, 31-41 (S.D.N.Y. Jan. 27, 2006).

17. Gurfein v. Ameritrade, et al., No. 04 Civ. 9526, 2006 U.S. Dist. LEXIS 3128 at *24-27 (S.D.N.Y. Jan. 26, 2006).

18. In re Adelphia Communications Corp., 398 F.Supp.2d 244, 253-55 (S.D.N.Y. 2005).

19. Wojtunik v. Kealy, 394 F.Supp.2d 1149, 1165-69 (D. Ariz. 2005).

20. Teamsters Local 445 Freight Div. Pension Fund v. Bombardier, No. 05 Civ. 1898, 2005 U.S. Dist. LEXIS 19506 at *68-74 (S.D.N.Y. Sep. 6, 2005).

21. Dynex, supra, at *29-32.

22. Alstom, supra, at *45-46, 48-56, 59-62, 82-83.

23. Teamsters Local 445, supra, at *59-63, 65-66.

24. Cliff v. Hyman Lippitt, No. 05-72221, 2005 U.S. Dist. LEXIS 38144 at *10, 21-22, 27-29 (E.D. Mich. Dec. 29, 2005).

25. Adelphia, supra, 398 F.Supp.2d at 249-52.

26. Wojtunik, supra, 394 F.Supp.2d at 1167-69.

27. Order 670, PP 32, 49-53.

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