BP unit accused of price manipulation

BP spokesman Ronnie Chappell said “market manipulation did not occur” and that the company intended to fight the charges in court. However, Chappell said an internal investigation conducted by BP found that several employees failed “to adhere to BP policies governing trading activities” and that they were dismissed from the company.

“We have also taken steps to strengthen the supervision of our trading activities,” Chappell said.

According to the CFTC lawsuit, which was filed in the U.S. District Court for the Northern District of Illinois, the plan to manipulate prices and pump up profits began to take shape in early 2004 amid declining propane prices that were particularly painful to BP because its traders had made significant bets that prices would rise.

The CFTC paints trading manager Mark Radley as a key architect of the plan to turn the situation around and potentially net the company $20 million in profit. Radley and others formulated a strategy to establish a massive position in the propane market in February 2004, the lawsuit contends, and he was recorded in one conversation as saying “we can control the market at will.”

Flynn said it was “ridiculous” for traders at a company the size of BP, which had profits of nearly $16 billion in 2004, to be engaged in such activity.

“It’s sort of like Bill Gates going out and shoplifting a package of bubble gum,” he said.

By the end of February 2004, BP controlled almost 90 percent of all the propane delivered on a pipeline that stretches from Mont Belvieu, Texas, to consumers as far away as New York, Pennsylvania and Illinois, investigators said. From the beginning of the month to Feb. 27, the cost of the liquid that is stripped from natural gas skyrocketed by more than 40 percent to about 90 cents per gallon — “a price that would not otherwise have been reached under the normal pressures of supply and demand,” investigators said.

One former BP trader, 34-year-old Dennis N. Abbott of Houston, pleaded guilty in federal district court in Washington on Wednesday to partaking in a conspiracy “to manipulate and corner the propane market.” Abbott, who has agreed to cooperate with law enforcement in an ongoing criminal investigation being conducted by the Federal Bureau of Investigation, faces up to five years in prison and a fine of $250,000, according to the Justice Department.

In addition to Abbott, Radley and the company itself, other current and former BP Products North America employees who face charges include: Donald Cameron Byers, the unit’s former chief operating officer; Martin Marz, the compliance manager; James Summers, the vice president of natural-gas liquids; and Cody Claborn, a propane trader. Abbott and Claborn were recently fired.

Aside from potential criminal charges, each defendant could be fined as much as $120,000.

In 2003, propane was the primary heating fuel for close to 7 million households, most of them concentrated in the Northeast and upper Midwest, according to the CFTC. It is a portable energy source for households beyond the reach of natural gas pipelines.

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