FERC has approved a $5 million settlement with Total Gas & Power North American that ends a lengthy enforcement case in which the agency initially sought fines and disgorgement of more than $225 million (IN12-17).
The commission alleged that the French oil firm’s subsidiary manipulated natural gas markets at four locations in the southwestern United States from 2009 to 2012. The FERC enforcement office alleged that the firm made uneconomic trades at four hubs to influence monthly index prices that benefited other positions it held.
Total wanted FERC to throw out the case, saying its trades were legitimate and FERC’s enforcement office failed to show any manipulative intent on its behalf. The case was born out of the testimony of two former employees, one of whom Total alleged stole from the company and both of whom were in search of whistleblower compensation of up to $65 million.
FERC instead opened up administrative law judge hearings on the case in a 2021 order. In 2022, Total appealed the case to a federal District Court in Texas, which eventually led to the settlement announced Jan. 8.
A Supreme Court decision in June 2024, Securities and Exchange Commission V Jarkesy, became relevant. That ruling held that the Seventh Amendment of the Constitution entitles a respondent in an administrative enforcement proceeding to a jury trial when the SEC seeks civil penalties for securities fraud, FERC explained in another order in the case issued in September.
“Because the SEC’s civil penalties for securities fraud are ‘designed to punish and deter, not to compensate,’ they are the ‘type of remedy at common law that could only be enforced in courts of law’ with Seventh Amendment protections,” FERC said. “In short, SEC civil penalty actions regarding fraud are ‘a common lawsuit in all but name’ and therefore the Jarkesy respondents were ‘entitled to a jury trial.’”
With Jarkesy in place, FERC acted to terminate the hearing proceedings and said it would not impose penalties against Total for the conduct alleged on the basis of an administrative enforcement proceeding before one of its administrative law judges.
“The commission is examining Jarkesy’s impact on the commission’s existing enforcement procedures and expects to further address its approach to enforcement cases in light of Jarkesy,” it said in the September order.
The September order did not slam the door on further proceedings in the case, which led to the settlement approved Jan. 8. Once Total makes the $5 million payment, FERC will dismiss with prejudice its claims and allegations in the enforcement matter.
The payment is not going to FERC or the federal Treasury, but rather to “certain agreed-upon” non-governmental organizations that were not named in the Jan. 8 order.
Total agreed to stipulate to some of the facts FERC laid out, but it neither admitted nor denied the allegations that it manipulated natural gas markets.
