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Commissioner Tony Clark Statement
May 1, 2015
Docket No. IN15-4-000 PDF
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Market Manipulation Fines for Maxim Power, Analyst

“I dissent from today’s order for two primary reasons. Most important, my decision is based on my belief that Enforcement Staff failed to meet its burden of proof. A second matter relates to the nature of the Commission’s decision regarding individual culpability in this case.

“While Enforcement Staff presents a plausible theory of its case, I am unable to support today’s decision given the evidentiary record before us and the relatively high burden placed on staff to prove its case. In a market manipulation case such as the one before us, Enforcement Staff bears the burden of proving by a preponderance of the evidence that the respondent intended to engage in a deceptive course of business.

“In past enforcement cases in which I have supported moving forward against a respondent, there has been little doubt in my mind that Enforcement Staff met its burden. In those cases, a record was developed that established clear intent and actions, and no plausible business explanation for the respondent’s behavior. Often, contemporaneous electronic messages have further corroborated staff’s theory of the case.

“This case is materially different. While I do not discount the evidence that casts Maxim’s behavior in a suspicious light, I cannot set aside the following undisputed facts in the record:

  • Gas pipeline restrictions were in place during the time in question.

  • When asked by the Independent Market Monitor about Maxim’s supply offers, Mr. Mitton responded that Maxim was bidding “conservatively.” This could have easily been interpreted by the Independent Market Monitor as a truthful response acknowledging that while the Pittsfield plant was typically burning gas, Maxim was offering in on oil as a way to play it safe given pipeline restrictions. This is not, on its face, an implausible business reason for structuring a supply offer in such a way. Yet, the Independent Market Monitor did not, at that time, follow-up with the next logical question, “What fuel are you burning in real time?” Rather, the Independent Market Monitor seemed satisfied to simply have a copy of the posted pipeline restrictions.

  • Approximately one month later, when the Independent Market Monitor did ask what fuel Pittsfield actually used, Maxim provided a truthful response.

  • Upon receiving that information, the Independent Market Monitor was able to mitigate Maxim prior to settlement.


“Staff’s case linking Maxim’s supply offers to a willful intent to deceive the Independent Market Monitor thus rests on the notion that while Mr. Mitton’s responses may have been technically correct and ultimately truthful, Mr. Mitton did not anticipate what information the Independent Market Monitor was really seeking and therefore his responses were too narrow and not as forthcoming as they should have been.

“To me, such a fact pattern does not a $5 million penalty make.

“A second matter relates to the Commission’s decision to penalize and hold accountable just one individual. The record clearly established that this bidding strategy was condoned and approved by management at Maxim.1 Even in the event that I had found that Enforcement Staff had met its overall burden in the case, I could not support holding only the front-line employee culpable when management itself embraces and takes ownership of the actions. To be clear, I find that there are circumstances in which it can be appropriate to hold individuals accountable in these types of cases, and I have supported efforts to do so in the past. There may be cases where a rogue front-line employee concocts a manipulative scheme without management’s active participation and blessing. However, this is not the case here. When we find individual liability appropriate, as a matter of fairness, we should strive to ensure that all those who carried out a scheme are held accountable, including superiors who knew of and authorized the actions.

“For these reasons, I respectfully dissent.”



                                                       
1Maxim Power Corp., 151 FERC ¶ 61,094, at P 126 (“Kyle Mitton, a senior analyst, directly participated in the scheme with the knowledge of his supervisors” and “at least two levels of management condoned Mitton’s actions”).