Reliant Resources' bogus power trades and transactions designed to shift earnings from one period to the next have drawn the minimum punishment from securities regulators.
Putting an end to a near yearlong investigation, the Securities and Exchange Commission issued a cease-and-desist order Monday against Reliant Resources and Reliant Energy, now CenterPoint Energy.
The Houston-based companies received no fines or other penalties.
Neither company admits nor denies the agency's findings of reporting and record-keeping violations and securities fraud in the settlement that was advanced by the companies.
The 17 round-trip trades between 1999 and 2001 involved the same-day purchase and sale of power, to the same company at the same price.
For the most part, these trades resulted in no profit or loss to either side, the commission said.
"Instead, the trades were designed for the sole purpose of increasing trading volumes to improve respondents' standing in the gas and power trading rankings in industry publications," according to the commission.
These were giant transactions, ranging from 30 times to 46 times the size of a normal large trade.
An article in the Wall Street Journal (subscription required) adds the following details:
The SEC said its probe showed that Reliant, starting in 1999, set out to become one of the nation's top-tier traders. The company arranged so-called wash trades with smaller competitors, buying and selling identical amounts of electricity or gas at identical prices on the same days. These transactions boosted revenue and trading volumes without lifting earnings.
During the period from 1999 through 2001, Reliant did 17 "wash" trades for a total of 134.43 million megawatt hours of electricity, with the average false trade, by the end of 2001, nearly 50 times the size of a normal large trade.
With that push, investigators said, Reliant was lifted from the No. 10 position in electricity trading to No. 7 by 1999, to No. 5 by 2000 and, finally, to No. 3 by 2001, when widespread allegations of trading improprieties began unraveling the wholesale-electricity market. Among gas traders, it was lifted to No. 7 from No. 8 through a smaller number of fake trades.
Fake, fake, fake. In two years, Reliant went from No. 7 to No. 3 in electricity trading on the basis of... nothing at all.
And yet these unfined and unpunished frauds were useful to someone else — George W. Bush. The architects of Reliant's brilliant fake business plan, former Reliant CEOs Don D. Jordan and R. Steve Letbetter are both Bush Pioneer donors, having raised well over $100,000 each.
No fines, no penalties, not even the sound of another shoe dropping.
Texas swindled California and gave the crooked money in record amounts to its governor to run for president.
