By Michael A. Mahone, Jr.

In U.S. Commodity Futures Trading Commission v. Dizona, the United States Court of Appeals for the Fifth Circuit recently considered allegations by the United States Commodity Futures Trading Commission that a natural gas trader had attempted to manipulate the price of natural gas by knowingly delivering false and inaccurate price and volume data to reporting services. These data gathering services would solicit bid data at the end of each month and would analyze this data to postulate an index price for natural gas, which would in turn set the price for the following month. Supposedly, the data reported to the reporting service was not based upon actual trades but was instead fabricated by the defendant to affect these indices, either positively or negatively. The Fifth Circuit ultimately agreed with the district court that there was insufficient evidence of price manipulation, once incriminating hearsay evidence was excised. Specifically, the Court explained that the Commission’s expert’s “general findings of biased reporting” and the vague incriminating statements made by the defendant on an audiotape (i.e., wherein he implicitly indicated that he would make sure to set the price at a particular level) were insufficient to show that the defendant delivered false reports in an attempt to manipulate the market price of natural gas. Yet, while the Commission was unable to prove its case in this instance, the theory advocated could very well be successful in the future, provided that better evidence is available.