STATEMENT OF FACTS
The Indictment alleged that El Paso Merchant Energy, Inc., a natural gas trading company reported false trade information by sending faxes and emails to industry newsletters2 in response to their requests for monthly gas trading prices. The Indictment also alleged that the defendants committed wire fraud by this reporting and conspired to commit both offenses.
James Brooks (hereinafter “Brooks”) was employed at El Paso Merchant Energy, Inc. (hereinafter
1 The appellate record is cited as R. followed by the bates number of the electronic page in the record.
2 The industry newsletters in question were Inside FERC (hereinafter “IFERC”) and Natural Gas Intelligence (hereinafter “NGI”).
“EPME”) as Senior Vice President for Risk Management in 2000 and subsequently as the Managing Director for Natural Gas starting in 2001. Brooks oversaw both physical and basis traders and audited the fair market value prices assigned to contracts owned by EPME, using an EPME proprietary computer program created for the company’s internal use. EPME’s Head of Global Trading, Tim Bourn, instructed Brooks to see that the traders submitted price information to IFERC and NGI. DX1,3 2, R. 5873- 5874. Brooks carried out this directive by generally seeing that the traders submitted this information to both publications.
In October of 2000, Brooks sent an email to all EPME gas traders seeking opinions on how this information should be reported; whether they should report fair market “book bias,” as they had in the past, or whether they should report “fixed trades” only. The majority of persons who responded suggested that EPME should report as it had in the past, which consisted of an internal computer generated determination of what was described as “book bias.” GX375 and GX376.
El Paso traders received no additional payment to report “prices” and there was no government regulation or oversight of this reporting process, the way the publications’ surveys were conducted, or the manner in which the magazines determined and eventually reported “index prices.” NGI did not publish any instruction as to which transactions (fixed or “book bias”) the traders were to report. IFERC did publish instructions that traders were to report “fixed-price,” “physical,” and “baseload” trades conducted during “bid week.” However, the instructions left many of these key terms undefined and testimony in the criminal trial confirmed various different understandings of the meaning of these terms.
3 Reference to DX and GX are to Defendants’ and Government’s exhibits respectively.
During its case in chief, the government called editors from both publications who testified that neither publication used a strict average of the reported index prices. In fact, the uncontroverted testimony was that both publications used their own methods and other information to calculate their numbers, including such diverse factors as the weather, demand, supply, pipeline conditions, historical relationships between pricing points, storage, the NYMEX/ Basis relationship and trading in the daily market.
- 4319-4322. So the word “price” was somewhat ambiguous in the context of this process. R. 8938-8939, R. 8747.
The district court denied several jury instructions requested by the defense, including a “good faith” instruction and the defense version of the “willful blindness” instruction modeled on this Court’s recent decision in Global-Tech Appliances, Inc. v. SEB, S.A, 131 S.Ct. 2060, 179 L.Ed.2d 1167 (2011). R. 2594, R.
10046, R. 3266, R. 10624-10625, R. 3277. Instead the court gave the Fifth Circuit pattern jury instruction for deliberate ignorance over a defense objection and in response to a jury note questioning the apparent conflict between the knowledge requirement and the prosecution’s argument that “ignorance of the law is no excuse,” the court instructed the jury that the Government need not prove that the Defendant “knew” his conduct was unlawful.