A former head of natural gas trading and two natural gas traders for El Paso Corp. (EP) were sentenced to lengthy terms by a U.S. federal court in Texas on Thursday for fraud in attempts to influence the price of the commodity.

U.S. District Judge Melinda Harmon sentenced James Brooks, former managing director of North American natural gas sales for El Paso Merchant Energy, to 14 years in prison, followed by a three-year term of supervised release, according to a statement by the U.S. Attorney's Office for the Southern District of Texas. Brooks, 50, was also ordered to pay a $5,000 fine.

Former natural gas traders Wesley Walton and James Phillips were sentenced to 11 years and two months each. Walton, 47, and Phillips, 50, also each will be subject to a three-year supervised release and a $7,500 fine.

The defendants were convicted of conspiracy, false reporting and wire fraud after participating in the submission of misleading figures to energy-industry publications in order to sway the natural gas market in their favor.

The stiff sentences are a big win for prosecutors and indirectly for civil enforcement attorneys at the Commodity Futures Trading Commission. They worked in tandem to bring a series of cases over the past few years--with mixed results-- against traders whom they alleged planted false information with price-reporting services in order to aid their trading positions. The long prison terms provide the authorities with a much greater deterrent against unlawful behavior in the future as well as a bargaining chip in future investigations when they seek traders' cooperation.

Brooks received a "particularly hard punishment," based on the large size of the perceived loss, said his lawyer, Wendell Odom. The loss figure is a "highly speculative figure," he added.

Odom said that there will be an appeal, but "it will take a while."

James Phillips' attorney, David Adler, said in an email that his client "will appeal the conviction and the sentence."

Walton's attorney couldn't be reached for comment.

The defendants remain free on bond while awaiting an order to surrender to a Bureau of Prisons facility, the U.S. Attorney's Office said.

-By Angel Gonzalez, Dow Jones Newswires; and Ann Davis, The Wall Street Journal; 713-547-9214; angel.gonzalez@dowjones.com
El Paso (NYSE:EP)
Historical Stock Chart
From May 2024 to Jun 2024 Click Here for more El Paso Charts.
El Paso (NYSE:EP)
Historical Stock Chart
From Jun 2023 to Jun 2024 Click Here for more El Paso Charts.