Gas trader trial: defining "book bias"

During Wednesday’s opening statements in the trial of a trio of former El Paso Corp. natural gas traders accused of reporting false data to publications Assistant U.S. Attorney John Lewis made reference to an e-mail exchange that is well known to anyone who has followed these cases.
It’s one started by defendant Jim Brooks on Oct. 23, 2000, where he polled natural gas traders at the company about how they should report the trading data to Inside FERC, an industry publication that created price indexes. In the e-mails Brooks asked:

“In an effort to get everyone’s opinion on this, reply as to the following: 1. Report according to our book bias. (as in the past). 2. Report verifiable fixed price trades only.”

Inside FERC wanted fixed price trades only but apparently El Paso and many others in the industry weren’t exactly following directions. Prosecutors allege companies were sending data that would move the indices in directions that would favor their positions, or their “book bias.”
But in opening statements Brooks’ attorney, Wendell Odom offered an alternative definition of “book bias.” It doesn’t mean sending false data to cheat someone and send indexes in the direction the company wanted, he said. Rather it meant taking trade prices from the company’s trading book.

Brooks wasn’t “telling them to cheat on the market but to tell the market where we are,” Odom said.

The e-mail exchange is a pretty important document in the government investigation because so many traders responded to it. At least two of the traders who responded that the company should report book bias numbers, Todd Geiger and William Ham, have pleaded guilty and are on the government witness list for this trial.
The Chronicle won’t be covering the trial daily (the government said it may take four to six weeks to put on its case) but we’ll try to cover key witnesses. We will be doing regular coverage of the civil trial in state court in Galveston involving BP’s Texas City refinery, should you need a daily fix of non-celebrity courtroom drama.

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