5th Circuit: BP traders didn’t break the law

An appeals court has upheld a lower court’s dismissal of charges against four former BP propane traders, saying the 2004 transactions in question weren’t against the law.

Mark Radley, James Summers, Cody Claborn and Carrie Kienenberger were accused of scheming back in 2004 to manipulate the price of propane flowing through a pipeline that starts in Mont Belvieu, in Chambers County, to markets in Ohio, Pennsylvania and New York. Evidence cited in the indictment included recorded phone messages in which they discussed cornering the market and trying to “control the market at will.”

But U.S. District Court Judge Gray Miller threw the case out in 2009, saying the transactions were exempt under the Commodities Exchange Act because they didn’t occur in a marketplace but were negotiated contracts between sophisticated companies.

The government appealed the decision. On Thursday a three judge panel of the 5th Circuit Court of Appeals ruled in favor of the traders.

“My client is relieved to know what he knew from the beginning, that he didn’t break the law,” said Mitch Lansden, an attorney for Claborn.

“Thank goodness for the smart, independent judges at trial and appeal who recognized that this business was lawful and this indictment was wrong,” said David Gerger, an attorney for Kienenberger.

The decision is unlikely to have an impact on BP’s deferred prosecution agreement in connection with the case, in which it paid $303 million in fines, including $53 million to reimburse losses suffered by others in the market.

It’s less clear what this means for Dennis Abbott, the BP trader who pleaded guilty in 2006 to one count of conspiracy. He has not been sentenced but could face up to five years in prison, a fine of $250,000 and other restitution. His attorney declined comment.

Abbott’s situation may be similar to that David Duncan, the former Arthur Andersen accountant who led the firm’s Enron practice. Duncan pleaded guilty to obstruction of justice and testified against the company during a 2002 trial (giving what was perhaps the least convincing admission of guilt ever — really, ask anyone who was there). The company was found guilty by a jury but the U.S. Supreme Court later threw out the case, Duncan’s plea deal was withdrawn and his record cleared.

If Abbott is fortunate, he could be in the same situation. But what happens next depends on whether the Department of Justice decides to take the case to the Supreme Court. The DOJ declined to comment on Friday.