Houston, Sept. 25: Dynegy, one of the largest energy traders in the US, agreed on Tuesday to pay $ 3 million to settle accusations that the company had used a series of off-balance-sheet partnerships to doctor its financial statements and mislead investors.
The Securities and Exchange Commission, which settled the civil case, also said that Dynegy had engaged in the so-called round-trip, or phoney, trades and that the company repeatedly had sought to mislead investors about the success of its trading operations.
The settlement comes as the world’s largest energy traders have seen their shares crumble amid accusations of accounting improprieties and efforts to manipulate the energy markets in the boom years that abruptly ended with Enron’s collapse in December. The settlement is also the first time the SEC has accused a major energy company of engaging in round-trip trades to increase volumes and revenues artificially.
For Dynegy, the agency’s accusations concern a series of transactions that were code named Project Alpha, which the investigators said the company used to bolster profit and cash flow statements in 2001 with the help of Arthur Andersen, its former auditor.
The SEC said on Tuesday that the company’s then chief financial officer, Robert D. Doty, continued to make misleading public statements about the transactions even after questions about them came to light in April. Doty, who resigned in June, could not be reached for comment.
Like its peers, Dynegy, which once sought to acquire Enron for $ 9 billion, has seen its fortunes vanish almost overnight. Its long-time chairman and chief executive Charles L. Watson resigned in May.
The company’s shares, which peaked at $ 47.50 last November, closed on Tuesday at $ 1.20. SEC officials claimed a small victory. “This is a significant case for us,” said Spencer C. Barash, the chief of enforcement in the agency’s Fort Worth office.
“This has given the commission an opportunity to speak out on deceptive practices in the energy industry. There are a lot of energy companies that engaged in sham transactions.”
John Sousa, a spokesman for Dynegy, based in Houston, said the investigation had been a “learning process” for the company and that new rules and practices had already been put into place.