On May 24, 2012, FERC issued an order approving a stipulation and consent agreement between FERC’s Office of Enforcement, Vista Energy Marketing, L.P. (“Vista”) and Michael P. Whalen, Jr. The order provides for a civil penalty of $350,000 for what the Commission called a “reckless violation” of a prior Commission order.
The Order resolves an investigation opened by the Commission into potential violations of FERC’s regulations concerning submissions of inaccurate information and the potential violations of an August 2009 order authorizing Vista to transact using market-based rates.
The primary issue in the investigation appeared to be the role of Michael P. Whalen in Vista’s operations. In June of 2006, while employed as a financial trader for Cinergy Corporation, Whalen had pled guilty to violating the Commodity Exchange Act by knowingly delivering false or misleading or inaccurate reports of market information to natural gas price indexes in an attempt to manipulate the wholesale settlement market.
In January of 2009, Vista filed an application under Federal Power Act section 205 requesting market-based rate authority to engage in wholesale sales of electric energy, capacity and ancillary services. In its initial application, Vista described its corporate structure as being comprised of a General Partner, and three Limited Partners. The General Partner, Irish Marketing, LLC (“Irish”) was in turn comprised of three members, one of which was Whalen. The Commission subsequently issued a deficiency letter, and sought, among other things, to confirm the identity of Whalen and to clarify Whalen’s role within both Irish and Vista. The Commission had concerns regarding Whalen’s ongoing and prospective role in both companies’ management and operations.
Responding to the Commission’s concerns, the Irish partnership was restructured, effectively removing Whalen from official management positions in both Irish and Vista. Vista then responded to the Commission’s deficiency letter, and supplemented its application. Vista acknowledged the Commission’s concerns and stated that Whalen would have no managerial or operational responsibilities in Vista. Not comforted with this response, the Commission again issued a deficiency letter requesting more information with regard to Whalen’s role in the companies and seeking specific confirmation that Whalen would not exert control or influence over Vista. Vista responded to this second order with additional assurances and clarified that Whalen’s role in either company was expressly limited to that of an investor.
Despite Vista’s representations, and having never informed the Commission of any changes to the information that Vista had provided, Whalen was allegedly involved in many aspects of Vista Marketing’s operations. His role allegedly included such activities as conducting development and marketing actions, participating in staffing and personnel management issues, participating in regular business meetings and directing Vista employees in tasks. Following an audit which revealed Whalen’s higher involvement in Vista, the Commission’s Office of Enforcement opened an investigation. The Office of Enforcement determined that Vista’s conduct had misled the Commission, and this “conduct constituted a reckless violation of a commission order given Vista’s awareness of the commission’s concerns and subsequent directives regarding Whalen’s role in Vista.”
In resolution of the matter, Vista agreed to pay a civil penalty of $350,000, and agreed not to seek the Commission’s authorization to sell wholesale energy in interstate commerce during the next two years. During this same time period, Whalen agreed to restrict his professional activities and would not act in any capacity greater than a passive investor in any wholesale power seller, that he would not make new investments in entities that seek or have the authority to sell wholesale power, and that he would adhere to restrictions on certain business contacts with individuals at entities in which he already has invested. Additionally, Whalen agreed to submit affidavits during this two year period attesting to his compliance with these conditions. Mitigating the sanctions, Vista had never actually transacted under its market based rate tariff and had voluntarily withdrawn the tariff in July of 2010 and as such did not make any profit based on its misrepresentations.
For a copy of the order, click here