Rich and Kevin Gates of Powhatan Energy Fund LLC in West Chester have been profiled in The Wall Street Journal and Forbes. They’ve spoken on panels in Washington D.C. And they’ve received support from several national business publications, blogs and web sites in their battle with the Federal Energy Regulatory Commission (FERC).

“We’re happy about it,” Rich Gates said about the positive attention. “When we made the web site public, we just said ‘let’s let it rip and see what happens’ because nothing like this had ever been done before.”

It was back in 2008 that the Gates brothers set up a separate fund from their regular business TFS Capital. The fund made trades on the energy market and resulted in money being made from rebates.

In 2010 this caught the attention of FERC which alleged that the trades fell under the category of market manipulation and what they called “wash trades.” In a lengthy examination of the issue in the Wall Street Journal, the newspaper defended the Gates brothers and wrote that “FERC doesn’t seem to understand the different between wash trades and a washing machine.”

The fight has now turned into a broader question about the role of FERC as a regulatory agency. It also has brought up for debate the definition of “market manipulation.” The problem isn’t that the definition is vague, Gates said.

“It’s very clear what it is,” Gates said. “The SEC and FERC require deceit or fraud. There’s very exact language defining it. But Mr. Bay’s Office of Enforcement has obfuscated its definition which has confused many. For example, one executive I recently met at a conference said he was concerned his firm was in violation of the market manipulation statute if 60 to 65 percent of his firm’s trades were profitable. At the same event, an industry insider described market manipulation in front of all of the attendees by saying trades should have ‘social value.’”

Gates would like to see some changes.

“I’d like the market to function efficiently,” he said. “I would like an open dialogue. I would like the politicization to come out of the regulation process. And I would like academics to be able to take part and not be shunned by FERC.”

With his West Chester business in the national spotlight in a way that he didn’t expect, Gates said part of what’s kept his spirits up has been a sense of mission.

“It’s bigger than us,” he said. “And this is my way for me to give back. I think of people who can’t speak up and I feel like I’m speaking for them.”

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Top photo courtesy of Philly.com