After years of trash-talking, threats and accusations, the Federal Energy Regulatory Commission has finally thrown the first jab against West Chester brothers Richard and Kevin Gates and their Powhatan Energy Fund, and it packs a $34.5 million punch.
But the Gates brothers, who have been maneuvering opposite the “bully” government agency since its initial warning on Aug. 3, 2010, are planning a swift response.
“We’re going to fight, and we look forward to meeting them in court,” Kevin Gates said in a recent RTO Insider report.
And “if the Gates brothers don’t pay up within 60 days, as they insist they won’t, FERC will have to file a complaint in U.S. District Court to force payment,” the article stated.
There they’ll have the opportunity to leverage a new venue for their argument and, possibly more important, a 2013 U.S. Supreme Court precedent that could reduce most or all of the FERC penalties thanks to a five-year statute of limitations. FERC must wait 60 days for the Gateses to pay, leaving less than a week of the alleged manipulative energy market trades unexpired by that five-year deadline.
“That would be an embarrassment for FERC, which seemingly left the investigation in limbo for almost two years,” the article stated.
FERC’s $29.8 million in civil penalties and $4.7 million in disgorgement of profits are based on claims that the “Powhatan Energy Fund and trader Houlihan ‘Alan’ Chen violated anti-manipulation rules by making riskless back-to-back up-to-congestion trades to profit on line-loss rebates.”
Read much more about the details of the trades in question and the timeline of events leading up to the May 29 order against the Gateses in RTO Insider here, and check out previous VISTA Today coverage of the ongoing saga here.