Correction to This Article
An article in the June 29 Business section about alleged manipulation of propane prices by a division of BP PLC incorrectly used a photo showing consumers buying tanks of AmeriGas propane. AmeriGas is not involved in the federal lawsuit.

U.S. Accuses BP Unit Of Price Manipulation

U.S. investigators say in a lawsuit that BP traders bought large amounts of propane and withheld it from the market to illegally manipulate prices.
U.S. investigators say in a lawsuit that BP traders bought large amounts of propane and withheld it from the market to illegally manipulate prices. (By Tim Boyle -- Getty Images)
By Brad Foss
Associated Press
Thursday, June 29, 2006

Federal investigators said yesterday that traders at a BP PLC unit cornered the U.S. propane market in the winter of 2004 to illegally manipulate prices, driving up heating costs for rural consumers.

The Commodity Futures Trading Commission said that BP traders, with the consent of senior management, "purchased enormous quantities of propane to establish a dominant" position in the market and then withheld fuel from the market in order to drive prices higher.

Details of the alleged plan, compiled with help from internal company documents and recorded conversations, were outlined in a civil lawsuit filed against the company's BP Products North America Inc. unit.

"It's pretty clear as to what they were doing," commission attorney Paul G. Hayeck said in an interview.

The suit was filed in the U.S. District Court for the Northern District of Illinois.

Also Wednesday, the Justice Department announced that a former BP trader implicated in the scheme, Dennis N. Abbott, 34, of Houston, has pleaded guilty "to conspiring to manipulate and corner the propane market." The agency said Abbott, who has agreed to cooperate with law enforcement in "an ongoing investigation," faces up to five years in prison and a fine of $250,000.

BP spokesman Ronnie Chappell said that "market manipulation did not occur" and that the company intended to fight the charges in court. Chappell said, however, that an internal investigation conducted by BP found that several employees failed "to adhere to BP policies governing trading activities" and that they were dismissed from the company.

"We have also taken steps to strengthen the supervision of our trading activities," Chappell said.

According to the lawsuit, the plan to manipulate prices and pump up profit began to take shape in early 2004. At the time, declining propane prices were particularly painful to BP because its traders had made significant bets that prices would rise.

The Commodity Futures Trading Commission presents trading manager Radley as a key architect of the plan to turn the situation around and potentially net the company $20 million in profit. In one recorded conversation, Radley boasted that the propane market was "vulnerable to a squeeze." In another, he said the market was "tight enough that if someone wanted to play games with it, potentially they could."

Radley and others formulated a strategy to establish a massive position in the propane market in February 2004, the lawsuit contends, and he was recorded in one conversation as saying "we can control the market at will."

In addition to Abbott, Radley and the company itself, other current and former BP Products North America employees who face charges include Donald Cameron Byers, the unit's former chief operating officer; Martin Marz, the compliance manager; James Summers, the vice president of natural gas liquids; and Cody Claborn, a propane trader.

In 2003, propane was the primary heating fuel for nearly 7 million households, most of them concentrated in the Northeast and upper Midwest, trading commission said.

© 2006 The Washington Post Company