United States v. Radley
2011 U.S. App. LEXIS 1715
| 5th Cir. | 2011Background
- Appellees Radley, Summers, Claborn, and Kienenberger were BP traders handling TET propane futures not traded on an exchange.
- TET propane futures trades occurred via Chalkboard and via direct negotiations or brokers, with OPIS providing a daily average price.
- From February 2004, Appellees engaged in a large February-long buying campaign, creating a surge in futures prices.
- BP profited as shorts nakedly covered at high prices and via profit from contracts tied to OPIS prices rising with demand.
- Indictment charged price manipulation, cornering, and wire fraud, with a district court later dismissing the counts and the indictment.
- The district court held that § 2(g) of the CEA exempted the OTC propane transactions; the government appealed seeking reversal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of § 2(g) exemption | Radley argues § 2(g) excludes OTC trades from CEA liability for manipulation/cornering. | United States contends § 2(g) is narrow and may not immunize non-contractive conduct. | Exemption applies to all aspects of a transaction; counts dismissed. |
| Whether alleged actions were transactions | Government contends bids/negotiations/communications are transactions under § 2(a)(1)(A). | Appellees argue several acts were non-transactions. | Bidding, negotiations, and concealment of a long position fall within § 2(g) exemption. |
| Wire fraud viability under § 1343 | Government asserts a scheme to defraud via misrepresentations related to the OTC trades. | If § 2(g) covers the conduct, wire fraud cannot stand on those theories. | Wire fraud counts fail to survive because the alleged scheme falls within the § 2(g) exemption. |
Key Cases Cited
- United States v. Jho, 534 F.3d 398 (5th Cir. 2008) (standard for CEA and indictment sufficiency; de novo review of statute)
- United States v. Kay, 359 F.3d 738 (5th Cir. 2004) (statutory interpretation and scope of exemptions)
- United States v. Rains, 615 F.3d 589 (5th Cir. 2010) (textual analysis and interpretation of securities/commodities exemptions)
- United States v. Molina-Gazca, 571 F.3d 470 (5th Cir. 2009) (treats contracts vs. transactions and related definitions)
- Neder v. United States, 527 U.S. 1 (U.S. 1999) (materiality in wire fraud prosecutions)
- Valencia v. United States, 600 F.3d 389 (5th Cir. 2010) (wire fraud materiality in commodities context)
- TRW Inc. v. Andrews, 534 U.S. 19 (U.S. 2001) (statutory construction; avoid superfluous terms)