FERC sues GreenHat Energy to enforce $242 million fraud penalty

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REUTERS/Lukas Barth

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  • Energy regulator says trading firm has failed to pay fine for defrauding wholesale-power market PJM Interconnection

NEW YORK (Reuters) - The U.S. energy regulator has sued GreenHat Energy LLC to collect more than $240 million in penalties it imposed on the company for what it described as "one of the largest electricity market frauds in American history."

The Federal Energy Regulatory Commission (FERC) sued Texas-based GreenHat Thursday in Philadelphia federal court to enforce a November order directing the trading firm and its co-founders to pay $229 million in civil penalties for defrauding the electric market and to return about $13 million in unjust profits.

William Barksdale, a lawyer for GreenHat, said the lawsuit was "fatally flawed" and cited what he called "repeated FERC enforcement misconduct."

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FERC's November order said it had referred claims by GreenHat of improper email communications by its enforcement staff in relation to the case to the Department of Energy's Office of the Inspector General (OIG). A related FERC order said the internal watchdog had considered the matter and "declined to take further action."

A FERC spokesman said the regulator does not comment on pending matters.

The agency's Nov. 5 order said GreenHat defrauded the Pennsylvania-based wholesale-power market PJM Interconnection, the largest in the country, by purchasing PJM-issued financial assets with no intent to pay for them and selling them from 2016 to 2018 to other energy firms for $13 million.

Thursday's complaint said the company had pulled a "classic fraud." GreenHat's conduct violated the Federal Power Act, FERC found in its November order.

The lawsuit said GreenHat has failed to pay a $179 million fine, two of its co-founders each did not pay $25 million fines, and the defendants failed to return the profits within 60 days as required.

PJM operates the grid in 13 Midwest and mid-Atlantic states and the District of Columbia.

The case is Federal Energy Regulatory Commission v. GreenHat Energy, LLC et al, United States District Court for the Eastern District of Pennsylvania, No. 2:22-cv-00044.

For Federal Energy Regulatory Commission: Thomas Olson with the Federal Energy Regulatory Commission

For GreenHat Energy, LLC and the Estate of Andrew Kittell: William Barksdale of Skadden, Arps, Slate, Meagher & Flom

For John Bartholomew and Kevin Ziegenhorn: N/A

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U.S. regulator orders GreenHat Energy to pay $242 mln fine

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