Canary’s Lawyer Exposed in Market-Rigging Case

     MANHATTAN (CN) – A government agency irreversibly blew the cover of an informant’s lawyer to alleged oil-market manipulators with a “completely reckless” disclosure, a federal judge ruled.
     The Commodity Futures Trading Commission “handed over hundreds of thousands of documents without first scanning them for privileged information,” U.S. District Judge William Pauley scolded in a 14-page opinion. “To call the CFTC’s production merely ‘inadvertent’ would risk turning the ‘completely reckless document production’ into a kind of centaur: easy to imagine from its constituent parts but impossible to find in practice.”
     It was just last year that the government strode that centaur out on to the field in its complaint over the alleged 2008 manipulation of oil futures on the New York Mercantile Exchange. Parnon Energy, Arcadia Petroleum, James T. Dyer of Australia and Nicholas Wildgoose of Rancho Santa Fe, Calif., are defendants in the action.
     When regulators last year handed over more than 250,000 documents that included emails between the CFTC and Chicago-based attorneys, “the significance of those emails was not obvious,” Pauley wrote.
     More discovery and research, however, led lawyers for the energy companies to identify the attorney for the government’s informant and learn that the informant worked for their competitor, according to the opinion.
     The identity of the informant remains secret, but the companies hoped to glean this information by subpoenaing the informant’s attorney and his law firm for all communications between them and the CFTC related to the case.
     Judge Pauley limited these subpoenas Wednesday to information that would not unmask the informant.
     “The government’s interest in preserving the informant’s anonymity in this case is strong,” he wrote. “The fact that the informant communicated only through an attorney suggests that he expected to remain anonymous. Although the informant’s employer competes with defendants and would have an independent incentive to report defedants’ manipulative activity to the government, the informant himself may be vulnerable to retaliation from his employer or future employers within the industry if it becomes known that he has cooperated with the government.”
     The companies must Wednesday, return unredacted metadata it received bua inadvertent disclosure.

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