updated 8/4/2006 4:57:23 PM ET 2006-08-04T20:57:23

Jurors convicted two former Houston energy traders of a handful of wire-fraud charges Friday, but either acquitted them or couldn’t reach a verdict on other conspiracy and false reporting counts.

The verdicts in the trial of ex-Dynegy Inc. trader Michelle Valencia and ex-El Paso Corp. trader Greg Singleton baffled defense lawyers and the stunned defendants.

“It doesn’t make any sense,” Valencia told her attorney, Chris Flood, minutes after U.S. District Judge Nancy Atlas read the roller-coaster verdict.

Jurors, who had reported deadlocks for two days on some counts, declined to explain their decision and quickly left the Houston federal courthouse without comment.

Valencia was convicted of seven counts of wire fraud and acquitted of five counts of false reporting and two other counts of wire fraud. Jurors couldn’t reach verdicts on a single count of conspiracy and eight other counts of false reporting.

Singleton was convicted of a single count of wire fraud. Jurors acquitted him of two counts of false reporting and two other counts of wire fraud. The panel couldn’t reach verdicts on two other counts of wire fraud and a single count of conspiracy against Singleton.

Sentencing was set for Sept. 11. Valencia faces a maximum of 35 years in prison, while Singleton faces up to five.

“It’s bizarre,” Flood said. “We received a fair trial. I’m just puzzled by the verdict.”

“It was a very interesting trial,” said Paul Nugent, Singleton’s lawyer. “It’s interesting how the jury rejected false reporting with Singleton.”

Valencia and Singleton were accused of reporting fake data in 2000 and 2001 to industry publications that use the information to calculate natural gas index prices. The publications, such as Inside FERC Gas Market Report or Natural Gas Intelligence, calculate price based on information supplied by traders or their companies, which in turn use those prices in trading.

Such indexes are used to price billions of dollars in transactions involving natural gas and electricity in physical and financial markets each year. Companies provide trade data voluntarily, and no governmental agencies regulate how the publications handled the information.

Valencia and Singleton acknowledged reporting fake data to the private, for-profit publications, but argued that they did so on orders and didn’t know it could be criminal. Prosecutors countered that to convict, jurors had to find that the defendants intended to deceive.

“It sounds like the jury was persuaded by the arguments that these people were just doing what was normal in the industry,” said Andrea Wolfman, former head of enforcement at the Federal Energy Regulatory Commission.

“You can only speculate that they might have been sympathetic to the notion that people hadn’t had much notice that this is criminal behavior,” said Wolfman, now an attorney in private practice.

She added that jurors may have been flummoxed in part by the complicated, jargon-filled case presented over three weeks. Three other former El Paso traders are to go to trial in November on charges of conspiracy, false reporting and wire fraud.

Valencia and Singleton declined comment, and are expected to appeal.

Prosecutor Belinda Beek said the government was pleased with the verdict, even though it appeared that jurors rejected their false reporting allegations.

“One government theory was false reporting. The other was wire fraud, which was separate and independent from the false reporting and conspiracy counts,” Beek said without elaboration.

The conspiracy and false reporting counts stemmed from the Commodity Exchange Act, which hadn’t before been used in a criminal prosecution. The wire fraud convictions stemmed from fake trades reported via e-mails, faxes or phone calls.

Fake reporting to boost the appearance of trading activity was common in the energy merchant industry before Enron Corp. crumbled into bankruptcy proceedings in late 2001.

Scrutiny of trading practices heightened after Enron crashed, and Valencia and Singleton were the first to go to trial in a string of ex-traders charged with reporting fake trades.

Since Valencia, Singleton and other traders were indicted in 2003 and 2004, the FERC has made moves to strengthen oversight. Agency rules now require companies that buy and sell natural gas and electric power in the wholesale market to adopt strict internal controls on price reporting. Congress also stiffened criminal penalties and allowed the FERC to require price reporting to a central agency. The FERC hasn’t yet invoked that authority.

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