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Brian Hunter, the Calgarian who made more than $100-million trading natural gas for Amaranth Advisors LLC before the hedge fund collapsed, fled the U.S. as Washington regulators were trying to interview him earlier this year, the chairman of the Federal Energy Regulatory Commission says.

"He was in the middle of an interview and there was a lunch break, and he never came back from lunch," FERC chairman Joseph Kelliher said in an interview yesterday after announcing preliminary findings that Amaranth, Mr. Hunter and another trader manipulated the market over three months early last year. FERC is seeking total penalties of $291-million (U.S.).

A spokesman for Mr. Hunter said he "voluntarily flew to the U.S.A. to meet with FERC officials and give an interview. Brian ended the interview when he and his attorney became aware that the FERC had misrepresented the agenda for the discussion."

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Mr. Hunter spent many hours co-operating with another U.S. agency, the Commodity Futures Trading Commission, the spokesman said. The commission filed a lawsuit Wednesday alleging Mr. Hunter tried to manipulate the price of natural gas securities. That suit did not allege Amaranth actually manipulated prices.

FERC preliminary findings, amounting to allegations, are based on a year of inquiry into the hedge fund and its problems. The fund and its two former traders have 30 days to respond, Mr. Kelliher said.

"It's an opportunity for them to rebut our findings. Now, it's not their first opportunity to do so; we've been talking to them on and off for a number of months."

In a statement yesterday, lawyers for Mr. Hunter called FERC's allegations baseless and without merit and noted Mr. Hunter had already gone to court in an attempt to stop FERC from proceeding.

The $8-billion (U.S.) hedge fund imploded in September and it's well known that Mr. Hunter was the lead natural gas trader. FERC's allegations also name Matthew Donohoe - believed to be an American now living in Calgary - who, FERC says, was executing the trades for Mr. Hunter.

Mr. Hunter, in turn, determined the trading strategy.

Mr. Donohoe could not be reached yesterday. Mr. Hunter and Amaranth deny the allegations and plan to contest them.

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In its allegations, FERC said Amaranth's Calgary trading desk operated without any senior or risk managers, even though the hedge fund told Nymex it had assigned a risk manager to sit among its energy traders.

FERC believes that evidence of Amaranth's alleged manipulation is clearest when it comes to its trading in February, on the date the March futures contract would be settled.

"In this case, our inquiry is aided by the fact that Hunter and Donohoe were physically separated by half a continent," it states.

At the time, Mr. Hunter was in Calgary and Mr. Donohoe was in Greenwich, Conn. "They chose to use instant messaging technology to communicate and effectuate their trading," FERC alleges.

"Buried in the millions of bytes of instant message texts uncovered by staff are the clear signals of their manipulative scheme."

FERC recommends penalties of $200-million (U.S.) for Amaranth, $30-million for Mr. Hunter and $2-million for Mr. Donohoe, in addition to making Amaranth disgorge more than $59-million "in unjust profits plus interest."

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The regulator says Amaranth still has assets of more than $600-million.

Mr. Hunter was hired in 2004 by Amaranth's chief executive, Nicholas Maounis, and Harpreet "Harry" Arora, a former Enron trader who established Amaranth's energy and commodities trading desk.

Mr. Hunter apparently grew to dislike reporting to Mr. Arora and to resent his own compensation, FERC said, citing a deposition of Mr. Maounis. In the summer of 2005, Mr. Hunter threatened to quit and signed on with another hedge fund.

To keep him, Mr. Maounis gave Mr. Hunter a promotion and doubled his share of the trading desk's profits to 15 per cent in mid-2005. Mr. Hunter made roughly $1-billion (U.S.) for Amaranth in 2005, largely from trading around the periods when hurricanes Katrina and Rita sent natural gas prices soaring, FERC said.

In late 2005, Amaranth allowed Mr. Hunter to move his trading desk to his hometown of Calgary.

At first he was alone there, but over the spring and summer of 2006 four other Amaranth natural gas traders came up from Greenwich: Mr. Donohoe, Matthew Calhoun, Shane Lee and Brad Basarowich. "Notably absent in Calgary were Amaranth senior management, risk management or compliance personnel," FERC alleges.

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The documents say that Mr. Hunter's natural gas portfolio lost about $1-billion (U.S.) in May, and Amaranth was forced to liquidate assets.

"By May 2006, the Calgary traders were under actual supervision of Amaranth management for the first time in half a year," the documents state. "Maounis testified that he directed the Calgary team to return to Greenwich for days at a time, on a regular basis, starting in June and through September, in part, to separate them from homes and families in order to motivate them to address the May losses."

Mr. Hunter, Mr. Donohoe and Amaranth do not appear to have attempted to manipulate the price of natural gas futures in June, July or August, FERC states.

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