Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, June 17, 2008

CMS Energy Officer Settles SEC Charges

The SEC settled administrative charges against Tamela Pallas.  Its Order finds that Pallas participated in and approved of the decision to do round trip energy trades while she was (a) Senior Vice President of Reliant Energy Services, Inc., a subsidiary of Reliant Energy, Inc. (Reliant), that was a part of Reliant's Wholesale Group and as the Chief Operating Officer and later (b) Chief Executive Officer of CMS Marketing Services & Trading, a subsidiary of CMS Energy Corp. (CMS). The inclusion of those transactions caused Reliant's and CMS's financial statements to present materially misleading pictures of their actual business activity. Although Pallas neither participated in discussions or decisions regarding how to account for the transactions nor participated in drafting earnings releases or Commission filings at either Reliant or CMS, according to the SEC, Pallas should have known that the revenues and expenses associated with the round trip trades would be included in each company's financial statements, including filings made with the Commission. The Order finds that Pallas's conduct with respect to the round trip trades was negligent and, as such, was a cause of the filing of reports, including offering materials, which included revenues and expenses related to round trip trades. Respondent's negligent conduct was also therefore a cause of the related misstatement of the transactions in each company's books, records and accounts.

Tamela Pallas consented to the issuance of the Order without admitting or denying any of the findings contained in the Order.

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