The former gas traders and supervisors received target letters from the Houston office of the U.S. attorney telling them they may face charges of commodity price manipulation, conspiracy and wire fraud.

They've also been told they have until Aug. 20 to contact prosecutors to begin discussing guilty pleas, according to sources familiar with the investigation.

The possible charges are nearly identical to those brought against Todd Geiger, a former El Paso trader who was accused of providing false information to Inside FERC's Gas Market Report. In December, he pleaded guilty to one count each of reporting inaccurate information under the Commodity Exchange Act and wire fraud.

The government's investigation relates to natural gas price indexes, which in the past were produced by various publications through surveys of energy traders and others. The indexes offer pricing snapshots for locations, or hubs, across the country and are used by buyers and sellers of natural gas to help set prices in contracts.

The Commodity Futures Trading Commission filed civil charges against several companies in the past two years, claiming their traders knowingly provided false data to publications with the intention of influencing natural gas prices.

The commodities commission has collected about $250 million in penalties from companies, including $30 million from Coral Energy Resources, a Houston-based trading subsidiary of Shell, and $20 million from El Paso.

Both companies have said they are cooperating in ongoing investigations, including the criminal investigations being conducted by the Houston U.S. attorney's office.

Defense attorneys whose clients received the target letters said they were surprised when they started to arrive via mail and fax Friday afternoon. It had been months since there was any apparent activity in the investigation, which started more than a year and a half ago.

Last summer, a judge ruled that the part of the Commodity Exchange Act used to charge Geiger and Michelle Valencia, a former Dynegy trader who faced similar charges, was overly broad and unconstitutional. The judge threw out some charges against the two, but later allowed prosecutors to reinstate the charges on a narrower basis.

The U.S. 5th Circuit Court of Appeals is to hear oral arguments on Valencia's appeal of the judge's refusal to dismiss the case.

While defense attorneys like to describe the Commodity Exchange Act charges as being on shaky ground, there's less doubt that can be cast on making a case for wire fraud or conspiracy.

For example, the government has November 2000 e-mails between Geiger, his supervisor and several other former El Paso employees discussing whether they should submit data to the trade publications based on "book bias" or verifiable fixed trades.

Some traders argue in the messages that competitors are providing inaccurate information, so El Paso should do the same.

"What are the odds of IFERC doing an audit if they are suspicious?" writes one trader who appeared to favor reporting the "book bias" data, referring to the publication that gathered the data.

The list of individuals who received the target letters does not include everyone who participated in the November 2000 e-mail discussion.

Notably, former New York Mercantile Exchange President Robert "Bo" Collins did not receive a target letter, according to sources familiar with the investigation.