The SEC claimed El Paso had issued "misleading" financial statements relating from 1999 to 2003 because it had inflated the company's proved oil and gas reserves.

A spokesman for Houston-based El Paso, Richard Wheatley, said the case was "a legacy issue, and in that sense we're very glad to put this legacy issue behind us."

Wheatley said El Paso had discovered that its reserves had been overstated and reported the matter itself to the SEC. He said the company has been cooperating fully with the regulator to resolve the issue.

El Paso owns North America's largest natural gas pipeline network which transports over a quarter of the natural gas used in the United States every day.

The SEC's complaint, filed in a Houston court, alleged that now former El Paso employees lacked necessary supporting information in drawing up reserve estimates, and said they also ignored "negative" drilling results which showed some oil and gas fields were not producing as expected.

El Paso has agreed to settle the SEC's civil legal action without admitting or denying the regulator's claims.

The energy firm has restated its 1999-2002 financial statements and its financial reports for the first nine months of 2003 and has reduced its previously reported oil and gas reserves.

Wheatley said El Paso has enhanced the processes it uses to estimate its oil and gas reserves in the wake of the case, including the use of an independent firm to audit the company's reserves.

El Paso will not pay any fines or penalties as a result of the case, although two former employees have both agreed to pay fines under 100,000 dollars each.

The securities watchdog said it had charged two subsidiary groups of El Paso and a total of five former employees of the energy firm as part of its investigation.