Opinion: Is the Commodity Futures Trading Commision’s mission to serve the public or Kraft Foods Group?

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We are taught in Journalism 101 to never, never, NEVER bury the lead … the thing the story is all about. 

So let me get right to the point.

To put it in a nutshell, while performing a noble endeavor in pursuing a civil action case against Kraft Foods Group Inc. for market manipulation of wheat on the Chicago Board of Trade, the Commodity Futures Trading Commission may be shirking its responsibility to tell the public what in the blue blazes is going on.

In the original case, CFTC claimed Kraft manipulated the wheat market by purchasing $90 million Chicago Board of Trade December 2011 wheat futures.  That spiked the cost of wheat futures and lowered cash prices at which point Kraft reversed its position netting itself a cool profit of more than $5.4 million.  As it turned out Kraft's wheat power play skirted a number of Chicago Board of Trade position limits.

When the CFTC learned of Kraft's dalliance in 2015 it filed a civil action case alleging:

“Kraft did not have a boa fide commercial need for the long futures position that it acquired in December 2011 wheat...Kraft held long positions in December 2011 wheat that exceeded the mandated speculative position limit for wheat on December 2, 5, 6, 7 and 8 by 2,110, 2106, 1,666, 1,226 and 226 contracts respectively.” 

Last  August  the CFTC announced that Kraft  agreed to pay a $16 million penalty for its 2011 commodity market manipulation. 

But. But. But.

As it turns out, the Kraft believed CFTC was supposed to keep the penalty hush hush.  Under the deal Kraft and the CFTC cut the public was never to learn about Kraft's dirty wheat laundry.  As you might imagine Kraft was as mad as a wet hen and so it took the CFTC to court last August alleging commissioner comments violated the deal's confidentiality agreement.

I've got to ask on the face of it why would CFTC do such a thing?  I mean isn't it their job to provide the truth and transparency to the tax paying public it is supposed to serve?

It turns out CFTC believed the deal it struck with Kraft demanded the Commission be on the QT while allowing individual commissioners speaking in the personal capacity to say whatever they liked:

“Our decision to approve the Consent Order was based on the fact that while this provision (hereinafter, “Paragraph 8”) limits what the Commission (i.e., the “party” referenced in Paragraph 8) can say about the Kraft litigation, it does not restrict individual Commissioners when speaking in their personal capacities. The text of Paragraph 8 could not be clearer: it binds the acts of a “party,” namely the Commission as plaintiff, and Kraft Foods Group, Inc. and Mondel?z Global LLC as defendants.  While other provisions—such as Section IV, Paragraph 10—do apply beyond the parties, specific language in the Consent Order makes it so.”

Pretty tricky.

But if you are in favor of full transparency the story isn't headed for a happy ending.  That's because this February, Kraft and the CFTC were back in the U.S. District Court for the Northern District of Illinois in front of Judge John Robert Blakey with a shiny new tentative settlement.

Last October Blakey ripped up the original settlement, essentially telling CFTC and Kraft to start over.

And start over they did.  The violated confidentiality clause is not in the new deal.  

But Kraft extracted this unbelievable promise from the CFTC.  Under the new deal Kraft gets to review all statements and press releases from the CFTC once the agreement is signed, sealed, and delivered by the court and the CFTC board.

That's quite a coup. And again I ask how does that serve the public interest?

About Dave Dickey

Dave Dikcey

Dickey spent nearly 30 years at University of Illinois at Urbana-Champaign’s NPR member station WILL-AM 580 where he won a dozen Associated Press awards for his reporting. For 13 years, he directed Illinois Public Media’s agriculture programming. His weekly column for the Midwest Center covers agriculture and related issues including politics, government, environment and labor. His opinions are his own and do not reflect the Midwest Center for Investigative Reporting. Email him at dave.dickey@investigatemidwest.org.