CFTC Commissioners, Staff Win Reprieve From Contempt Hearing
October 22 2019 - 9:18PM
Dow Jones News
By Dylan Tokar
The U.S. Commodity Futures Trading Commission's top brass can't
be blocked from airing their views on the agency's enforcement
efforts, an appeals court has ruled.
The ruling by the U.S. Court of Appeals for the Seventh Circuit
is a victory for the CFTC, which has been locked in a legal battle
with Kraft Foods Group Inc. and Mondelez Global LLC over statements
the agency released following a settlement with the two food
companies.
The dispute stems from an unusual provision in the
Kraft-Mondelez settlement, under which the two companies --
previously a single corporate entity -- agreed to pay $16 million
to settle claims they manipulated the wheat-futures market. The
provision appeared to prohibit parties to the settlement from
commenting publicly on the deal.
Despite the provision, the CFTC released three statements --
including a press release, a statement by all five members of the
commission, and a separate statement by the agency's two Democratic
commissioners -- touting the agreement a day after the settlement
was approved in court. The statements caused Kraft and Mondelez to
ask a federal judge to hold the derivatives regulator in contempt
of court.
The judge, John Robert Blakey of the U.S. District Court for the
Northern District of Illinois, in August ordered CFTC Chairman
Heath Tarbert, the agency's two Democratic commissioners and other
agency staff to appear for an evidentiary hearing that Judge Blakey
said could result in a referral for criminal contempt.
In response, the CFTC filed several emergency motions, asking
Judge Blakey and the Seventh Circuit to delay or cancel the
evidentiary hearing. The regulator argued that privileges
protecting high-ranking executive branch officials prevented the
commissioners from testifying.
After his initial order, Judge Blakey softened his stance,
saying a referral for criminal contempt was unlikely, given that
Kraft and Mondelez had made clear in subsequent filings that they
were seeking only an order of civil contempt.
In a filing to the Seventh Circuit earlier this month, Judge
Blakey argued that the CFTC's appeal was premature. But he
continued to press for appearances by the agency's commissioners,
as well as staff members who were involved in the settlement with
Kraft and Mondelez.
The Seventh Circuit on Tuesday sided with the CFTC. The appeals
court blocked Judge Blakey from forcing the commissioners,
including Mr. Tarbert, or staff members from testifying in court,
and from finding them personally liable for violating the
confidentiality provision in the Kraft-Mondelez settlement.
"Every member of the commission has a right to publish an
explanation of his or her vote," the appeals court said. "If the
commission has done wrong, that is because of what the commission
itself said and did, not because of what any of its members or
employees thought or planned."
A lawyer for Kraft and Mondelez didn't respond to a request for
comment.
The Seventh Circuit left open the possibility for Judge Blakey
to find that the agency, as an institution, violated the consent
order. But it said the judge would have to conduct his inquiry by
relying on the agency's official acts and the case's administrative
record.
The confidentiality provision prohibited Kraft, Mondelez and the
CFTC from making any public statements other than to refer to the
terms of the settlement or public documents filed in the case. The
appeals court on Tuesday highlighted four sentences from the
agency's press release, which Kraft and Mondelez have argued
violated the confidentiality provision.
In one sentence, the CFTC said the $16 million penalty was
approximately three times Kraft and Mondelez's alleged gain from
market manipulation. In another, the commission said it believed
the settlement advanced the agency's mission of fostering
transparent and competitive markets. The sentences were among a
number of statements from the three documents published by the CFTC
that the two companies have argued were violations of the
provision.
Write to Dylan Tokar at dylan.tokar@wsj.com
(END) Dow Jones Newswires
October 22, 2019 21:03 ET (01:03 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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