MDLZ Mondelez International Inc

By Dave Michaels 

WASHINGTON -- Kraft Foods Group Inc. and Mondelez Global LLC are poised to pay $16 million to settle regulatory allegations they manipulated the market for wheat futures.

The deal, if approved by a federal court in Chicago, would resolve an unusual legal standoff: The companies had accused the Commodity Futures Trading Commission of violating an earlier settlement with them by commenting on it. The deal had limited what could be said about the case.

A judge has considered sanctioning the CFTC and its commissioners over the comments.

Now, the CFTC and the companies appear to have reached a pact with the same penalty amount as the one announced in 2019, a person familiar with the matter said, but without restrictions on what CFTC commissioners can say about the outcome.

On Wednesday, Kraft and Mondelez -- previously a single corporate entity -- withdrew their request for the CFTC to be sanctioned. The judge, John Robert Blakey, said in a notice posted in the court's docket Thursday that he would take the motion "under advisement." He has scheduled another hearing for March 26.

The companies cried foul last year after the CFTC released three statements -- a press release, a statement by all five commissioners, and a separate statement by its two Democrats -- that explained the settlement and its unusual gag order.

The original settlement didn't explain how the company's trading ran afoul of the law, an unusual omission in regulatory enforcement orders. It also didn't require the companies to agree with the regulator's claims that they had violated the law.

A spokeswoman for Kraft on Thursday declined to comment. A spokesman for Mondelez didn't respond to a request seeking comment.

Judge Blakey last month said the CFTC statements were "egregious misconduct" and indicated he would issue findings that could spell out consequences for the commission. An appeals court panel said last year that CFTC commissioners can't be held in contempt individually because the law authorizes them to opine about any enforcement action.

The judge said at a hearing on Thursday that he blames the "collective entity" of the CFTC for the statements, according to a transcript. Judge Blakey said the result of his findings could be "an admonishment" to not "do this kind of thing again."

Judge Blakey also said Thursday that he didn't know "why you guys are agreeing to $16 million, but, you know, that's your call, not mine."

The case before Judge Blakey involves claims from 2015 that Kraft illegally manipulated the price of wheat by amassing a huge position in futures contracts while never intending to take delivery of the commodity.

Kraft's strategy, the CFTC alleged, was to use its enormous trading position to drive down the spot-market price of wheat, which it could then buy, while increasing the price of the futures contracts it could later sell for a profit.

--Dylan Tokar contributed to this article.

Write to Dave Michaels at dave.michaels@wsj.com

(END) Dow Jones Newswires

March 06, 2020 17:19 ET (22:19 GMT)

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