Kent Law College Covers Kraft-Mondelez, Renato Mariotti, and US v. Andrei Flotron
Thom Thompson – John Lothian News
The 11th annual Conference on Futures and Derivatives took place on Thursday at Chicago- Kent IIT College of Law. I was going to say the panels covered the waterfront on recent developments in futures law, but I just looked up the phrase. It means “cover every detail” and, thank God, they did not do that. Instead, the panels were interesting and engaging.
My favorite panel of the day was a late-morning solo performance by the conference co-chair, Jake Kahn, partner at Riley Safer, regarding antitrust and futures law. Among other things. antitrust law has many implications for market manipulation cases, especially private cases brought under the 1914 Clayton Act because that federal law provides for the awarding of treble damages as well as covering the plaintiff’s lawyers’ fees. This suddenly clarified for me (Ohhhhhh!) why Kraft and Mondelez are so aggressive about keeping the CFTC from spilling the beans about what Kraft might have done in the 2011 CBOT wheat markets that led to the CFTC charging manipulation in 2015. There is a class action suit out there against Kraft, and Kraft would certainly rather have the plaintiffs conduct lengthy (cost prohibitive) discovery instead of getting ammunition from CFTC findings available on the internet for free.
Speaking of Kraft and the CFTC, the best line of the entire day came at the end of the first panel when Marc Nagel, the other Conference co-chair, asked Jamie McDonald, the head of the CFTC’s Division of Enforcement, whether he wanted to comment on the Kraft litigation. To general laughter McDonald demurred, of course, although I don’t remember whether it was because of a we-don’t-comment-on-current-litigation stance or because of the settlement McDonald negotiated with Kraft earlier this year that even he and the CFTC’s white-shoe outside counsel would have to concede gags him and every other CFTC employee in matters re: CFTC v Kraft.
Nagel’s mirthful question came at the end of an hour-long discussion between McDonald and Scott Williamson, one of his own direct reports at the CFTC who is Acting Deputy Enforcement Director (italics mine). Interviewing your boss is hard – in public harder. And doing it in front of 100-plus probably adversarial lawyers, while you are temporarily (Acting Deputy Director, remember) performing a role you might be auditioning for, had to be uncomfortable as hell for Williamson. It was uncomfortable – especially when McDonald joshingyly complained that Williamson was only lobbing softballs at him. Williamson was nonplussed.
In the afternoon Renato Mariotti sat down with Andrew Vrabel, Global Head of Investigations at the CME, to discuss a hypothetical spoofing investigation. (I guess you can’t spell the name Renato Mariotti these days without the letters s-p-o-o-f.) The two explored a case of a trader found to be spoofing by his own firm. They held the room’s attention for an hour by discussing from many angles the responsibilities and the legal risks attaching to the various attorneys involved in the case. In their hypothetical base story, the chief compliance officer of the FCM where the spoofer worked was a lawyer who was or wasn’t, maybe could have been, wasn’t necessarily . . . acting as a lawyer in her role as CCO.
That panel touched on one of the major themes of the day: supervision. In his panel, McDonald brought up a newly heightened focus on the role of business line supervisors. When he noted that the CFTC recognized that many CCOs do not have the authority to force supervisors in their firms to supervise properly, he granted CCOs a little breathing room by acknowledging the limits to their authority. Supervision was also highlighted by the NFA panelists, Jennifer Sunu and Patricia Cushing, who noted that NFA was bringing more complaints about failure to supervise – and, again, despite the common paranoia of industry CCOs, they do not always blame a firm’s CCO. Allison Passman, a CFTC trial attorney, got everyone’s attention right before lunch with a litany of recent successful CFTC “failure to supervise” cases along with a tease that some additional ones continue to be litigated.
The day’s penultimate session, presented by William Ridgway, a partner at Skadden Arps, was about cybersecurity. The half-hour talk was very well received and was possibly the buzziest of the day’s program.
The last session was called Pushing the Envelope, and it too was a crowd pleaser. First, please note that the day’s program was targeted toward educating in-house and defense attorneys about recent developments in law and regulation. A number of the program speakers were regulators (CME, CFTC, NFA). Pushing the Envelope turned out to be a discussion of a federal case, United States v Andrei Flotron, the spoofing case that DOJ lost. It must have cheered the defense bar immensely to hear about a victory for their side. Robert Frenchman, founding partner at Mukasey Frenchman, spent a riveting half-hour explaining how the federal case, which hinged on a charge of conspiracy, fell apart. The key to Flotron’s victory was their demonstrating to the jury that traders in a proprietary trading environment don’t conspire, they compete. The jury came back with its verdict after less than a day of deliberations. This story’s happy ending was a nice send off for a defense-ive crowd.