Thursday, September 05, 2019

Hearing to determine CFTC’s contempt in Kraft Foods matter continued until October

By Brad Rosen, J.D.

In this closely watched case, Judge Sharon Johnson Coleman of Northern District of Illinois granted the CFTC’s emergency motion filed on August 28, 2019, under seal, to continue a previously scheduled hearing for September 12, 2019 to October 2, 2019. The deadline for submitting for prehearing briefs was also extended. As the agency’s motion was filed under seal, it is not publicly available and the basis for the CFTC requesting the continuance is unknown. On August 30, 2019, the defendants Kraft Foods Group, Inc., Mondelez Global LLC filed responses to the CFTC’s filing, which similarly were under seal and unavailable to the public (CFTC v. Kraft Foods Group, Inc., August 30, 2019, Coleman, J.).

Judge Blakey, the presiding judge in the case, is scheduled to conduct the evidentiary hearing on October 2nd where CFTC Chairman Heath Tarbert, Commissioners Rostin Behnam and Dan Berkovitz, and Division of Enforcement Director James McDonald will be required to appear, testify, and be subject to cross examination.

Relief granted to the CFTC and recent developments. In addition to continuing the evidentiary hearing to October 2, 2019, Judge Coleman also granted the additional relief requested in CFTC’s emergency motion:
  • Leave to file an oversized brief;
  • The briefing deadline for the motion for contempt, sanctions, and other relief has been extended to September 23, 2019; and
  • The court entered the CFTC’s emergency motion to vacate the minute order dated August 19, 2019 entered by the court.
In other developments, on September 30, 2019, CFTC General Counsel Daniel J. Davis, and Deputy General Counsel also filed appearances in the case on behalf of the Commodity Futures Trading Commission.

A strange trip its been. The genesis of the current dispute goes back to August 14, 2019, when Kraft, Mondelez, and the CFTC entered into a consent order whereby it was agreed that the defendants would pay $16 million to resolve CFTC claims they manipulated wheat futures prices. That consent order was unusual in two respects. First, Kraft, Mondelez, and the CFTC (as a full Commission) were limited in their ability to speak publicly about the case. Moreover, the order was void of any factual findings or conclusions of law, which is out of the ordinary in these types of regulatory settlements.

What happened next was even more unusual. On August 15, 2019, the CFTC issued a press release, a statement about the case where the agency boasted that the penalty was valued at three times the defendants’ gain from the alleged wrongdoing, among other things. Additionally, CFTC Commissioners Behnam and Berkovitz issued a joint statement freely sharing their thoughts about the settlement and its policy implications. They claimed the gag provision did not apply to them.

Not surprisingly, Kraft and Mondelez took issue with the CFTC and commissioner public statements. On August 16, 2019, they filed an emergency motion for contempt and sanctions charging the CFTC with deliberately violating the consent order. In an initial hearing on August 19, 2019, Judge Blakey ordered key CFTC officials to appear at the evidentiary hearing (now set for October 2, 2019) to provide further explanation with regard to the various public statements made.

Developments in this highly unusual case will remain closely watched by regulatory and criminal attorneys across the country.

The case is No. 15-cv-02881.