- Kraft Heinz and Mondelez International have agreed to pay $16 million in civil penalties under a settlement with the Commodity Futures Trading Commission, which alleged that the company made $5 million in illegal profits in 2015 by manipulating the market for wheat futures. [Editor's note: The CFTC removed its public statements about the settlement from its website Monday.]
- "America is the breadbasket of the world; wheat markets are its heart," said Heath Tarbert, the CFTC's chairman. "Market manipulation inflicts real pain on farmers by denying them the fair value of their hard work and crops. It also hurts American families by raising the costs of putting food on the table. Instances of market manipulation are precisely the kinds of cases the CFTC was founded to pursue."
- The CFTC complaint alleges that, in response to high cash wheat prices in 2011, Kraft purchased more than 3,000 futures contracts for $90 million, with the aim of sending the market a false signal about how much wheat it needed for its Toledo, Ohio, mill.
The company's actual goal in buying the contracts was to narrow the price spread between December 2011 and deferred-month wheat futures contracts, the CFTC alleged. That caused the market to sell cash wheat to Kraft at lower prices while still earning the company a profit on its speculative futures positions, the regulator said.
The $16 million fine ends four years of litigation and is three times the amount of profit the company earned on its trade.
"This action demonstrates the CFTC's resolve to aggressively prosecute and punish those who manipulate or attempt to manipulate our nation's commodity markets," CFTC Commissioners Dan Berkovitz and Rostin Behnam said in a separate statement.
Shortly after the settlement was announced, though, Kraft Heinz and Mondelez filed a formal complaint with an Illinois federal judge, saying the CFTC violated its side of the agreement by speaking publicly about the case in statements posted on the agencys website. "We strongly disagree with the CFTC's statements, which blatantly violate and misrepresent the terms and spirit of the consent order," the companies said. They added they will be seeking immediate relief from the court.
In its statement, the CFTC said it can't comment on the case but individual commissioners can. All of the CFTC's public statements have been removed from the regulator's website.
Separately, Kraft Heinz's new CEO, Miguel Patricio, said the company has put procurement issues behind it and is ready to move forward. The Securities and Exchange Commission subpoenaed the company last year over its procurement process, leading it to restate its earnings for the past two years.