Delta CEO Jon Ruggles fined $ 3 million in commodities trading scheme

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In an unusual case that underscores the complexity of overseeing commodity trading, the CME Group has sanctioned a former fuel manager of an airline for directing foreign exchange orders from his own employer, among others, and generating market gains of over $ 3 million in the process.

Jon Ruggles, who was vice president of fuel at Delta Airlines from mid-2011 to the end of 2012, was sanctioned today by CME regulators for using his position at the time “to get an award from favorable execution “for commodity trading orders” in flagrant violation of the rules of Exchange “, according to a written conclusion.

Using an account registered in his wife’s name, Ruggles completed at least 82 transactions that opposed or offset orders from Delta, or placed orders for personal gain ahead of transactions destined for Delta, according to the reports. conclusions. As a result, Ruggles is permanently banned from the CME and must pay $ 3.11 million in fines and restitution.

“Delta has the highest ethical standards and expects all of its employees to uphold these standards. Our values-based culture is essential to Delta’s success,” said a spokesperson for the airline in a statement. statement sent via email while declining to comment on details of the CME’s Sanction against Ruggles or his wife, Ivonne. Separately, Jon and Ivonne Ruggles did not immediately respond to requests for comment.

Ed Hirs, professor of energy economics at the University of Houston, said while commodity regulation can be a murky world, Ruggles’ alleged conduct deserves punishment.

“At the very least, it’s unethical, and I’m surprised it’s not just completely illegal, because it’s trading with inside information, and it’s trading for its own. benefit, “Hirs said in a telephone interview Monday evening. Further, he said, “This is clearly an internal control issue for Delta.”

Ruggles, an outspoken energy trader who worked on Wall Street as well as for the secret European company Trafigura before landing at Delta, has had a mixed experience there.

Hired in early 2011 to help straighten out a fuel cover book that had lost airline money, Ruggles managed to generate impressive business returns with an atypical business style for an airline – for example, through a complex heating oil contract at the end of 2011 which generated some 100 million dollars. He was also instrumental in the airline’s controversial purchase of an oil refinery in Pennsylvania the following year, an attempt at vertical integration that was flouted by some industry observers.

But in the second half of 2012, Delta’s hedging portfolio was in trouble and Ruggles disagreed with management.

At the end of the year, as described in this writer’s book “The Secret Club That Runs the World,” Delta received a subpoena from the Commodity Futures Trading Commission, which wanted documents relating to the transactions of contracts of Ruggles personal and corporate commodities. Confronted with Delta’s management about the investigation, Ruggles was puzzled, telling them “it didn’t matter.”

Yet Ruggles never returned to Delta after the subpoenas were revealed and the CFTC investigation continued. In a conversation about a year later, Ruggles denied that the Justice Department, which was rumored to be reviewing the case itself, was involved.

Monday’s CME discovery hinted at the ongoing CFTC investigation, noting that “if Ruggles reaches[s] a settlement with the CFTC “or is forced to return profits as a result of a court ruling, the money he reimburses will be credited against the amount requested by the CME. A CFTC spokesperson did not not immediately responded to a request for comment.

There are a number of quirks in the CME v Ruggles case.

For one thing, at the time in question – a period of seven and a half months at the end of 2012 – Ruggles himself was not a member of the exchange. In fact, in order to initiate disciplinary action against Ruggles, the NYMEX Business Conduct Committee held an evidentiary hearing to determine that, indeed, Ruggles was subject to the regulatory jurisdiction of the CME.

Then, based on its alleged violation of various rules, including those governing fraud and bad faith, the prohibited disclosure of non-public information, and failure to appear before exchange staff, the CME imposed its sanction.


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