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Jon Ruggles

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Jon P. Ruggles
Born{1973 28 November} (50 years old)
Youngstown, Ohio, United States
EducationUniversity of Michigan and the University of Texas
OccupationBusiness executive
EmployerMcKinsey & Company

Merrill Lynch

Delta Air Lines
Known forTrading for Delta Air Lines fuel supply
SpouseIvonne Ruggles (2003-present)

Jon Paul Ruggles (born November 28, 1973) is an American executive known for founding Monroe Energy and creating an internal trading house that enabled Delta Air Lines to control its fuel supply.[1] According to CNBC, Delta hired Ruggles as vice-president of fuel in 2011 to help right a fuel-hedge book that had been losing the airline money. He managed to generate notable trading returns.[2]

Ruggles' career has been marked for being the "mastermind" behind Monroe.[3] However, his success has been shadowed by an accusation of insider trading brought by the Commodity Futures Trading Commission (CFTC).[4] The case signaled a turning point for the regulatory agency, as it sought to expand its regulatory reach under Rule 180.1 and develop new case law against industry-standard practices in commodities trading by using Ruggles to define insider trading regulation for the commodities industry under Misappropriation Theory.[5][6][7]

Since his departure from Delta, Ruggles has become an investor and executive in the oil industry, working for investment firms The Carlyle Group and Silverpeak. Ruggles has been described as a "galvanizing" figure.[8][9] Ruggles' career and personality have been the subject of numerous articles and books and national media coverage. Kate Kelly, a bestselling author and New York Times journalist, featured him as one of the two leading characters in her book, The Secret Club That Runs the World (2014), alongside fund manager Pierre Andurand.

Early life

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Ruggles was raised in Youngstown, Ohio. He is the son of a former U.S. Army sergeant who became a finance professor at Youngstown State University, and a mother who was an elementary school teacher and an artist.[10] Ruggles attended the University of Michigan at Ann Arbor and the University of Texas at Austin graduating with studies in physics, engineering, and business. He also served in the US Army.[11]

Career

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Ruggles began his early career in the energy industry, holding roles at Exxon, ConocoPhillips, and Trafigura before joining consulting firm McKinsey & Company.[12]

In 2011, Ruggles was recruited by Richard Anderson, the then-CEO of Delta Air Lines, to lead an initiative aimed at overhauling Delta's fuel procurement strategy. Anderson envisioned Delta's fuel operations functioning like a commodity trading house and hedge fund rather than a passive price-taker.[13] At the time, Delta was the world's largest fuel-consuming company and faced significant exposure to volatile oil prices.[14] Ruggles received a $1 million a signing bonus to take on Anderson's difficult task according to Kelly.[15]

Ruggles recruited a team of experienced energy and derivatives traders from Wall Street firms to join Epsilon Trading. Delta implemented advanced risk management systems, expanded risk limits, and built a trading desk for more than 20 traders.[16] Delta reported $420 million in derivatives trading profits in 2011 from Ruggles,[17][18] a stark contrast to previous years where it had lost up $80 million up to $1.4 billion through its hedging program by relying upon simplistic trading strategies.[19] Ruggles funded the bonus pool for 80,000 employees at Delta in 2011 by making a single purely speculative trade in the heating oil market that earned more than $100 million.[20][21][22]

Ruggles created Monroe Energy, acquiring the Trainer Refinery from ConocoPhillips for $180 million and invested over $100 million to bring the idled refinery back online.[23] Despite initial skepticism from business media, Monroe Energy became a success, with earnings reaching a peak of $1.2 billion for a single quarter in 2022.[24][25][26][27][28][29]

Ruggles left Delta at the end of 2012, and is now believed to be an owner of the North Atlantic Refinery in Canada.[30]

Controversy at Delta

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In 2014, CNBC broke the news that Ruggles was being investigated by the CFTC. In September 2016, Ruggles and the CFTC reached an out-of-court settlement regarding his trading activities during his tenure at Delta Air Lines.[31][32] Under the terms of the settlement, Ruggles agreed to pay $3 million in fines.[33] Ruggles did not admit to any wrongdoing and was not prosecuted criminally. He agreed to cease trading NYMEX energy futures for an indeterminate period. Delta Air Lines did not pursue any legal action against him.[34]

In the final settlement, Ruggles' wife, Ivonne Ruggles, was not implicated or sanctioned by the CFTC. Although some trades were executed in accounts registered in her name, the CFTC's focus remained solely on Jon Ruggles, with no penalties imposed on her.[35][36]

Impact

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The Ruggles case marked a shift in insider trading regulation in commodities markets.[37] Before the Dodd-Frank Act in 2010, the CFTC did not have regulatory power under Commodity Exchange Act (CEA) focusing only on insider misuse by CFTC personnel or individuals in exchanges under its oversight.[38] There were no broad, market-wide prohibitions on insider trading like those enforced by the SEC in securities markets.[39]

Harvard Law School's Forum on Corporate Governance noted:

"These cases (referring to Ruggles and one other at the time) mark a significant development in CEA enforcement. Historically, “insider trading” was not prohibited by the commodities laws. With the adoption of CEA Section 6(c)(1) and CFTC Regulation 180.1, the Commission now has broad-based authority to bring “insider trading” actions based on deceptive conduct, similar to the Securities and Exchange Commission’s (SEC’s) authority under Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. Nonetheless, the differences in trading between futures and securities make it unlikely that insider trading enforcement will become a centerpiece of the CFTC’s enforcement program as it is for the SEC’s."[40]

Ruggles' did not admit wrongdoing in his settlement with the CFTC was never prosecuted criminally.[41] The CFTC's other four test cases contemporary to Ruggles (including Bogucki) relying on Misappropriation Theory have resulted in two out-of-court settlements and two court-room losses. No Misappropriation Theory insider trading cases have been tried by the CFTC since 2019.[42][43]



References

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  1. ^ Kelly, Kate (2014). The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders (Paperback ed.). New York, NY USA: Penguin Random House. p. 13. ISBN 978-1-59184-546-1.
  2. ^ Heller, Matthew (June 14, 2016). "Ex-Delta Trader Fined for Commodities Manipulation". CFO Magazine.
  3. ^ Kelly, Kate (2014). The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders (Paperback ed.). New York, NY USA: Penguin Random House. p. 217. ISBN 978-1-59184-546-1.
  4. ^ "Ex-Airline Employee Sued by CFTC for Insider Trading of Futures Based on Misappropriated Information". Lexology.
  5. ^ "Misappropriation theory of insider trading". Cornell Law School. January 1, 2022.
  6. ^ "17 CFR Part 180 -- Prohibition Against Manipulation".
  7. ^ "CFTC Insider Trading Enforcement Efforts Increase: Implications for Private Fund Managers". Shulte Roth + Zabel. 2018.
  8. ^ "When Delta went gambling on jet fuel". Fortune Magazine. June 3, 2014.
  9. ^ Kelly, Kate (2014). The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders. New York: Penguin Random House. pp. 120, 206. ISBN 978-1-59184-546-1.
  10. ^ Kelly, Kate (2014). The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders. Portfolio/Penguin. p. 116. ISBN 978-1-59184-546-1.
  11. ^ Kelly, Kate (2014). The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders. New York, NY USA: Penguin Random House. pp. 115–116. ISBN 978-1-59184-546-1.
  12. ^ Kelly, Kate (2014). The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders. New York, NY USA: Penguin Random House. p. 106. ISBN 978-1-59184-546-1.
  13. ^ Kelly, Kate (2014). The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders. New York, NY USA: Penguin Random House. pp. 107–108. ISBN 978-1-59184-546-1.
  14. ^ Kelly, Kate (2014). The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders. New York, NY USA: Penguin Random House. pp. 107–111. ISBN 978-1-59184-546-1.
  15. ^ Kelly, Kate (2014). The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders. Penguin Random House. p. 108. ISBN 978-1-59184-546-1.
  16. ^ Kelly, Kate (2014). The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders. New York, NY USA: Penguin Random House. p. 115. ISBN 978-1-59184-546-1.
  17. ^ "DAL 12.31.2011 10K". www.sec.gov.
  18. ^ Kelly, Kate (2014). The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders. New York, NY USA: Penguin Random House. p. 123. ISBN 978-1-59184-546-1.
  19. ^ Kelly, Kate (2014). The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders. Portfolio. p. 111. ISBN 978-1-59184-546-1.
  20. ^ "Delta to Pay $264 Million in Profit Sharing to Employees" (Delta Letter from the CEO to Employees and Shareholders).
  21. ^ Kelly, Kate (2014). The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders. New York, NY USA: Penguin Random House. ISBN 978-1-59184-546-1.
  22. ^ "The Secret Club that Runs the World: Inside the Fraternity of Commodity Traders". The Financial Times.
  23. ^ "Delta's risky oil refinery bet". CNN - Money Magazine.
  24. ^ "Why Buying A Refinery Could Be A Disaster For Delta Air Lines (Even With JPMorgan's Help)". Forbes.
  25. ^ "Delta Air Lines' Oil Refinery Just Became Way More Valuable". Motley Fool.
  26. ^ "Delta Air Lines Bought an Oil Refinery. It Didn't Go as Planned". New York Times.
  27. ^ "Delta Belatedly Is Facing Up To Its One Big Mistake: Investing In An Oil Refinery". Forbes.
  28. ^ "Delta Reaps Fuel Savings From Refinery Ownership". Airline Weekly.
  29. ^ "Delta's Trainer Refinery Softens Blow of Rising Jet Fuel Prices". Delco.Today.
  30. ^ Antle, Rob (October 6, 2016). "Come By Chance refinery director ordered to pay US$5.25M for 'fraudulent' fuel trades at prior job". CBC.
  31. ^ "Commodity Futures Trading Commission Vs. Jon P. Ruggles" (PDF). CFTC. September 29, 2016.
  32. ^ "Delta executive Jon Ruggles fined $3 million in commodities trading scheme". CNBC.
  33. ^ "Delta executive Jon Ruggles fined $3 million in commodities trading scheme". CNBC. June 13, 2016.
  34. ^ "Former Delta executive settles CFTC trading case". CNBC.
  35. ^ "Satisfaction of Judgement". PACER Monitor.
  36. ^ "Former Delta Air Lines Trader Penalized $3.1 Million by NYMEX". Bloomberg.
  37. ^ "CFTC attacks insider trading in futures market". Cranes - Chicago Business.
  38. ^ "Commodity Exchange Act & Regulations | CFTC". www.cftc.gov.
  39. ^ "CFTC Year in Review and a Look Forward". Harvard Law School Review on Corporate Governance.
  40. ^ "CFTC Year in Review and a Look Forward". Harvard Law School Forum on Corporate Governance. February 4, 2017.
  41. ^ "Insider Trading in Commodities Markets: An Evolving Enforcement Priority" (PDF). Latham & Watkins. March 11, 2021.
  42. ^ "The Misguided Prosecution of Barclays FX Trader Robert Bogucki". 2019.
  43. ^ "Insider Trading in Commodities Markets: An Evolving Enforcement Priority - Number 2827" (PDF). Latham & Watkins.
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