The Industrial Energy Consumers of America (IECA) told members of Congress last Thursday that ethical questions have been raised by CFTC Chairman James E. Newsome’s decision to resign from the agency in order to become the new president of the New York Mercantile Exchange (Nymex), which is regulated by the Commodity Futures Trading Commission (CFTC).
In a letter to Sens. Thad Cochran (R-MS) and Tom Harkin (D-IA) and Reps. Bob Goodlatte (R-VA) and Charles Stenholm (D-TX), the IECA requested immediate congressional action establishing a one-year time period from when top government officials from agencies with energy market enforcement responsibilities can take jobs with the organizations that their agency oversees.
“As consumers, we not only request, but demand that government officials not be placed in a position of temptation by the prospect of moving quickly into a high paying position with the organizations that they are to monitor and regulate,” said IECA Executive Director Paul N. Cicio. “Who is protecting the interests of the public?
“The ability of top government officials who have responsibility for overseeing a business organization one day and leave the next day to accept a lucrative job with that same organization raises serious integrity and ethics questions,” Cicio said.
He also said Newsome is not the first CFTC commissioner to do this. At least one other commissioner was hired by Nymex and another former CFTC chairman, Wendy Gramm, wife of former Texas Senator Phil Gramm, was elected to Enron’s board of directors. “This same commissioner was a strong proponent of the Commodities Futures Modernization Act of 2000 (CFMA), which had the specific impact of excluding Enron from CFTC oversight. This is a disconcerting and ethically appalling pattern,” said Cicio.
Newsome also has been a strong proponent of CFMA, which Cicio indicated has been at least partly responsible for increased energy price volatility on the exchange.
In announcing Newsome’s new job at the exchange, Nymex Chairman Mitchell Steinhause lauded him for guiding the implementation of the CFMA during a period of unprecedented futures volume growth in the industry. “He demonstrated by far the most forward-thinking, pro-business stance of any CFTC chairman,” said Steinhause. “We expect him to add a great deal of value through his insight into the international marketplace, his strategic planning skills, and his thorough understanding of our industry.”
Cicio noted that the volatility of energy futures contracts has sky-rocketed since 2000 while agricultural commodities, which were excluded from CFMA, have not. “And, the Nymex natural gas futures contract is the most volatile commodity in the world,” Cicio said. “Volatility is bad for consumers but good for Nymex.
“Nymex and the Enrons of the world operate in a multi billion dollar market so the temptations for personal gain, and thus abuse, are tremendous. Even though James Newsome is leaving the CFTC, he will still have strong relationships with the CFTC. Our fear is that these relationships could prove more advantageous to the Nymex than to the public that the CFTC is supposed to serve.”
Cicio noted that many companies require their top executives to sign agreements that prevent them from working directly for competitors, recruiting employees or sharing corporate secrets. “We should expect more from our government officials, not less.”
Newsome was not available late last week to comment, but a spokeswoman from Nymex said that once he becomes the Nymex president he will be prohibited for a year from “dealing with issues related to the CFTC.”
“He wouldn’t be meeting with the CFTC about us having a new product or something like that,” said Nymex spokeswoman Nachamah Jacobovits. “And as soon as he started talking with us he notified the ethics officer of the CFTC that he was in discussions with us and obviously could not be involved in any discussions of matters related to Nymex.
“We are very proud of the fact that many of our staff members formerly worked for the CFTC, including our general counsel and one of our previous presidents,” Jacobovits said.
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