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NEW: Loeffler’s Firm “Facilitated An Enron-Like Scandal” That Cost Georgians Millions More To Heat Their Homes

While Loffler Was Helping Run ICE, It Facilitated “Excessive Speculation” In Natural Gas Commodities That Caused Severe Inflation And Higher Gas Bills For Consumers

A new report from Mother Jones reveals that while unelected “political mega-donor,” pandemic profiteer, and richest senator Kelly Loeffler was an executive at Intercontinental Exchange (ICE), her company “provided a platform for highly speculative unregulated energy trading that ended up causing an Enron-like scandal and costing residents of Georgia millions of dollars.”

ICE allowed a “rapacious hedge fund” known as Amaranth Advisors to take advantage of the so-called “Enron loophole” and “manipulate prices” in natural gas commodities on its unregulated trading platform. While ICE “profited off Amaranth’s unregulated trading,” its “relative lack of oversight” on its platform eventually caused Amaranth to crash and shut down. According to a U.S. Senate investigation, the hedge fund’s “excessive speculation” inflated natural gas prices and caused Georgia families to pay $18 million more to heat their homes in one winter. 

When Loeffler left ICE to be appointed to the Senate, the company still run by her husband “changed compensation terms” to allow Loeffler to walk away with a hefty golden parachute, “transforming about-to-become-worthless securities into a seven-figure windfall.” Loeffler still owns up to $25 million in ICE stock.

This isn’t the only time Loeffler’s company has engaged in shady practices to boost its bottom line. ICE also “sought to profit off the pandemic’s impact on the housing market and the mortgage industry” while Loeffler was opposing additional emergency aid in the Senate for Georgia families on the verge of losing their homes due to the crisis. Loeffler also helped ICE market an offshore tax dodge for the world’s biggest banks after the Great Recession through a Cayman Islands subsidiary registered at “one of the most notorious locations for offshore tax shelters.” 

“Senator Loeffler owes Georgians an explanation for how she allowed her company’s unregulated corporate greed to run wild and leave Georgia families out in the cold,” said DSCC spokesperson Helen Kalla. “Kelly is for Kelly – and her toxic record of enriching herself at Georgians’ expense is exactly why they’ll vote her out in January.”

Mother Jones: How Kelly Loeffler’s Firm Facilitated an Enron-Like Scandal

By David Corn

Key Points:

  • At one point while Loeffler was helping to run ICE, the firm was involved in a financial controversy that was emblematic of the unrestrained corporate wheeling-and-dealing of the 2000s that led to the economic collapse of 2008. And Georgia homeowners paid a price.
  • In 2006, a giant hedge fund called Amaranth Advisors accumulated massive natural gas holdings on the New York Mercantile Exchange (NYMEX) and was dominating the natural gas market. It held up to 70 percent of natural gas commodities on the exchange and, consequently, was able to manipulate prices by buying or selling large chunks of its holdings. 
  • According to a subsequent Senate investigation, Amaranth’s moves “constituted excessive speculation” and “had a direct effect on U.S. natural gas prices and increased price volatility in the natural gas market.” 
  • In August of that year, NYMEX, concerned about Amaranth’s trading, directed the fund to reduce its natural gas positions. Amaranth did so on NYMEX, but it increased its natural gas holdings on an unregulated energy exchange run by ICE—Sprecher and Loeffler’s firm.
  • There were no trading limits on ICE’s exchange, and no routine government oversight. The Senate report pointed out that this loophole and the ability of an investor to shift to the market run by ICE impeded regulators’ “authority to detect, prevent, and punish market manipulation and excessive speculation.” 
  • But operating an unregulated exchange was good business for ICE. As CFTC commissioner Bart Chilton noted in 2007, the Enron loophole “helped foster the incredible growth of the Intercontinental Exchange.”
  • Amaranth’s natural gas skullduggery in 2006 went too far. During a sell-off, the firm ended up losing $6 billion and experienced a stunning crash. The firm had to shut down.
  • ICE publicly said this debacle wouldn’t hurt its own prospects, maintaining, “Amaranth‘s business is not individually material to ICE’s revenues.” But others incurred a cost. Partly due to Amaranth’s speculative trading on the unregulated ICE exchange, purchasers of natural gas that year were hit with inflated prices. “Many of these inflated costs were passed on to consumers, including residential users who paid higher home heating bills,” the Senate report found.
  • The Municipal Gas Authority of Georgia calculated that 243,000 of its customers collectively had to pay an extra $18 million in the winter of 2006 and 2007 because of Amaranth’s shenanigans
  • Those machinations were partly made possible by ICE, which profited off Amaranth’s unregulated trading. TheStreet.com reported, “It was the relative lack of oversight at the ICE that let Amaranth make the high-risk natural gas trades that ultimately turned sour, critics charge… [T]he ICE is exempt from reporting trading data for over-the-counter trades to regulators at the Commodities Futures Trading Commission. Critics say the loophole permitted Amaranth to aggressively add to its high-risk bet that natural gas prices would rise at a future date.” 
  • Naturally, ICE had previously opposed efforts to allow the CFTC to regulate its energy exchange—a move that might have prevented the steep rise in natural gas prices and the collapse of Amaranth. Such a reform, ICE stated in an annual report, “could require us and our participants to operate under heightened regulatory burdens and incur additional costs” and “deter some participants from trading on our…platform.” In other words, ICE would lose money if trading on its exchange was monitored to safeguard against the sort of speculation and abuse that occurred in the Amaranth case and that posed an estimated $9 billion cost to American families and consumers.
  • At the time of the Amaranth flame-out, Loeffler, serving as a spokesperson for the company, defended ICE, saying it was too soon to form any conclusions about the Amaranth implosion. “We think until there is more information, it’s not fair for anyone to guess what Amaranth may have been doing,” she said. “We believe we are only a small piece of the…market and certainly the most transparent piece.”
  • The Loeffler campaign did not respond to a request for a comment regarding this slice of her private sector experience. ICE, too, did not reply to a request for comment.

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