Hillary Clinton cattle futures controversy
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In 1978 and 1979,
lawyer A lawyer is a person who practices law. The role of a lawyer varies greatly across different legal jurisdictions. A lawyer can be classified as an advocate, attorney, barrister, canon lawyer, civil law notary, counsel, counselor, solic ...
and First Lady of Arkansas
Hillary Rodham Clinton Hillary Diane Rodham Clinton ( Rodham; born October 26, 1947) is an American politician, diplomat, and former lawyer who served as the 67th United States Secretary of State for President Barack Obama from 2009 to 2013, as a United States senat ...
engaged in a series of trades of cattle futures contracts. Her initial $1,000 investment had generated nearly $100,000 (), when she stopped trading after ten months. In 1994, after Clinton had become
First Lady of the United States The first lady of the United States (FLOTUS) is the title held by the hostess of the White House, usually the wife of the president of the United States, concurrent with the president's term in office. Although the first lady's role has never ...
, the trading became the subject of considerable controversy regarding the likelihood of such a spectacular rate of return, possible
conflict of interest A conflict of interest (COI) is a situation in which a person or organization is involved in multiple interests, financial or otherwise, and serving one interest could involve working against another. Typically, this relates to situations i ...
, and allegations of disguised
bribery Bribery is the Offer and acceptance, offering, Gift, giving, Offer and acceptance, receiving, or Solicitation, soliciting of any item of value to influence the actions of an official, or other person, in charge of a public or legal duty. With reg ...
.
Claudia Rosett Claudia Rosett is an American writer and journalist. A former staff writer for ''The Wall Street Journal'', she writes a foreign affairs column for ''Forbes'', blogs for PJ Media, makes guest appearances on television and radio, and is attached to ...

"Hillary's Bull Market"
'' The Wall Street Journal'', October 26, 2000. Accessed July 14, 2007.
It was suspected by commentators that the profits were in fact allocations to her of profits from unrelated large block trades managed by her investment advisor
James Blair James Blair may refer to: *James Blair (Australian judge) (1870–1944), Australian judge, lawyer, and politician *James Blair (cricketer) (1900–1961), Australian-born New Zealand cricketer * James Blair (farmer) (1825–1901), Scottish-born farm ...
, outside counsel to Tyson Foods, Arkansas' largest employer, in an attempt to gain influence with her husband Bill Clinton, then
Attorney General of Arkansas The Attorney General of Arkansas, usually known simply as the Attorney General (AG), is one of Arkansas's seven constitutional officers. The officeholder serves as the state's top law enforcement officer and consumer advocate. Since January 1 ...
.


Background and Clinton's trading

Clinton had no experience in such financial instruments. Bill Clinton's salary as Arkansas Attorney General and then
Governor of Arkansas A governor is an administrative leader and head of a polity or political region, ranking under the head of state and in some cases, such as governors-general, as the head of state's official representative. Depending on the type of political r ...
was modest and Clinton later said she had been interested in building a financial cushion for the future. pp. 86–87. pp. 134–138. The Clintons' combined income in 1978 from the governorship and Rose Law Firm amounted to $51,173, .
James Blair James Blair may refer to: *James Blair (Australian judge) (1870–1944), Australian judge, lawyer, and politician *James Blair (cricketer) (1900–1961), Australian-born New Zealand cricketer * James Blair (farmer) (1825–1901), Scottish-born farm ...
was a friend, lawyer, outside counsel to Tyson Foods, Arkansas' largest employer, and had been doing so well trading commodities futures that he encouraged friends and family to enter the market too., pp. 73–76. Blair in turn traded through, and relied upon cattle markets expertise from broker Robert L. "Red" Bone of Refco, a former Tyson executive. In October 1978, when Bill Clinton was Attorney General and on the verge of being elected Governor, Clinton opened a trading account, although Blair made most of the trades. By January 1979, Clinton was up $26,000; but later, she would lose $16,000 in a single trade. At one point she owed in excess of $100,000 to Refco as part of covering losses, but no margin calls were made by Refco against her. Near the end of her trading, Blair correctly predicted a market downturn and sold short, giving her a $40,000 gain in one afternoon. In July 1979, once she became pregnant with
Chelsea Clinton Chelsea Victoria Clinton (born February 27, 1980) is an American writer and global health advocate. She is the only child of former U.S. President Bill Clinton and former U.S. Secretary of State and 2016 presidential candidate Hillary Clinton ...
, "I lost my nerve for gambling ndwalked away from the table $100,000 ahead." She briefly traded
sugar Sugar is the generic name for sweet-tasting, soluble carbohydrates, many of which are used in food. Simple sugars, also called monosaccharides, include glucose, fructose, and galactose. Compound sugars, also called disaccharides or double ...
futures contracts and other non-cattle commodities in October 1979, but more conservatively, through Stephens Inc. During this period she made about $6,500 in gains, which she failed to pay taxes on at the time, consequently later paying some $14,600 in federal and state tax penalties in the 1990s.Bill Montague; Kevin Johnson
"Commodities trading saga: Pieces still missing"
'' USA Today'', April 25, 1994. Accessed December 14, 2012.
Once her daughter was born in February 1980, she moved all her commodities gains into
U.S. Treasury Bonds United States Treasury securities, also called Treasuries or Treasurys, are government debt instruments issued by the United States Department of the Treasury to finance government spending as an alternative to taxation. Since 2012, U.S. go ...
.


Media scrutiny

The profits made during the cattle trading first came to public light in a March 18, 1994 report by '' The New York Times'', which had been reviewing the Clintons' financial records for two months. Jeff Gerth
" Top Arkansas Lawyer Helped Hillary Clinton Turn Big Profit"
'' The New York Times'', March 18, 1994. On March 28, 1994, Securities Week, a McGraw-Hill Companies publication, published an article outlining the repeated regulatory violations committed by her broker, Red Bone, which resulted in greater scrutiny and questions not only about how much money she had made in the markets, but how she had made it. Accessed July 14, 2007.
It coincided with the beginning of congressional hearings over the Whitewater controversy. Bob Herbert
"The Circus That Is Whitewater"
'' The New York Times'', March 20, 1994. Accessed April 6, 2008.
Clinton initially told aides that she had made the futures gains by studying the financial news and placing trades herself, but later acknowledged the help of Blair. Media pressure continued to build, and on April 22, 1994, she gave an unusual press conference under a portrait of Abraham Lincoln in the
State Dining Room The State Dining Room is the larger of two dining rooms on the State Floor of the Executive Residence of the White House, the home of the president of the United States in Washington, D.C. It is used for receptions, luncheons, larger formal dinne ...
of the White House, to address questions on both matters; it was broadcast live by CBS, NBC,
ABC ABC are the first three letters of the Latin script known as the alphabet. ABC or abc may also refer to: Arts, entertainment, and media Broadcasting * American Broadcasting Company, a commercial U.S. TV broadcaster ** Disney–ABC Television ...
, and CNN. Gwen Ifill
"Hillary Clinton Takes Questions on Whitewater"
'' The New York Times'', April 23, 1994. Accessed July 15, 2007.
In it she said she had done the trading, but often relying upon the advice of Blair, and having him place orders for her; she said she did not believe she had received preferential treatment in the process. She also downplayed the dangers of such trading: "I didn't think it was that big a risk.
lair Lair may refer to: __NOTOC__ * Secret lair * Lair, Kentucky * ''Lair'' (novel), a 1979 novel by James Herbert * ''Lair'' (video game), a 2007 video game * ''The Lair'', 2007-2008 American gay-themed vampire television series * The Lair (Dreamworld ...
and the people he was talking with knew what they were doing."


Likelihood of results

Various publications sought to analyze the likelihood of Clinton's successful results. Clinton made her money by betting mostly on a market downturn at a time when cattle prices actually doubled. The editor of the '' Journal of Futures Markets'' said in April 1994, "This is like buying ice skates one day and entering the Olympics a day later. She took some extraordinary risks."Mark Hosenball, Rich Thomas, and
Eleanor Clift Eleanor Irene Clift ('' née'' Roeloffs; born July 7, 1940) is an American political journalist, television pundit, and author. She is a contributor to MSNBC and blogger for ''The Daily Beast''. She is best known as a regular panelist on ''The ...

"Hillary's Adventures In Cattle Futures Land"
'' Newsweek'', April 11, 1994. Accessed March 2, 2009.
Her activities involved exposure to losses that could have been greater than her family's net worth if the market had turned sharply against her. The former head of the IRS chief counsel’s Commodities Industry Specialization Team expressed skepticism that a novice trader could make such a return. One analysis performed by
Auburn University Auburn University (AU or Auburn) is a public land-grant research university in Auburn, Alabama. With more than 24,600 undergraduate students and a total enrollment of more than 30,000 with 1,330 faculty members, Auburn is the second largest uni ...
and published in the Journal of Economics and Finance claimed to find that the odds of a return as large as Clinton obtained during the period in question were about one in 31 trillion.


Merc and Melamed investigations

Chicago Mercantile Exchange The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is a global derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board, an a ...
records indicated that $40,000 of her profits came from larger trades initiated by James Blair. According to exchange records, "Red" Bone, the commodities broker that facilitated the trades on behalf of Refco, reportedly because Blair was a good client, allowed Clinton to maintain her positions even though she did not have enough money in her account to cover her activity. For example, she was allowed to order 10 cattle futures contracts, normally a $12,000 investment, in her first commodity trade in 1978 although she had only $1,000 in her account at the time.Charles R. Babcock
"Hillary Clinton Futures Trades Detailed"
'' The Washington Post'', May 27, 1994. Accessed July 14, 2007.
Bone denied any wrongdoing in conjunction with Clinton's trading and said he did not recall ever dealing with Clinton personally. As it happened, during the period of Clinton's trading, Refco was under investigation by the Mercantile Exchange for systematic violations of its
margin Margin may refer to: Physical or graphical edges *Margin (typography), the white space that surrounds the content of a page *Continental margin, the zone of the ocean floor that separates the thin oceanic crust from thick continental crust *Leaf ...
trading rules and reporting requirements regarding cattle trading. In December 1979, the exchange issued a three-year suspension to Bone and a $250,000 fine of Refco (at the time, the largest such penalty imposed by the exchange). After the Clinton trading matter became public,
Leo Melamed Leo Melamed (born March 20, 1932) is an American attorney, finance executive, and a pioneer of financial futures. He is the chairman emeritus of CME Group (formerly the Chicago Mercantile Exchange). Personal life Melamed was born Leibel Melamdo ...
, a former chairman of the Mercantile Exchange, was brought in by request of the White House to review the trading records. On April 11, 1994, he said that the whole matter was "a tempest in a teapot" and that while her brokers had not required her to provide typical margin cushions, she had not knowingly benefited. Gwen Ifill
" Hillary Clinton Didn't Report $6,498 Profit In Commodities Account, White House Says"
'' The New York Times'', April 12, 1994. Accessed July 15, 2007.
On May 26, 1994, after the new records concerning the larger Blair trades came to light, he said "I have no reason to change my original assessment. Mrs. Clinton violated no rules in the course of her transactions." But as to the question of whether she had been allocated profits from larger block trades, he said of the new accounting, "It doesn't suggest that there was allocation, and it doesn't prove there wasn't,"Stephen Engelberg
"New Records Outline Favor for Hillary Clinton on Trades"
'' The New York Times'', May 27, 1994. Accessed July 15, 2007.
an assessment of uncertainty shared by
Merton Miller Merton Howard Miller (May 16, 1923 – June 3, 2000) was an American economist, and the co-author of the Modigliani–Miller theorem (1958), which proposed the irrelevance of debt-equity structure. He shared the Nobel Memorial Prize in Economic ...
, a Nobel Prize-winning economist at the University of Chicago Graduate School of Business.


Clinton responses

Hillary Clinton's defenders, including White House Counsel
Lloyd Cutler Lloyd Norton Cutler (November 10, 1917 – May 8, 2005) was an American attorney who served as White House Counsel during the Democratic administrations of Presidents Jimmy Carter and Bill Clinton. Early life and education Cutler was born ...
, maintained throughout that she had made her own decisions, that her own money was constantly at risk, and that she made both winning and losing trades throughout the ten months." No One Bribed Anyone in Clinton Trading"
Lloyd Cutler Lloyd Norton Cutler (November 10, 1917 – May 8, 2005) was an American attorney who served as White House Counsel during the Democratic administrations of Presidents Jimmy Carter and Bill Clinton. Early life and education Cutler was born ...
(letter to the editor), '' The New York Times'', June 3, 1994. Accessed July 15, 2007.
Regarding suggestions that Blair had favored Clinton so that Tyson Foods could gain influence with Governor Clinton, they pointed out that CEO Don Tyson, who had in 1978 endorsed Clinton, in 1980 endorsed Frank D. White, Clinton's opponent in his reelection bid. Tyson denied any knowledge of Blair's trading partnership with Clinton. The ''New York Times'' noted, however, that notwithstanding Hillary Clinton's "artful explanation", the commodities trading had ended over a year before the 1980 election and that Tyson had switched sides after Bill Clinton did not lobby the state legislature to increase the weight limit on trucks, although Tyson believed that he had received such a promise from him at the time of the 1978 election. Clinton's defenders also stressed that Blair and others stayed in the market longer than Clinton and lost much of what they had previously earned, showing that the risk was real. Indeed, some reports had Blair losing $15 million Roger Morris, ''Partners in Power: The Clintons and Their America''.
Henry Holt Henry Holt may refer to: *Henry Holt (North Dakota politician) (1887–1944), lieutenant governor *Henry Holt (publisher) (1840–1926), American publisher and author **Henry Holt and Company, Holt's publishing company *Henry E. Holt (born 1929), ...
, 1996. , p. 233.
and Bone was reported as bankrupt.


Official findings

There never was any official governmental investigation into, or findings about, or charges brought regarding Hillary Rodham's cattle futures trading.


References

{{DEFAULTSORT:Cattle Futures Controversy Hillary Clinton controversies Clinton administration controversies Futures markets