John D. Arnold

John Douglas Arnold (born 1974) is an American billionaire, former hedge fund manager, and former natural gas trader instrumental in the Enron scandal.[2] His firm, Centaurus Advisors, LLC, was a Houston-based hedge fund, composed of former Enron traders, that specialized in trading energy products.[3][4] Arnold announced his retirement from running the hedge fund on May 2, 2012.[5][6][7][8][9] Arnold now focuses on his political activism through Arnold Ventures LLC, and through Laura and John Arnold Foundation whose 2020 scheduled grant to finance Baltimore Police Department's military-grade surveillance hardware is subject to legal challenges by American Civil Liberties Union, based on unconstitutional infringement of privacy for all Baltimore city residents[10].

John D. Arnold
Born
John Douglas Arnold

1974 (age 45–46)
Dallas, Texas
Alma materVanderbilt University
OccupationPolitical activist, former Enron trader, former hedge fund manager
Net worth $ 3.3 billion (Nov 20, 2019)[1]
Spouse(s)Laura Muñoz
Children3

Early life

Arnold was raised in Dallas, Texas, and he was the younger of two sons. His mother later would work as an accountant at Arnold's Centaurus.[5][11] His father was a lawyer and died when Arnold was 17.[5][11] A 1995 graduate of Vanderbilt University, he completed a degree in mathematics and economics in only three years.[11] He is a member of Lambda Chi Alpha.[12]

Career

Enron

After college, he began his career at Enron as an oil analyst, but soon was promoted to assistant trader.[11] In 1996, he moved to the Natural Gas Desk upon the departure of Jeff Bussan,[13] trading natural gas derivatives.[11] Using their new Internet-based trading network, EnronOnline, he is credited with making three quarters of a billion dollars for Enron in 2001 and was rewarded with the largest bonus in Enron history, some $8 million, days before the company declared bankruptcy costing shareholders $74 billion.[11][14] His former colleagues dubbed him "king of natural gas."[15][16][17] (His brother, Matthew, also traded at Enron.)[5]

Centaurus

In the wake of the Enron scandal in 2002, he founded Centaurus with his previous year's bonus. According to Arnold, "After Enron collapsed, there was a general revaluation of credit risk among energy companies. The better credits were less willing to take on the lesser credits as counter parties. So the lesser credits found themselves with fewer counter parties willing to trade with them, even though they still needed to hedge the pricing risks in their business. Hedge funds previously had not been involved in the over-the-counter market, except for the very largest, because the other participants were reluctant to grant credit to that type of entity."[18]

During the collapse of Amaranth Advisors, Centaurus is widely credited as being one of the major players on the other side of their position, returning as much as 150% in 2005.[19]

At an energy conference, Arnold stated that he looks "to place bets on a market that he determines is 'biased'... we ask ourselves can we identify what is forcing a market to price a product at an unfair value, and then, what will push it back to fair value." Referring to the speculative trading taking place on the unregulated over-the-counter Intercontinental Exchange (ICE) and NYMEX's Clearport Trading, he said: "Trading never went away... what has changed is the non-commercial type of interest... because of this there has never been as much investor interest as there is today."[20]

During August 2008, Centaurus acquired around 10% of the shares of National Coal Corporation (NCOC).[21]

Arnold gave a public speech to the U.S. Commodity Futures Trading Commission (CFTC), in which he opposed limits on financially settled trading positions but supported limits in the physical energy futures as they near expiration. Arnold said, "I try to buy things whenever they're trading below what [our] analysis shows to be fair value and sell things whenever our analysis shows that the forward curve is higher than our analysis of fair value." [22][23][24]

Philanthropy
Main article: Arnold Ventures LLC

The Laura and John Arnold Foundation was a private foundation founded by Arnold and his wife Laura.[25][26] The organization was founded in 2008, the same year that the Arnolds signed the Giving Pledge, a pledge by some high-net-worth individuals to donate a large fraction of their income to philanthropic causes during their lifetimes.[27] In October 2018, it was reported that Arnold had spent more than $100 million in health-care related grants since 2014, with a particular focus on reducing pharmaceutical drug costs.[28] Arnold also has been an influential supporter of Democrats’ efforts to pass a drug-price reform bill.[29]

Since 2008, the foundation has invested more than $1 billion, ostensibly in the areas of pension reform, pretrial and criminal justice reform, prescription drug price reform, the quality of academic research, combating predatory higher education practices, the evaluation of social programs, school system governance reform, and electoral reform. However, the organization has also generated controversy with its algorithmic pretrial risk assessment tool that has been sued for potentially leading to at least two murders.[30][31] In 2016, the group funded allegedly unconstitutional[32] aerial surveillance of Baltimore's historic neighborhoods. [33]

In 2019, the organization was transformed into a limited-liability company composed of the former foundation, a donor-advised fund, and the Action Now Initiative advocacy organization - the new entity is known as Arnold Ventures LLC with the charter "to remove barriers between data and decisive action, working swiftly across the policy-change spectrum."[34]

Controversy

Arnold Ventures LLC is embroiled in controversy for "using a personal fortune to bend criminal justice and bail reform to one’s ideological worldview" by funding an pre-trial web tool that is designed to help decide whether bail is necessary and how much. The tool is "scored without personal interview of the alleged offender and excludes input from arresting officers, attorneys or judges."[35] The former foundation was sued over the initiative by the families of victims.[36]

John Arnold and his brother Matthew (who also worked at Enron)[37] have raised the ire of architectural conservationists for tearing down historical homes in the River Oaks neighborhood of Houston.[38]

Personal life

Arnold is married to Laura Elena (Muñoz) Arnold. She is co-founder of Arnold Ventures LLC. She is a graduate of Harvard College, Yale Law School, and has a Master of Philosophy degree in European Studies from the University of Cambridge.[39] She was formerly an attorney in Houston, Texas and an oil company executive. They have three children.[40]

References
  1. Forbes: The World's Billionaires - John Arnold 20 November 2019
  2. Apple, Sam (2017-01-23). "The Young Billionaire Behind the War on Bad Science". Wired. ISSN 1059-1028. Retrieved 2019-06-10.
  3. Ahmed, Azam (2012-05-03). "John Arnold Is Said to Close Hedge Fund and Return Investor Money". The New York Times. Retrieved 2013-10-08.
  4. Kumar, Nishant (2013-05-02). "Hedge fund Centaurus to return cash, shut Asia office: source". Reuters. Retrieved 2013-10-08.
  5. "When a billionaire trader loses his edge - The Term Sheet: Fortune's deals blogTerm Sheet". Finance.fortune.cnn.com. 2012-05-04. Archived from the original on 2013-09-20. Retrieved 2013-10-08.
  6. "Houston billionaire trader John Arnold retiring at 38 - Houston Chronicle". Chron.com. 2012-05-02. Retrieved 2013-10-08.
  7. Kate Kelly (2012-05-02). "Legendary Energy Trader John Arnold to Retire". Cnbc.com. Retrieved 2013-10-08.
  8. Kroll, Luisa. "Hedge Fund Billionaire John Arnold's Fund Was Up When He Announced He Was Getting Out". Forbes. Retrieved 2013-10-08.
  9. "Ex-Trader at Enron to Retire From Hedge Fund". Online.wsj.com. Retrieved 2013-10-08.
  10. https://theintercept.com/2020/04/09/baltimore-police-aerial-surveillance/
  11. New York Times: "CORPORATE CONDUCT: THE TRADER; Enron Trader Had a Year To Boast of, Even If..." By DAVID BARBOZA July 09, 2002
  12. "Lambda Chi Alpha - Notable Alumni". lambdachi.org. 2013-08-14. Archived from the original on 2014-08-15. Retrieved 2013-10-08.
  13. "A speculator who is in for the long haul". Financial Times. May 14, 2008.
  14. New York Times, "Energy Trading, Post-Enron", January 15, 2006
  15. "'King of Natural Gas' John Arnold retiring". MarketWatch. Retrieved 2013-10-08.
  16. Vardi, Nathan. "The King Of Natural Gas Quits". Forbes. Retrieved 2013-10-08.
  17. Demos, Telis (2009-11-24). "Centaurus's John Arnold: The king of natural gas - Nov. 24, 2009". Money.cnn.com. Archived from the original on 2013-12-13. Retrieved 2013-10-08.
  18. "Futures & Options Trading for Risk Management - CME Group". Nymex.com. Retrieved 2013-10-08.
  19. Tett, Gillian (2006-12-20). "Smart trades that made this a good year for some". FT.com. Retrieved 2013-10-08.
  20. "The Role of Market Speculation in Rising Oil and Gas Prices: A Need To Put The Cop Back On The Beat" (PDF). Hsgac.senate.gov. Retrieved 2013-10-08.
  21. Houston Business Journal, "Centaurus scoops up National Coal shares" August 29, 2008
  22. Demos, Telis (2009-11-24). "Centaurus's John Arnold: The king of natural gas - Nov. 24, 2009". Money.cnn.com. Retrieved 2013-10-08.
  23. "Energy Trading Mogul Warns on Trading Limits". The New York Times. 2009-08-05. Retrieved 2013-10-08.
  24. "John D. Arnold's CFTC (U.S. Commodity Futures Trading Commission) speech" (PDF). Cftc.gov. Retrieved 2013-10-08.
  25. Lev Facher, Lev, "How a billionaire couple greased the skids for Nancy Pelosi’s drug pricing bill, Stat News, November 26, 2019
  26. Apple, Sam (January 22, 2017). "The Young Billionaire Behind the War on Bad Science". Wired.
  27. Preston, Caroline (October 16, 2011). "A Thirtysomething Billionaire Couple Take on Tough Issues Via Giving". Chronicle of Philanthropy.
  28. Loftus, Peter (2018-10-21). "A Billionaire Pledges to Fight High Drug Prices, and the Industry Is Rattled". Wall Street Journal. ISSN 0099-9660. Retrieved 2018-10-21.
  29. Facher, Lev (2019-11-26). "How a Billionaire Couple Greased The Skids For Nancy Pelosi's Drug Pricing Bill". Stat News. ISSN 0099-9660. Retrieved 2019-11-26.
  30. Wing, Nick (2017-07-31). "Dog The Bounty Hunter Joins Lawsuit Against Chris Christie Over Bail Reform". HuffPost. Retrieved 2019-06-10.
  31. "Did A Bail Reform Algorithm Contribute To This San Francisco Man's Murder?". NPR.org. Retrieved 2019-06-10.
  32. Emmons, Alex (2020-04-09). "Lawsuit Aims to Stop Baltimore Police From Using War-Zone Surveillance System to Spy on Residents". The Intercept. Retrieved 2020-04-10.
  33. Broadwater, Kevin Rector, Luke. "Report of secret aerial surveillance by Baltimore police prompts questions, outrage". baltimoresun.com. Retrieved 2019-06-10.
  34. Candid. "Laura and John Arnold Foundation to Restructure as LLC". Philanthropy News Digest (PND). Retrieved 2019-06-10.
  35. Malhi, Sabrina (1 March 2020). "Bail reforms by liberal billionaires can create a public threat". TheHill.
  36. Wing, Nick. "Dog The Bounty Hunter Joins Lawsuit Against Chris Christie Over Bail Reform". Huffington Post. Retrieved 6 March 2020.
  37. Anspon, Catherine D (18 July 2017). "Storied Texas Mansion Completely Demolished: The Bulldozer Brings Down Houston's Greatest Architect". PaperCity Magazine.
  38. "Big and Modern on Lazy Lane: John Arnold Tries House Trading | Swamplot". swamplot.com.
  39. Baylor College of Medicine: "Laura Arnold named to BCM Board of Trustees" by Lori Williams September 26, 2008
  40. "Our Team | Laura and John Arnold Foundation". Arnoldfoundation.org. Archived from the original on 2015-02-08. Retrieved 2013-10-08.
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