John Douglas Arnold is an American billionaire, former hedge fund manager, and former natural gas trader instrumental in the Enron scandal. His firm, Centaurus Advisors, LLC, was a Houston-based hedge fund, composed of former Enron traders, that specialized in trading energy products. Arnold announced his retirement from running the hedge fund on May 2, 2012. 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.
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. His father was a lawyer and died when Arnold was 17. A 1995 graduate of Vanderbilt University, he completed a degree in mathematics and economics in only three years. He is a member of Lambda Chi Alpha.
Career
Enron
After college, he began his career at Enron as an oil analyst, but soon was promoted to assistant trader. In 1996, he moved to the Natural Gas Desk upon the departure of Jeff Bussan, trading natural gas derivatives. 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. His former colleagues dubbed him "king of natural gas."
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." 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. 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 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." During August 2008, Centaurus acquired around 10% of the shares of National Coal Corporation. Arnold gave a public speech to the U.S. Commodity Futures Trading Commission, 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 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."
Philanthropy
The Laura and John Arnold Foundation was a private foundation founded by Arnold and his wife Laura. 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. 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. Arnold also has been an influential supporter of Democrats’ efforts to pass a drug-price reform bill. 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. In 2016, the group funded allegedly unconstitutional aerial surveillance of Baltimore's historic neighborhoods. 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."
Controversy
is embroiled in controversy for "using a personal fortune to bend criminal justice and bail reform to one’s ideological worldview" by funding a 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." The former foundation was sued over the initiative by the families of victims. John Arnold and his brother Matthew have raised the ire of architectural conservationists for tearing down historical homes in the River Oaks neighborhood of Houston.
