Enron Origins
Senior Enron executives served hard jail time and shareholders lost $74 billion dollars during the 2001 collapse of the infamous energy trading giant. Enron’s crooked accounting ultimately wiped out more than $1.5 billion in retirement savings for firefighters, teachers, and others. Yet not everyone was left penniless, jobless or in prison. 27-year-old John Arnold, a star trader on Enron’s natural gas trading desk, who according to news reports, apparently made Enron $750 million in the year before bankruptcy. For his troubles, with “no accusations of wrongdoing attached to his name,” John Arnold received an $8 million dollar bonus, just days before Enron filed for bankruptcy.
With the backing of two other investors and his post-Enron bonus, Arnold and started a new hedge fund named Centaurus Energy in 2002. At its peak, Centaurus had about $6 billion under management. While his compensation varied on an annual basis, John Arnold personally received $1.5 billion in compensation in 2009. In 2012, at the age of 38, Arnold closed Centaurus Energy Master Fund. With an estimated net worth of $3.5 billion, the Laura and John Arnold Foundation was established as his philanthropic initiative in 2008.
In 2021, the most recent year Arnold’s tax filings were published, the foundation had $3.6 billion in total assets.
The New Tom Steyer?
Just like John Arnold, Tom Steyer went from running a hedge fund to leading a non-profit foundation. Steyer previously ran Farallon Capitol, the hedge fund he founded, for 26 years. In the process he made billions, investing in coal power plants s—despite his contrived public appeals for progressivism. Americans are fed up with billionaires, like Steyer and John Arnold telling them what to do when they previously made their billions doing the opposite.
Just like Arnold, Steyer will spend his personal fortune to win a policy debate.
The Arnold fund is flush with cash. For the 2021 tax year, the Laura and John Arnold Foundation reported its holdings as nearly $3.2 billion, up from around $2.16 billion for 2018. The increase in the Foundation’s wealth came largely from capital gains, dividends and interest on investments. Just over $200 million came from the Arnolds–$130 million of which was in the form of securities. By donating securities, the Arnolds get a tax deduction of the market value of those securities, and the Foundation can sell them at a later date without paying capital gains tax on any increase in value.
Even with the disclosure requirements for 501(c)(3) private foundations, Arnold has found ways to hide how the Foundation uses its money. For 2019, the Foundation reported that it transferred contributions to three controlled entities. Over $1.5 million was contributed to Cayman Islands-based TS Impact, Inc. Another Cayman Islands entity, Credit Opportunities Access Fund (International), LP, was paid distributions of over $1.5 million. A Texas-based investment fund called Hoffer Co-Invest, LP, which was registered in Delaware on June 20, 2013 under file number 5354874, received distributions of over $1 million.