For Release: March 18, 2008
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today that it has filed an administrative enforcement action alleging that Rockland P. McMahan, a cattle order buyer in Austin, Texas, violated federal commodity laws by reporting knowingly inaccurate and misleading information regarding a purchase of feeder cattle to the United States Department of Agriculture (USDA), failing to produce to the CFTC adequate records regarding the purported sale, and delivering to the CFTC false, misleading, and/or knowingly inaccurate responses to routine inquiries and in reports or documents required to be filed with the CFTC under the Commodity Exchange Act.
“Feeder cattle” are young steers that are sent to feedlots for finishing into “fed” or “fat” cattle that, in turn, are sent to packers for slaughter. An “order buyer” of feeder cattle buys and sells feeder cattle and calves to and from ranchers and feedlots as a middleman.
According to the complaint, a USDA market price reporter in Amarillo, Texas, contacted McMahan every week, seeking information about cattle purchases and sales for inclusion in the USDA’s weekly cash market feeder cattle report. In late October 2004, McMahan allegedly told the USDA price reporter that he had purchased 1,800 head of feeder steers weighing an average 725 pounds. As alleged, the USDA included McMahan’s reported purchase in its weekly cash market feeder cattle report, which is used as a source of market information by producers, consumers, and distributors in the sale and purchase of, among other things, livestock, meat, and grain. The complaint further alleges that the Chicago Mercantile Exchange (CME) incorporated McMahan’s reported purchase to the USDA in its calculation of the CME Feeder Cattle Index to which the CME’s feeder cattle futures contract cash settles.
As stated in the complaint, McMahan did not purchase or have a bona fide agreement to purchase any feeder steers weighing between 700 and 849 pounds— the required weight under the CME specifications for inclusion in the CME feeder cattle futures contract— and, thus, his direct report to the USDA, and indirect report to the CME, was false.
While performing market surveillance, CFTC staff questioned McMahan about the cattle he had reported purchasing. The complaint states that McMahan was not forthright in responding to the special call for information. According to the complaint, McMahan did not advise the CFTC that he had really purchased a mixed load of 1,829 heifers and 930 steers weighing 900 pounds. As a result, the complaint charges that McMahan violated federal commodity laws and regulations requiring the production of cash market and other records upon request, and provided false, misleading or knowingly inaccurate information to the CFTC.
The Commission would like to thank the CME’s Market Regulation Department for its assistance in the investigation.
The following Division of Enforcement staff are responsible for this action: David A. Terrell, Scott R. Williamson, Rosemary Hollinger and Richard Wagner. Hugh Rooney from the Commission’s Division of Clearing and Intermediary Oversight and William Kokontis and Duane Schambach from the Division of Market Oversight, Market Surveillance Branch also assisted.
Last Updated: March 18, 2008