UNITED STATES OF AMERICA

Before the

COMMODITY FUTURES TRADING COMMISSION

________________________________________________
)
In the matter of: ) CFTC DOCKET NO. _______
) ORDER INSTITUTING PROCEEDINGS PURSUANT TO SECTIONS 6(c), 6(d) AND 8a(4) OF THE COMMODITY EXCHANGE ACT AND FINDINGS AND ORDER IMPOSING REMEDIAL SANCTIONS

JAMES DEN HARTOG :

)
and : )

JAMES BAUMGARD, :

)

Respondents. :

)
________________________________________________ )

 

I.

The Commodity Futures Trading Commission ("Commission") has reason to believe that James Den Hartog ("Den Hartog") has violated Sections 4b(a)(i), 4b(a)(ii), 4b(a)(iii) and 4c(b) of the Act, 7 U.S.C. §§ 6b(a)(i), 6b(a)(ii), 6b(a)(iii) and 6c(b) (1994), and Regulations 33.10(a), (b) and (c), 17 C.F.R. §§ 33.10(a), (b) and (c) (1998) and that James Baumgard ("Baumgard") has violated Sections 4b(a)(i), 4b(a)(iii) and 4c(b) of the Act and Regulations 33.10(a) and (c). Therefore, the Commission deems it appropriate and in the public interest that public administrative proceedings be, and they hereby are, instituted to determine whether Den Hartog and Baumgard (collectively, "Respondents") engaged in the violations set forth herein and to determine whether any order should be issued imposing remedial sanctions.

II.

In anticipation of the institution of these administrative proceedings, Respondents have each submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Without admitting or denying the findings herein, Respondents each acknowledge service of this Order Instituting Proceedings Pursuant to Sections 6(c), 6(d) and 8a(4) of the Act and Findings and Order Imposing Remedial Sanctions ("Order"). Respondents each consent to the use of the findings contained in this Order in this proceeding and in any other proceeding brought by the Commission or to which the Commission is a party.1

III.

The Commission finds the following:

A. SUMMARY

Between December 1995 and June 1996, Den Hartog, the general manager of a cooperative grain elevator called Cooperative Elevator Association ("Cooperative"), engaged in unauthorized speculative trading that resulted in trading losses to the elevator of approximately $1 million. As part of his scheme, between at least February and June 1996, Den Hartog made or caused to be made false written statements that concealed the nature of the trading and the trading losses from Cooperative's Board of Directors ("Board"). It was not until June 16, 1996 that Den Hartog advised the president of the Board about his speculative trading losses.

By no later than April 23, 1996, Baumgard, the account executive for Cooperative's hedge account at FCC, knew that Den Hartog was engaged in speculative trading and had incurred trading losses that Den Hartog had failed to disclose to the Board. Nevertheless, during the next six weeks, Baumgard accepted orders from Den Hartog that he knew were unauthorized. Baumgard also recommended and assisted Den Hartog in implementing an options trading strategy in an attempt to reduce or limit Den Hartog's trading losses. He also failed to disclose to both his customer, Cooperative, and his supervisors at FCC that Den Hartog was engaging in speculative trading and concealing trading losses from Cooperative.

B. RESPONDENTS

1. James Den Hartog resides at 1608 Johnson Lane, Worthington, Minnesota 56187. He has never been registered with the Commission in any capacity. From November 1993 to June 1996, Den Hartog was the general manager of Cooperative, a cooperative commercial grain elevator located in Ocheyedan, Iowa.

2. James Baumgard resides at 16663 255th Avenue, Spirit Lake, Iowa 51360. Since September 22, 1989, Baumgard has been a registered associated person ("AP") of Farmers Commodities Corporation ("FCC"), a registered futures commission merchant ("FCM"), pursuant to Sections 4k(1) of the Act, 7 U.S.C. § 6k(1) (1994). Baumgard was the FCC account representative for the Cooperative hedge account at FCC from the date it first opened in December 1993 through at least June 16, 1996. He worked at a FCC branch office that during this time was first located in Jackson, Minnesota, and later in Spirit Lake, Iowa.

C. FACTS

1. Den Hartog's Fraud by Unauthorized Trading and Making False Statements

On December 6, 1993, the Board authorized Den Hartog to open a commodity trading account at FCC to hedge Cooperative's cash grain business risks. On or about December 23, 1993, Den Hartog opened a commodity trading account on behalf of Cooperative with FCC. In the FCC opening account documents, Den Hartog designated the Cooperative account as a commercial hedge account ("hedge account"). Den Hartog customarily placed the commodity futures ("futures") and options on futures ("options") orders for the hedge account with Baumgard.

Beginning in approximately December 1995 and continuing through June 1996, Den Hartog established and liquidated spread positions in corn futures in certain sub-accounts of the hedge account that did not hedge Cooperative's cash market risks and which were not authorized by the Board. Specifically, between December 11, 1995 and April 22, 1996, Den Hartog placed orders with FCC to sell and buy approximately 2.2 million bushels of corn futures at the Chicago Board of Trade ("CBT"). Den Hartog placed the resulting open spread positions in one of two separate sub-accounts of the hedge account, designated the 01 and 02 sub-accounts. Den Hartog did not establish those positions to hedge any of Cooperative's cash market risks.

Beginning in February 1996 and continuing through May 1996, Den Hartog willfully made or caused to be made false written statements in various Cooperative financial reports which concealed negative open trade equity and concealed realized trading losses resulting from his unauthorized trading. Den Hartog willfully presented some of these false or misleading statements to the Board in its monthly meetings in February, March, April and June of 1996.

2. Baumgard's Fraud by Accepting Unauthorized Orders

On or about April 23, 1996, Den Hartog told Baumgard he had incurred at least $1 million in trading losses, including significant losses trading in the 01 and 02 sub-accounts, and that he had been concealing these losses from the Board. As a result of this conversation, Baumgard knew that most, if not all, of the trades that Den Hartog had entered in the 01 and 02 sub-accounts were speculative in nature and not authorized by Cooperative's opening account documents with FCC. From April 23 through at least June 11, 1996, Baumgard continued to accept orders for corn futures and options on futures from Den Hartog for the hedge account, including orders for the 01 and 02 sub-accounts, which he knew were not authorized by the Board.

On or about April 24, 1996, Den Hartog sought advice from Baumgard about possible strategies to address his negative open trade equity in the 01 and 02 sub-accounts. Subsequently, Baumgard recommended an options trading strategy to reduce or limit the losses in the hedge account and assisted Den Hartog in implementing that strategy.

On April 25, 1996, as a result of Baumgard's advice, Den Hartog placed orders with Baumgard to sell 200,000 bushels of CBT December 1996 corn put options at a strike price of $3.00, buy 200,000 bushels of CBT July 1996 corn call options at a strike price of $4.80 and sell 200,000 bushels of CBT July 1996 corn call options at a strike price of $5.20. Den Hartog placed these option positions in the 02 sub-account. Den Hartog did not establish these option positions to hedge any of Cooperative's cash market risks.

3. Baumgard's Fraud by Failing to Disclose Den Hartog's Unauthorized Trading and Related Losses

Baumgard knew that his and his firm's customer, Cooperative, had authorized only hedge trading in the hedge account. Nevertheless, he never advised the Board that Den Hartog was engaging in unauthorized trading in the 01 and 02 sub-accounts or that Den Hartog was concealing substantial losses deriving from that trading. Nor did Baumgard advise his supervisors at FCC about these matters until sometime after June 16, 1996.

On or about June 16, 1996, Den Hartog first told the president of the Board about the trading losses in the 01 and 02 sub-accounts. The Board fired Den Hartog on June 25, 1996. Den Hartog's unauthorized trading described above resulted in realized losses of at least $1 million for Cooperative, excluding commissions and fees.

D. VIOLATIONS OF THE ACT AND COMMISSION REGULATIONS

1. Den Hartog Defrauded Cooperative by Engaging in Unauthorized Trading on Its Behalf 

Section 4b(a)(i) of the Act prohibits any person from cheating and defrauding any other person in connection with commodity futures trading for or on behalf of such other person. Section 4c(b) of the Act and Commission Regulation 33.10(a) prohibit any person from cheating and defrauding any other person in connection with commodity option transactions. Section 4b(a)(iii) prohibits willful deception of any other person in connection with commodity futures trading for or on behalf of such other person. Section 4c(b) of the Act and Commission Regulation 33.10(c) prohibit willful deception of any other person in connection with commodity option transactions.

As a general matter, unauthorized trading in violation of Section 4b(a) occurs when trades are executed without the customer's permission or contrary to the customer's trading instructions. In re Interstate Securities Corp., [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 25,295 at 38,955 (CFTC June 1, 1992); Cange v. Stotler Inc., 826 F.2d 581, 589 (7th Cir. 1987); Haltmeir v. CFTC, 554 F.2d 556, 560 (2d Cir. 1977). Speculative trading in an account intended only for hedge trading constitutes unauthorized trading for purposes of Section 4b of the Act. FDIC v. UMIC, Inc., 136 F.3d 1375, 1384 (10th Cir. 1998); Evanston Bank v. Conticommodity Services, Inc., 623 F. Supp. 1014, 1023-24 (N.D. Ill. 1985).

An employee who defrauds his employer in connection with a commodity transaction on behalf of the employer can be held liable for violating the anti-fraud provisions of Section 4b. Merrill Lynch Futures Inc. v. Kelly, 585 F. Supp. 1245, 1251-52, 1256-57 (S.D.N.Y. 1984) (in a proceeding to confirm an order of attachment, a clerk with Merrill Lynch Futures, Inc., who allegedly participated in a scheme to defraud by accepting certain losing out trades in his employer's error account, was properly charged with violating Section 4b). Here, Den Hartog made unauthorized trades on behalf of another person, i.e., his employer, Cooperative, and thus is liable for violations of Sections 4b(a)(i), 4b(a)(iii) and 4c(b) of the Act, and Commission Regulations 33.10(a) and (c). See also Heinold Commodities, Inc. v. Elliot, [1986-1987 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 23,566 at 33,482 (N.D. Ill. Mar. 30, 1987) (FCM stated a valid claim of fraudulent trade allocation under Section 4b of the Act against a company and its principal employee who was hired by the FCM to manage one of its branch offices).

2. Den Hartog Defrauded Cooperative by Making False Reports and Statements

Willfully issuing false statements to another regarding the status of their commodity trading account violates Section 4b(a)(ii) of the Act. SeeCFTC v. Skorupskas, 605 F. Supp. 923, 933 (E.D. Mich. 1985). Den Hartog willfully made or caused to be made false written reports or statements in violation of Sections 4b(a)(ii) and 4c(b) of the Act and Commission Regulation 33.10(b) by creating false reports that concealed the unauthorized trading losses, some of which were provided to the Board.

3. Baumgard Committed Fraud by Knowingly Accepting Unauthorized Orders

An AP engages in unauthorized trading when the AP accepts orders on behalf of a customer from an unauthorized trader or accepts orders that the AP knows are contrary to instructions from the customer. Interstate, ¶ 25,295 at 38,955; Sansom Refining Company v. Drexel Burnham Lambert Inc., [1986-1987 Transfer Binder] Comm. Fut. L. Rep. (CCH)
¶ 23,796 at 34,108 n.10 (CFTC July 20, 1987), aff'd but remanded on other grounds sub nom., Drexel Burnham Lambert Inc. v. CFTC, 850 F.2d 742 (D.C. Cir. 1988), aff'd sub nom., Sansom Refining Company v. Drexel Burnham Lambert Inc., [1987-1990 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 24,596 (CFTC Feb. 16, 1990). More specifically, a broker who willfully accepts speculative trades for a customer's hedge account engages in unauthorized trading. See UMIC, 136 F.3d at 1384 (employee of an introducing broker violated Section 4b by, among other things, recommending and accepting orders for speculative trades on behalf of a savings and loan's hedge account). Here, Baumgard knew that Den Hartog was acting contrary to the instructions of the customer, Cooperative, and yet he accepted the improper orders from Den Hartog. Therefore, Baumgard violated Sections 4b(a)(i), 4b(a)(iii) and 4c(b) of the Act and Commission Regulations 33.10(a) and (c).

4. Baumgard Committed Fraud by Breaching His Duty to Advise His Customer of Obvious Dangers to Its Financial Interests

An AP also has a duty to disclose to a customer obvious dangers to its financial interests and a willful failure to meet this duty or even reckless disregard thereof constitutes a violation of Section 4b. See Drexel Burnham Lambert Inc. v. CFTC, 850 F.2d 742, 748 (D.C. Cir. 1988) (broker's willful disregard of whether he was accepting orders in accordance with his client's instructions constituted a reckless inattention to obvious dangers to a client's interests and violated Section 4b); Do v. Lind-Waldock & Company, [1994-1996 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 26,516 at 43,321 (CFTC Sept. 27, 1995) (Commission applied the standard from Drexel that "reckless inattention to obvious dangers to a client interests" triggers Section 4b liability and found that a broker's failure to cancel an order as instructed by a client because he assumed it already had been executed met the "reckless inattention" standard and constituted fraud). In this case, Baumgard knew that Den Hartog was engaged in unauthorized trading and had concealed the trading losses, but failed to disclose these obvious financial dangers to his customer, Cooperative. Consequently, Baumgard is liable for violations of Sections 4b(a)(i), 4b(a)(iii) and 4c(b) of the Act, and Commission Regulations 33.10(a) and (c).

IV.

OFFERS OF SETTLEMENT

Respondents have submitted the Offers, in which, without admitting or denying the findings herein, they: (1) admit the jurisdiction of the Commission with respect to the matters set forth herein; (2) waive notice of hearing, a hearing, all post-hearing procedures, judicial review by any court, any objection to the staff's participation in the Commission's consideration of the Offers, all claims which they may possess under the Equal Access to Justice Act, 5 U.S.C. § 504 (1994) and 28 U.S.C. § 2412 (1994), as amended by Pub. L. No. 104-121, §§ 231-32, 110 Stat. 862-63, and Part 148 of the Commission's Regulations, 17 C.F.R. §§ 148.1, et seq., relating to or arising from this action, and any claim of Double Jeopardy based upon institution of this proceeding or the entry of any order imposing a civil penalty or any other relief; (3) stipulate that the record basis on which the Order may be entered shall consist solely of the Order and findings in the Order consented to in the Offers; and (4) consent to the Commission's issuance of this Order, which makes findings as set forth below and orders each of them to: (a) cease and desist from violating the provisions of the Act and Regulations that each has been found to have violated; (b) pay a civil monetary penalty as set forth below; and (c) comply with their respective undertakings as set forth below in Sections VI.4 and VI.10.

In addition, Den Hartog consents to a prohibition from directly or indirectly trading on or subject to the rules of any contract market on behalf of himself or others, except that Den Hartog is permitted to engage in bona fide hedging, as defined by Commission Regulation 1.3(z), to hedge price risks associated with his business as a hog breeder. Baumgard consents to a suspension of his registration as an AP for sixty days and to conditions and restrictions to his registration as an AP after the sixty-day suspension as described below in Section VI.9.

V.

FINDINGS OF VIOLATIONS

Solely on the basis of the consents evidenced by the Offers, and without any adjudication on the merits, the Commission finds that Den Hartog violated Sections 4b(a)(i), 4b(a)(ii), 4b(a)(iii) and 4c(b) of the Act, 7 U.S.C. §§ 6b(a)(i), 6b(a)(ii), 6b(a)(iii) and 6c(b) (1994), and Regulations 33.10(a), (b) and (c), 17 C.F.R. §§ 33.10(a), (b) and (c) (1998); and that Baumgard violated Sections 4b(a)(i), 4b(a)(iii) and 4c(b) of the Act, and Regulations 33.10(a) and (c).

VI.

ORDER

Accordingly, it is hereby ordered that:

DEN HARTOG

1. Den Hartog shall cease and desist from further violations of Sections 4b(a)(i), 4b(a)(ii), 4b(a)(iii) and 4c(b) of the Act, 7 U.S.C. §§ 6b(a)(i), 6b(a)(ii), 6b(a)(iii) and 6c(b) (1994), and Regulations 33.10(a), (b) and (c), 17 C.F.R. §§ 33.10(a), (b) and (c) (1998).

2. Den Hartog shall pay a civil monetary penalty in the amount of Ten Thousand Dollars ($10,000) within five (5) business days of the date of the Order and make such payment by electronic funds transfer to the account of the Commission at the United States Treasury or by certified check or bank cashier's check made payable to the Commodity Futures Trading Commission and addressed to Dennese Posey, Division of Trading and Markets, Commodity Futures Trading Commission, 1155 21st Street, N.W., Washington, D.C. 20581 under cover of a letter that identifies Den Hartog and the name and docket number of this proceeding. A copy of the cover letter and of the form of payment shall be simultaneously transmitted to Phyllis J. Cela, Acting Director, Division of Enforcement, Commodity Futures Trading Commission, 1155 21st Street, N.W., Washington, D.C. 20581.

3. Den Hartog is prohibited from directly or indirectly trading on or subject to the rules of any contract market on behalf of himself or others and all contract markets shall refuse him all trading privileges thereon, except that Den Hartog is permitted to engage in bona fide hedging, as defined by Commission Regulation 1.3(z), to hedge price risks associated with his business as a hog breeder.

4. Den Hartog is directed to comply with his undertakings:

A. never to apply for registration or seek exemption from registration with the Commission in any capacity and never to engage in any activity requiring such registration or exemption from registration, or act as a principal, agent or officer of any person registered, exempt from registration or required to be registered with the Commission;

B. to cooperate fully with the staff of the Commission in this proceeding and in such further investigations and other proceedings as the Commission or its staff shall determine to pursue with regard to the factual matters discussed in the Order, by, among other things: (1) responding promptly, completely, and truthfully to any inquiries or requests for information; (2) providing authentication of documents; (3) providing staff complete and truthful information in response to any inquiries they may have, including providing complete and truthful signed written statements upon request; (4) preparing for testimony and testifying completely and truthfully; and (5) not asserting privileges under the Fifth Amendment of the United States Constitution in connection with any information or testimony he is asked to provide; and

C. not to take any action or make any public statement denying, directly or indirectly, any finding in the Order or finding or allegation in any related Commission proceeding or creating, or tending to create, the impression that the Order or any related Commission proceeding is without a factual basis; provided, however, that nothing in this provision affects: (i) Den Hartog's testimonial obligations; or (ii) his right to take contrary factual or legal positions in any proceedings to which the Commission is not a party. Den Hartog understands and agrees that the Commission's acceptance of this Offer is conditioned upon his compliance with this agreement in statements made by him and by agents acting under his authority or control.

5. Den Hartog has acknowledged that the Commission's decision not to impose a higher civil monetary penalty is conditioned upon the accuracy and completeness of his representations in his Financial Disclosure Statement (CFTC Form 177) and other representations concerning his financial condition. Den Hartog consents that, if at any time following the entry of the Order, the Division of Enforcement obtains information indicating that his representations in his Financial Disclosure Statement and other representations concerning his financial condition were fraudulent, misleading, inaccurate, or incomplete in any material respect at the time they were made, the Division of Enforcement may, at any time following entry of the Order, petition the Commission to: (1) reopen this matter to consider whether Den Hartog provided accurate and complete financial information at the time such representations were made; (2) determine the amount of additional civil monetary penalty to be imposed; and (3) seek additional remedies that the Commission would be authorized to impose in this proceeding if Den Hartog's offer had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Den Hartog was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of additional civil monetary penalty to be imposed, and whether any additional remedies should be imposed. Den Hartog may not, by way of defense to any such petition, contest the validity of, or findings in, the Order, or assert that payment of a civil monetary penalty should not be ordered.

BAUMGARD

6. Baumgard shall cease and desist from further violations of Sections 4b(a)(i), 4b(a)(iii) and 4c(b) of the Act, 7 U.S.C. §§ 6b(a)(i), 6b(a)(iii) and 6c(b) (1994), and Regulations 33.10(a) and (c), 17 C.F.R. §§ 33.10(a) and (c) (1998).

7. Baumgard shall pay a civil monetary penalty in the amount of Twenty-Five Thousand Dollars ($25,000) within five (5) business days of the date of the Order and make such payment by electronic funds transfer to the account of the Commission at the United States Treasury or by certified check or bank cashier's check made payable to the Commodity Futures Trading Commission and addressed to Dennese Posey, Division of Trading and Markets, Commodity Futures Trading Commission, 1155 21st Street, N.W., Washington, D.C. 20581 under cover of a letter that identifies Baumgard and the name and docket number of this proceeding. A copy of the cover letter and of the form of payment shall be simultaneously transmitted to Phyllis Cela, Acting Director, Division of Enforcement, Commodity Futures Trading Commission, 1155 21st Street, N.W., Washington, D.C. 20581. If Baumgard fail to pay the full amount of this penalty within fifteen (15) business days of the date of the Order, pursuant to Section 6(e)(2) of the Act, Baumgard shall be automatically prohibited from trading on or subject to the rules of any contract market, and all contract markets shall refuse them trading privileges, and Baumgard's registration as an AP shall be automatically suspended until Baumgard shows to the satisfaction of the Commission that payment of the full amount of the penalty with interest thereon to the date of payment has been made.

8. Baumgard's registration as an AP is suspended for sixty days.

9. After the sixty-day suspension is concluded, Baumgard's registration as an AP is conditioned and restricted as follows:

a. Baumgard may not act as an AP pursuant to Section 4k of the Act, and as defined under Regulation 1.3(aa), unless his activities are subject to a Supplemental Sponsor Certification Statement ("SSCS") in the form attached hereto, executed and submitted to the Commission by a designated principal of the Commission registrant that employs him ("Sponsor"). Immediately upon the Sponsor's ceasing to serve as Baumgard's employer, Baumgard shall stop acting as an AP until his activities are once again subject to a SSCS in the form attached hereto, executed and submitted to the Commission by a qualified sponsor;

b. Baumgard must be supervised by a designated principal of the Sponsor who shall be a Commission registrant ("Supervisor");

c. The Supervisor shall review at least on a weekly basis, and monitor generally, all transaction slips, including office orders, for all customer orders received by Baumgard. The Sponsor shall maintain a written record of these weekly evaluations and immediately confer with Baumgard if the Sponsor has any questions or concerns;

d. The Sponsor shall maintain a separate file of all correspondence and memoranda of telephone calls concerning problems, complaints, disputes or claims arising from or related to Baumgard's handling of any customer account;

e. The Supervisor shall discuss monthly with Baumgard in person at Baumgard's office any questions, problems, complaints, disputes or claims of which the Sponsor is aware arising from or related to Baumgard's handling of any customer account. The Sponsor shall maintain a written record of these monthly conferences with Baumgard;

f. The Supervisor shall send letters on a quarterly basis to Baumgard's customers, including one addressed to an officer of a corporate customer or customer organized as a cooperative, requesting that such customers review their account statements and confirm that all transactions during the previous quarter were authorized by the customer. The Sponsor shall maintain a written record of these quarterly letters and the responses received from the customers;

g. The Sponsor shall make all the letters and records that Sponsor maintains pursuant to paragraphs (c) through (f) above available to inspection by the Commission or the National Futures Association ("NFA");

h. Baumgard shall not directly or indirectly act in any supervisory capacity over anyone required to be registered with the Commission;

i. Baumgard shall not serve on any disciplinary committee, arbitration panel, oversight panel or governing board of any self-regulatory organization subject to regulation by the Commission ("SRO");

j. Baumgard shall not directly or indirectly act as a principal, partner, branch manager or officer of any entity registered or required to be registered with the Commission;

k. Baumgard's registration shall be automatically suspended if he is charged with any violation of the Act, Commission regulations, NFA rules or requirements, SRO rules, the terms of the Order or a disciplinary offense as defined in Commission Regulation 1.63(a)(6), except that, as to offenses defined in Regulation 1.63(a)(6)(i) (C), suspension shall occur if fines aggregating $5,000 or more are imposed during the period of these conditions rather than during a calendar year;

l. If Baumgard's registration is automatically suspended pursuant to the preceding subparagraph, the period of suspension shall terminate six months after the date of the suspension, unless the Commission files within that period a Notice of Intent to Revoke or Restrict Registration, pursuant to Commission Regulation 3.60(a); and

m. The conditions set forth in this paragraph VI.-9 shall remain in effect until two years and sixty days after the date of the Order.

10. Baumgard is directed to comply with his undertakings:

a. to comply with his agreement with Farmers Commodities Corporation to pay it Seventy-Five Thousand dollars ($75,000) in connection with his conduct this case;

b. to cooperate fully with the staff of the Commission in this proceeding and in such further investigations and other proceedings as the Commission or its staff shall determine to pursue with regard to the factual matters discussed in the Order, by, among other things: (1) responding promptly, completely, and truthfully to any inquiries or requests for information; (2) providing authentication of documents; (3) providing staff complete and truthful information in response to any inquiries they may have, including providing complete and truthful signed written statements upon request; (4) preparing for testimony and testifying completely and truthfully; and (5) not asserting privileges under the Fifth Amendment of the United States Constitution in connection with any information or testimony he is asked to provide; and

C. not to take any action or make any public statement denying, directly or indirectly, any finding in the Order or finding or allegation in any related Commission proceeding or creating, or tending to create, the impression that the Order or any related Commission proceeding is without a factual basis; provided, however, that nothing in this provision affects: (i) Baumgard's testimonial obligations; or (ii) his right to take contrary factual or legal positions in any proceedings to which the Commission is not a party. Baumgard understands and agrees that the Commission's acceptance of this Offer is conditioned upon his compliance with this agreement in statements made by him and by agents acting under his authority or control.

A copy of this Order shall be served upon each Respondent and upon the NFA and all contract markets.

By the Commission.

                                                                                        __________________________________

                                                                                        Jean A. Webb
                                                                                        Secretary to the Commission
                                                                                        Commodity Futures Trading Commission

Dated: ____________________

 

1 Respondents do not consent to this use of their respective Offers or the findings in this Order, consented to in their Offers, as the sole basis for any other proceeding brought by the Commission, other than a proceeding brought to enforce the terms of this Order. Respondents also do not consent to the use of their Offers or the findings in the Order by any other person or entity in this or in any other proceeding. The findings made in the Order are not binding on any other person or entity named as a defendant or respondent in this or any other proceeding.