IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MINNESOTA

_______________________________________________________
)
COMMODITY FUTURES TRADING COMMISSION, ) Civil Action No. 00-207/RHK/SRN
Plaintiff, )
)

vs.

)
)
PENSION AMERICA, INC., FUTURES PROFIT ) COMPLAINT FOR INJUNCTIVE AND

MAKING, LLC, SELECTIVE FUTURES

) AND OTHER EQUITABLE RELIEF
MANAGEMENT, LLC, SPECIALIZED COMMODITY ) AND FOR CIVIL MONETARY
COMMODITY TIMING, LLC, COMMODITY ) PENALTIES UNDER THE
TIMING SPECIALISTS, LLC, EDWARD ) COMMODITY EXCHANGE ACT
STEVENSON KIRRIS III, LEONARD G. NAUMAN )
D/B/A NAUMANADVISORY SERVICES and )
WILLIAM RELF, )
)

Defendants.

)
)
KIDZ FIRST INTERNATIONAL, INC., )
)

Relief Defendant.

)
_______________________________________________________ )


I.

SUMMARY

1. For at least three years, from approximately April 1997 through the present (the "relevant time"), Defendants Pension America, Inc. ("PAI"), Futures Profit Making, LLC ("FPM"), Selective Futures Management, LLC ("SFM"), Specialized Commodity Timing, LLC ("SCT"), Commodity Timing Specialists ("CTS"), Edward Stevenson Kirris, III ("Kirris"), Leonard G. Nauman d/b/a Nauman Advisory Services ("Nauman"), and William J. Relf ("Relf") (collectively, the "Defendants") have solicited, accepted and pooled more than $600,000 from approximately 36 commodity pool participants ("investors"), mostly in the Minneapolis and Brainerd, Minnesota areas, for the purported purpose of trading commodity futures.

2. During the relevant time, PAI, FPM, SFM, SCT, CTS, Kirris, Nauman and Relf, without the benefit of registration with the Commodity Futures Trading Commission ("Commission"), committed fraud by misappropriating investors' funds intended for futures trading to their personal use, misappropriating some of the newer investors' funds to make returns of principal and purported profits to earlier investors, in a manner akin to a Ponzi scheme, making misrepresentations of material facts to investors and prospective investors and issuing false commodity statements to investors, in connection with the Defendants' operation of four commodity pools, the FPM, SFM, SCT and CTS pools. Defendants also commingled investor funds and failed to provide required disclosure documents and to obtain signed acknowledgements of receipt of disclosure documents from investors. Thus, Defendants have engaged, are engaging, and are about to engage in acts and practices which constitute violations of Sections 4b(a)(i) and (iii), 4b(a)(ii), 4m(1), 4n(4) and 4o(1) of the Commodity Exchange Act, as amended ("Act"), 7U.S.C. 6b(a)(i) and (iii), 6b(a)(ii), 6m(1), 6n(4) and 6o(1) (1994), and Regulations 4.20(c), 4.21 and 4.22 promulgated thereunder, 17 C.F.R. 4.20(c), 4.21 and 4.22 (2000).

3. During the relevant time, Nauman owned and operated a company called Kidz First International, Inc. ("KFI"), which purportedly manufactures, markets and sells bicycle seats for children. At various times during the past three years, Nauman transferred pool investor funds, without their knowledge or consent, to bank and futures trading accounts in KFI's name.

4. Accordingly, pursuant to Section 6c of the Act, 7 U.S.C. 13a-1 (1994), the plaintiff, Commission, brings this action to enjoin such acts and practices, and to compel compliance with the provisions of the Act and Regulations. In addition, the Commission seeks an accounting, disgorgement, rescission, restitution, civil monetary penalties, the appointment of an equity receiver and such other equitable relief as the Court may deem necessary or appropriate under the circumstances.

5. Unless restrained and enjoined by this Court, the Defendants are likely to continue to engage in the acts and practices alleged in this Complaint and in similar acts and practices, as more fully described below.

II.

JURISDICTION AND VENUE

6. This Court has jurisdiction over this action pursuant to Section 6c of the Act, 7U.S.C. 13a-1, which authorizes the Commission to seek injunctive relief against any person whenever it shall appear to the Commission that such person has engaged, is engaging, or is about to engage in any act or practice constituting a violation of any provision of the Act or any rule, regulation or order thereunder.

7. Venue properly lies with this Court pursuant to Section 6c of the Act, 7 U.S.C. 13a-1(e), in that the Defendants are found in, inhabit, or transact business in this district, and the acts and practices in violation of the Act have occurred, are occurring, or are about to occur within this district.

III.

THE PARTIES

8. Plaintiff Commodity Futures Trading Commission is an independent federal regulatory agency charged with the responsibility for administering and enforcing the provisions of the Act, 7 U.S.C. 1 et seq. (1994), and the Regulations promulgated thereunder, 17 C.F.R. 1 et seq. (2000).

9. Defendant Pension America, Inc. is a Minnesota corporation incorporated in 1989. Its address was 5251 West 73rd Street, Suite A, Edina, MN 55439, until April 2000. Its office is now located at 6180 Olsen Memorial Highway, Golden Valley, MN 55422. It operates commodity pools and has been listed in futures commission merchant ("FCM") account opening documents as the holding company for at least two commodity pools, SCT and CTS. PAI has never been registered with the Commission in any capacity.

10. Defendant Futures Profit Making, LLC is a limited liability company formed exclusively for the purpose of operating a commodity pool. At all relevant times, FPM has shared office space with PAI. FPM has never been registered with the Commission in any capacity.

11. Defendant Selective Futures Management, LLC is a limited liability company formed exclusively for the purpose of operating a commodity pool. Until November 1999, SFM shared office space with PAI and FPM. Its office is now located at Kirris' home, 824 West 3rd Street, Red Wing, MN 55066. SFM has never been registered with the Commission in any capacity.

12. Defendant Specialized Commodity Timing, LLC is a limited liability company formed exclusively for the purpose of operating a commodity pool. Until November 1999, SCT shared office space with PAI, SFM and FPM. Its office is now located at Relf's home, 772 Holden Lane, Hudson, Wisconsin 55406. SCT has never been registered with the Commission in any capacity.

13. Defendant Commodity Timing Specialists is a limited liability company formed exclusively for the purpose of operating a commodity pool. Until November 1999, CTS shared office space with PAI, FPM, SFM and SCT. It is now located at 3 Dellwood Lane, St. Paul, MN 55128. CTS has never been registered with the Commission in any capacity.

14. Defendant Edward Stevenson Kirris III, whose address is 824 West 3rd Street Red Wing, MN 55066, was vice president of PAI until January 19, 2000 when Nauman terminated his employment. He controls and operates the SFM, SCT and CTS pools. Kirris was registered as an associated person of Dean Witter Reynolds, Inc. from September 4, 1985 until May 2, 1989. Kirris is not currently registered with the Commission in any capacity.

15. Defendant Leonard G. Nauman d/b/a Nauman Advisory Services, whose address is 1020 Quebec Avenue North, Golden Valley, MN 55427, is president and chief executive officer of PAI. He is listed on FCM account opening documents as the manager or authorized trader for the SFM, FPM and SCT pools and is the president of KFI. Nauman has never been registered with the Commission in any capacity.

16. Defendant William J. Relf, whose address is 772 Holden Lane, Hudson, Wisconsin 53406, controls and operates the SCT pool. Relf has never been registered with the Commission in any capacity.

17. Relief Defendant Kidz First International, Inc. is a Minnesota corporation incorporated in 1993. At all relevant times, KFI maintained office space at PAI. It allegedly manufactures and markets bicycle seats for children. Nauman is the president and CEO of KFI. KFI has never been registered with the Commission in any capacity.

IV.

FACTS

Pension America, Inc. (PAI)

18. Nauman started PAI in 1989 and at all relevant times served as its president and CEO. In 1992, Nauman hired Kirris as the vice president of the company, supervised and coordinated Kirris' activities with respect to PAI, FPM, SFM, SCT and CTS, and eventually fired him in January 2000. Nauman also hired Relf in January 1999, and supervised, directed and controlled him with respect to his involvement in PAI and the four pools from January 1999 through November 1999.

19. In 1997, Nauman and Kirris began operating the FPM and SFM commodity pools out of the PAI office and in 1999, Nauman, Kirris and Relf began operating the SCT and CTS pools out of the PAI office. They prepared and signed correspondence and statements on PAI letterhead, which they sent to investors regarding their accounts from PAI's office.

20. Until November 1999, all statements from the FCMs where trading accounts were maintained for the four commodity pools were mailed to PAI's office. In November 1999, Kirris and Relf took over operation of the SFM, SCT and CTS pools and began to operate the pools out of their homes.

The Futures Profit Making Pool (FPM)

21. During the relevant time, Kirris and Nauman, in person and through the mail, solicited, accepted and pooled approximately $90,000 from at least 9 investors for investment in the FPM pool. Kirris solicited the investors and Nauman made all trading decisions and placed all trades for the FPM pool.

22. Kirris and Nauman received personal checks and wire transfers in person and through the mail, intended for investment in the FPM pool. Kirris and Nauman commingled these funds with funds of other entities they owned and operated.

23. Kirris and Nauman falsely represented to FPM investors that they were successful commodity traders who regularly made profitable returns of up to 30% annually, and promised prospective investors such profitable returns. In fact, Kirris and Nauman were not successful commodity traders, had little experience trading commodity futures and lost or misappropriated the funds they invested in the FPM trading accounts.

24. Kirris and Nauman downplayed the risks of futures trading to FPM investors, falsely representing that they could limit risks by their method of trading. At no time did Kirris or Nauman deliver or cause to be delivered to FPM pool investors or prospective investors a Risk Disclosure or other written document discussing the risks of commodity futures trading, as required by Commission Regulation 4.21.

25. Kirris and Nauman represented to FPM pool investors that all of their funds would be used to trade commodity futures and that they would receive no fees or commissions for trading the FPM pool. They told some investors that they would split any profits the FPM pool earned with investors on a fifty-fifty basis. They told other investors that the first 25% return that the FPM pool earned in a year would go to the FPM investors. Kirris and Nauman would split the next 25% of the profits that the FPM pool earned for the year with investors and would take all of the profits after the FPM pool earned a 50% return for the year.

26. Nauman opened up two trading accounts in the name of FPM at an FCM in March 1997 and May 1998, respectively. He deposited $6,000 in one account, lost $5,847 trading and withdrew the remaining balance, $152.97 in March 1999. He deposited approximately $50,100 into the other account, earned a net profit of approximately $5,900 from trading and withdrew a total of approximately $56,000 from the account in three installments in September and October 1998 and January 1999.

27. By March 1999, both of FPM's trading accounts had a $0 balance. Nauman and Kirris did not provide investors with copies of the account statements they received from the FCM and did not inform investors that there was no money in FPM's trading accounts as of March 1999.

28. From January 1999 through at least January 2000, Nauman periodically prepared, signed and mailed account statements to FPM investors purporting to show the status of their investments. These account statements falsely stated that profits, in the range of at least 25% to 30% annually, had been generated from futures trading and that the FPM account never had a losing month. The claims of profitable trading were false and Nauman knew them to be false at the time he made them.

29. Nauman intended the false representations of profits he made to investors for the FPM pool to solicit new funds and to discourage withdrawals by current investors.

30. Nauman misappropriated some of the FPM pool investors' funds for his own personal use. Of the approximately $90,000 Kirris and Nauman received for the FPM pool, they deposited approximately $56,000 in commodity trading accounts, earned a total net profit of approximately $50 trading and withdrew a total of approximately $56,000 from the trading accounts from September 1998 through January 1999. Nauman used funds in FPM's name to purchase a tract of land near Ladysmith, Wisconsin in 1998, valued at approximately $30,000 - $40,000, and two automobiles, valued at approximately $20,000, for his personal use. Although Nauman purchased the tract of land and the two automobiles in FPM's name, none of the FPM investors authorized or consented to use of their investment in FPM for these purposes.

The Selective Futures Management Pool (SFM)

31. During the relevant time, Kirris solicited, accepted and pooled at least $221,000 from at least 12 pool investors for the purpose of trading commodity futures in the SFM pool.

32. Kirris and Nauman received personal checks and wire transfers in person and through the mail, intended for investment in the SFM pool. Kirris and Nauman commingled investor funds with funds of other entities they owned and operated.

33. Kirris solicited all the investors for the SFM pool. He falsely represented to investors that he was a successful commodity trader who regularly made profitable returns of up to 30% annually, and promised prospective investors such profitable returns. Kirris was not a successful commodity trader, had little futures trading experience and lost the funds invested in the SFM trading accounts.

34. Kirris downplayed the risks of futures trading to SFM investors, falsely representing that Kirris and Nauman could limit risks by their method of trading. At no time did Kirris deliver or cause to be delivered to SFM investors or prospective investors a Risk Disclosure Document or other written document discussing the risks of commodity futures trading, as required by Commission Regulation 4.21.

35. During the relevant time, Kirris represented to prospective and current SFM investors that all of their funds would be and were used to trade commodity futures and that if they invested with him they would not lose any money. Kirris represented to SFM investors that he received no fees or commissions for trading the SFM pool. He told investors that the first 25% return that the SFM pool earned in a year would go to the SFM investors. Kirris would split the next 25% of the profits that the SFM pool earned for the year with investors and would take all of the profits after the SFM pool earned a 50% return for the year. Kirris did not adhere to this. Kirris and Nauman withdrew funds from the SFM trading accounts for personal and company operating expenses regardless of trading profits.

36. Kirris opened up two accounts in the name of SFM at a registered FCM in April 1997 and April 1998, respectively. In the summer of 1997, Nauman took over making the trading decisions and placing all trades for the SFM pool and continued to do so until November 1999. At the time Nauman took over trading for SFM, neither Kirris nor Nauman disclosed that fact to SFM investors.

37. Kirris and Nauman misappropriated some of the SFM investors' funds. Of the $221,000 received for the SFM pool, Kirris and Nauman deposited $216,908 in two trading accounts at FCMs, lost $37,578 trading, and withdrew $179,330. They deposited $154,800 of the funds they withdrew in a checking account in the name of SFM at a bank in Red Wing, Minnesota and paid it to Nauman, purportedly as a loan, for his personal use through a series of checks signed by Kirris drawn on this account in 1998 and 1999. Nauman and Kirris knew that the funds provided to Nauman for his personal use were those of SFM pool investors. Nauman deposited some of these funds into a bank account in the name of PAI, then deposited them into a bank account in the name of KFI and subsequently transferred them into trading accounts at several FCMs in the name of KFI. He eventually lost all but $746.16 of the $154,800 through futures trading. SFM investors were not made aware of the "loans" until the beginning of the year 2000, and did not consent to or authorize the loan of the SFM pool funds to Nauman. To date, Nauman has not repaid the money.

38. Kirris misappropriated some of the funds from more recent SFM investors to make returns of principal and purported profits to some of the earlier investors, in a manner akin to a Ponzi scheme. Kirris informed SFM investors who requested their money back that he could not pay them until he solicited new individuals to invest in the pool.

39. From July 1999 through January 2000, Kirris periodically prepared and mailed account statements to some SFM investors who requested them. These account statements falsely reported that SFM had generated profits from futures trading in the range of 13% - 27% annually. The account statements also overstated the value of each investor's share of the pool. Kirris also orally confirmed to several SFM investors the purported profitability of the futures trading reflected in the written statements. Kirris knew that his written and oral representations were false at the time he made them.

40. Kirris did not provide SFM investors with the profit and loss statements that he received from the FCMs carrying the SFM pool accounts, and he did not inform investors that there was no money in SFM's trading accounts as of May 31, 1999.

41. Kirris intended the false representations of profits he made to investors in the SFM pool to solicit new funds from prospective investors and current investors and to discourage withdrawals by current investors.

Specialized Commodity Timing (SCT) and Commodity Timing Specialist (CTS) Pools

42. During the relevant time, Kirris and Relf solicited, accepted and pooled at least $200,000 from at least seven investors for the SCT pool and approximately $113,500 from at least eight investors for the CTS pool.

43. Kirris, Nauman and Relf received personal checks and wire transfers in person and through the mail, intended for investment in the SCT and CTS pools. Kirris and Nauman commingled these funds with funds of other entities they owned and operated.

44. Kirris and Relf falsely represented to SCT and CTS investors that they and Nauman were successful commodity traders who regularly made profitable returns of up to 40% annually. Kirris and Relf also promised prospective investors such profitable returns. Kirris, Nauman and Relf were not successful commodity traders. At the time they made these misrepresentations, they had already lost or misappropriated all funds deposited in the FPM and SFM pools' trading accounts. They eventually lost most of the funds invested in the SCT and CTS pools' trading accounts through their futures trading. As with the other pools, Kirris and Relf downplayed the risks of futures trading to SCT and CTS pool investors, representing that they and Nauman could limit risks by their method of trading. Kirris and Relf did not provide investors with a Risk Disclosure Document or any other writing that discussed the risks of commodity futures trading, although such was required by Commission Regulation 4.21.

45. Kirris and Relf represented to SCT and CTS investors that all of their funds would be used to trade commodity futures, and that neither they nor Nauman would receive any fees or commissions for trading the pools. Rather, they described to investors the same arrangement that existed for the other pools whereby profits would be shared. Kirris, Nauman and Relf did not adhere to this. Instead, Kirris, Nauman and Relf withdrew funds from the SCT and CTS trading accounts for personal and company operating expenses regardless of trading profits.

46. Kirris represented to some SCT and CTS pool investors that he made all the trading decisions and placed all trades for the SCT and CTS pools when, in fact, he did not. Nauman made the trading decisions and placed all trades for the SCT and CTS pools from January 1999, when the SCT pool started, through November 1999. In November 1999, Kirris and Relf took over operation of the SCT and CTS pools, and since that time Kirris has made the trading decisions and placed all trades for the SCT and CTS pools.

47. Kirris, Nauman and Relf periodically prepared and mailed account statements to SCT and CTS investors purporting to show the status of their investments. These statements did not uniformly report the same trading results to all investors. Some of these account statements falsely stated that profits, in the range of 25% - 27% annually, had been generated from futures trading and overstated the value of each investor's share of the pool. Other statements showed trading losses, but did not accurately reflect the losses that SCT and CTS had suffered. All of these statements were false and Kirris, Nauman and Relf knew them to be false at the time they made them. Kirris, Nauman and Relf did not provide SCT and CTS investors with profit and loss statements they received from the FCM carrying the SCT and CTS trading accounts.

48. Kirris, Nauman and Relf intended the false representations of profits they made to investors for the SCT and CTS pools to solicit new funds and to discourage withdrawals by current investors.

Defendants' Claims Of Exemption From Registration With The Commission

49. On or about March 26, 1997, Nauman drafted and signed a letter for the FPM pool stating that FPM was not required to register with the Commission as a CPO because, pursuant to Commission Regulation 4.13(a)(2), the total gross capital contributions it received for all of the pools it operated did not exceed $200,000 and none of the pools it operated had more than fifteen participants. Nauman provided the letter to the Commission and FPM pool investors.

50. On or about April 15, 1997, Nauman drafted and Kirris signed a letter for the SFM pool stating that SFM was not required to register with the Commission as a CPO, similar to the letter filed for the FPM pool. Nauman and Kirris provided the letter to the Commission and SFM pool investors.

51. On or about December 21, 1998, Nauman drafted and Relf signed a letter for the SCT pool and on or about February 2, 1999, Nauman drafted a letter for the CTS pool. The letters claimed exemption from the Commission's CPO registration requirement. Nauman and Relf provided the letters to the Commission and SCT and CTS pool investors.

52. None of the pools were exempt from registration with the Commission because PAI, Nauman, Kirris and Relf operated the FPM, SFM, SCT and CTS pools at the same time, and the pools had total gross capital contributions of over $600,000 and a total of 36 investors. The SFM pool itself had total gross capital contributions of over $200,000.

Relief Defendant Kidz First International, Inc. (KFI)

53. In 1989, Nauman started KFI, which he incorporated in 1993.

54. From 1997 through the present, Nauman transferred at least $18,000 directly from pool bank accounts into trading and bank accounts under the name of KFI. During this time period, Nauman transferred at least another $150,000 indirectly from the pools to KFI, mostly through PAI.

55. KFI has not repaid the pools.

Recent Activity

56. In March and April 2000, Nauman solicited investors to invest in KFI. Kirris and Relf informed SCT and CTS investors that in August 2000 they solicited an investor who invested $95,000 in the SCT and CTS pools. Kirris and Relf have also recently asked investors if they know of anyone else who would be interested in investing in SCT and CTS.

57. Earlier this year, SCT and CTS investors requested their money back. Relf and Kirris asked them not to withdraw their money and promised them that they would earn a significant return on their investment through Kirris' commodity futures trading. In fact, since May 2000, the SCT and CTS accounts have consistently lost money.

V.

VIOLATIONS OF THE COMMODITY EXCHANGE
ACT AND REGULATIONS THEREUNDER

COUNT I

VIOLATIONS OF SECTION 4b(a)(i) and (iii) OF THE ACT:
FRAUD BY MISAPPROPRIATION AND MISREPRESENTATIONS

58. Paragraphs 1 through 57 are realleged and incorporated herein.

59. During the relevant time, Kirris, Nauman and Relf violated Section 4b(a)(i) and (iii) of the Act, 7U.S.C. 6b(a)(i) and (iii) (1994), in that they cheated or defrauded or attempted to cheat or defraud investors or prospective investors in the pools and willfully deceived or attempted to deceive the investors or prospective investors in the pools by: misappropriating funds received from investors for personal expenses, to make "loans" to Nauman and to use to pay earlier investors, as in a Ponzi scheme; misrepresenting to investors that all their funds were going to be used to trade commodity futures when they were not; misrepresenting their prior trading success to potential investors and promising them profitable trading while claiming to be able to limit risks; misrepresenting to investors the profits and the value of each investor's share of the pools; and sending letters to investors and the Commission misrepresenting that they were exempt from registration with the Commission as CPOs when they were not.

60. Kirris, Nauman and Relf, engaged in this conduct in or in connection with orders to make, or the making of, contracts of sale of commodities for future delivery, made, or to be made, for or on behalf of other persons where such contracts for future delivery were or may have been used for (a) hedging any transaction in interstate commerce in such commodity, or the products or byproducts thereof, or (b) determining the price basis of any transaction in interstate commerce in such commodity, or (c) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof.

61. The actions and omissions of Kirris, Nauman and Relf described in this Count were done within the scope of their employment with PAI, FPM, SFM, SCT and CTS and, therefore, PAI, FPM, SFM, SCT and CTS are also liable for their violations of Section 4b(a)(i) and (iii) of the Act, 7 U.S.C. 6b(a)(i) and (iii) (1994), pursuant to Section 2a(1)(A)(iii) of the Act, 7 U.S.C. 4 (1994).

62. Nauman, directly or indirectly, controlled Kirris and Relf and did not act in good faith or knowingly induced, directly or indirectly, the acts constituting the violations of Kirris and Relf alleged in this count, and thereby is also liable for Kirris and Relf's violations of Section 4b(a)(i) and (iii) of the Act, 7 U.S.C. 6b(a)(i) and (iii) (1994), pursuant to Section 13(b) of the Act, 7 U.S.C. 13c(b) (1994).

63. Each material misrepresentation or omission, each false report or statement, and each willful deception made during the relevant time period, including but not limited to those specifically alleged herein, is alleged as a separate and distinct violation of Section 4b(a)(i) and (iii).

COUNT II

VIOLATIONS OF SECTION 4b(a)(ii) OF THE ACT:
FRAUD BY FALSE REPORTS

64. Paragraphs 1 through 57 are realleged and incorporated herein.

65. During the relevant time, Kirris, Nauman and Relf violated Section 4b(a)(ii) of the Act, 7 U.S.C. 6b(a)(ii) (1994), in that Nauman willfully made or caused to be made to the investors in the FPM, SCT and CTS pools, Kirris willfully made or caused to be made to the investors in the SFM, SCT and CTS pools and Relf willfully made or caused to be made to the investors in the SCT pool, written reports or statements which falsely represented the profits, losses and the value of each investor's share of the pools. Kirris, Nauman and Relf also sent letters to investors and the Commission misrepresenting that they were exempt from registration with the Commission as CPOs when they were not. These false reports or statements were made in or in connection with orders to make, or the making of, contracts of sale of commodities for future delivery, made, or to be made, for or on behalf of other persons where such contracts for future delivery were or may have been used for (a) hedging any transaction in interstate commerce in such commodity, or the products or byproducts thereof, or (b) determining the price basis of any transaction in interstate commerce in such commodity, or (c) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof.

66. The actions and omissions of Kirris, Nauman and Relf described in this Count were done within the scope of their employment with PAI, FPM, SFM, SCT and CTS and, therefore, PAI, FPM, SFM, SCT and CTS are also liable for their violations of Section 4b(a)(ii) of the Act, 7 U.S.C. 6b(a)(ii) (1994), pursuant to Section 2a(1)(A)(iii) of the Act, 7 U.S.C. 4 (1994).

67. Nauman, directly or indirectly, controlled Kirris and Relf and did not act in good faith or knowingly induced, directly or indirectly, the acts constituting the violations of Kirris and Relf alleged in this count, and thereby is also liable for Kirris and Relf's violations of Section 4b(a)(ii) of the Act, 7 U.S.C. 6b(a)(ii) (1994), pursuant to Section 13(b) of the Act, 7 U.S.C. 13c(b) (1994).

68. Each false report or statement made during the relevant time period, including but not limited to those specifically alleged herein, is alleged as a separate and distinct violation of Section 4b(a)(ii).

COUNT III

VIOLATIONS OF SECTION 4m(1) OF THE ACT:
ACTING AS AN UNREGISTERED CPO AND CTA

69. Paragraphs 1 through paragraph 57 are realleged and incorporated herein.

70. A commodity pool operator ("CPO") is any firm or individual engaged in a business which is of the nature of an investment trust, syndicate, or similar form of enterprise, and that, in connection therewith, solicits, accepts, or receives from others funds, securities, or property, either directly through capital contributions, the sale of stock or other forms of securities, or otherwise, for the purpose of trading in any commodity for future delivery on or subject to the rules of any contract market. Section 1a(4) of the Act, 7 U.S.C. (4) (1994). With certain specified exceptions and exemptions, not applicable here, all CPOs are required to be registered with the Commission, pursuant to Section 4m(1) of the Act, 7 U.S.C. 6m(1) (1994).

71. A commodity trading advisor ("CTA") is any person who for compensation or profit

engages in the business of advising others, either directly or through publications, writings, or electronic media, as to the value of or advisability of trading in any contract of sale of a commodity future for future delivery made or to be made on or subject to the rules of any contract market; any commodity option or any leverage transaction for compensation or profit, and as part of a regular business, issues or promulgates analysis or reports concerning any of the activities referred to above. Section 1a(5) of the Act, 7 U.S.C. 1a(5) (1994). A CTA is exempt from registering if, during a twelve month period, he has not furnished trading advice to more than fifteen persons and does not hold himself out generally to the public as a CTA. Section 4m(1) of the Act, 7 U.S.C. 6m(1) (1994).

72. During the relevant time, Nauman acted as a CTA and Nauman and Kirris acted as CPOs for the FPM pool; Nauman and Kirris acted as CTAs and CPOs for the SFM pool; and Nauman and Kirris acted as CTAs and Nauman, Kirris and Relf acted as CPOs for the SCT and CTS pools. Nauman and Kirris are not exempt from registration with the Commission as CTAs for the four pools because they each furnished commodity trading advice to more than fifteen investors during a twelve month period.

73. The actions and omissions of Kirris, Nauman and Relf described in this Count were done within the scope of their employment with PAI, FPM, SFM, SCT and CTS and, therefore, PAI, FPM, SFM, SCT and CTS are also liable for their violations of Section 4m(1) of the Act, 7 U.S.C. 6m(1) (1994), pursuant to Section 2a(1)(A)(iii) of the Act, 7 U.S.C. 4 (1994).

74. Nauman, directly or indirectly, controlled Kirris and Relf and did not act in good faith or knowingly induced, directly or indirectly, the acts constituting the violations of Kirris and Relf alleged in this count, and thereby is also liable for Kirris and Relf's violations of Section 4m(1) of the Act, 7 U.S.C. 6m(1) (1994), pursuant to Section 13(b) of the Act, 7 U.S.C. 13c(b) (1994).

75. Each instance, during the relevant time period, where Kirris, Nauman, Relf, PAI, FPM, SFM, SCT and CTS acted as CPOs and CTAs without the benefit of registration with the Commission when the were not exempt from registration with the Commission as CPOs and CTAs, is alleged as a separate and distinct violation of Section 4m(1).

COUNT IV

VIOLATIONS OF SECTION 4o(1) OF THE ACT:
FRAUD BY A CPO AND CTA

76. Paragraphs 1 through 57 are alleged and incorporated herein.

77. During the relevant time, Kirris, Nauman and Relf violated Section 4o(1) of the Act, 7U.S.C. 6o(1) (1994), in that they, as CPOs and CTAs, directly or indirectly employed one or more devices, schemes, or artifices to defraud pool participants or prospective pool participants, or engaged in transactions, practices or courses of business which operated as a fraud or deceit upon pool participants or prospective pool participants by: misappropriating funds received from investors; falsely representing their trading record; fraudulently promising profits from trading with limited risks; misrepresenting to investors that all their funds were going to be used to trade commodity futures when they were not; misrepresenting to investors the identity of the person who was actually making the trading decisions and placing trades for the pools; issuing statements to investors which falsely represented the profits, losses and balances; and sending letters to investors and the Commission misrepresenting that they were exempt from registration with the Commission as CPOs when they were not. These acts were effected by use of the mails or other means or instrumentalities of interstate commerce.

78. The actions and omissions of Kirris, Nauman and Relf described in this Count were done within the scope of their employment with PAI, FPM, SFM, SCT and CTS and, therefore, PAI, FPM, SFM, SCT and CTS are also liable for their violations of Section 4o(1) of the Act, 7 U.S.C. 6o(1) (1994), pursuant to Section 2a(1)(A)(iii) of the Act, 7 U.S.C. 4 (1994).

79. Nauman, directly or indirectly, controlled Kirris and Relf and did not act in good faith or knowingly induced, directly or indirectly, the acts constituting the violations of Kirris and Relf alleged in this count, and thereby is also liable for Kirris and Relf's violations of Section 4o(1) of the Act, 7 U.S.C. 6o(1) (1994), pursuant to Section 13(b) of the Act, 7 U.S.C. 13c(b) (1994).

80. Each material misrepresentation or omission, each act of misappropriation and conversion, and each false report or statement made during the relevant time period, including but not limited to those specifically alleged herein, is alleged as a separate and distinct violation of Sections 4o(1)(A) and (B) of the Act, 7 U.S.C. 6o(1)(A) and (B).

COUNT V

VIOLATIONS OF SECTION 4n(4) OF THE ACT AND REGULATION 4.22:
FAILURE TO REPORT TO POOL PARTICIPANTS

81. Paragraphs 1 through 57 are realleged and incorporated herein.

82. During the relevant time, Kirris, Nauman and Relf violated Section 4n(4) of the Act, U.S.C. 6n(4) (1994), and Regulation 4.22, 17 C.F.R. 4.22 (2000), when acting as CPOs, by failing to furnish accurate and appropriate statements of account to pool participants containing the information required by Regulation 4.22 and by failing to provide account statements to participants at least quarterly. Specifically, the statements Kirris, Nauman and Relf provided did not periodically reflect the total amount of gain or loss from all transactions in which the pools engaged, the total amount of all brokerage commissions, the total amount of expenses incurred by the pools, the net asset value of the pools at the beginning and end of the reporting period, the total amount of additions made during the reporting period or total amount of withdrawals made during the reporting period. Further, Kirris, Nauman and Relf did not provide account statements to investors on a quarterly basis.

83. The actions and omissions of Kirris, Nauman and Relf described in this Count were done within the scope of their employment with PAI, FPM, SFM, SCT and CTS and, therefore, PAI, FPM, SFM, SCT and CTS are also liable for their violations of Section 4n(4) of the Act, 7 U.S.C. 6n(4) (1994), and Regulation 4.22, 17 C.F.R. 4.22 (2000), pursuant to Section 2a(1)(A)(iii) of the Act, 7 U.S.C. 4 (1994).

84. Nauman, directly or indirectly, controlled Kirris and Relf and did not act in good faith or knowingly induced, directly or indirectly, the acts constituting the violations of Kirris and Relf alleged in this count, and thereby is also liable for Kirris and Relf's violations of Section 4n(4) of the Act, 7 U.S.C. 6n(4), and Regulation 4.22, 17 C.F.R. 4.22 (2000), pursuant to Section 13(b) of the Act, 7 U.S.C. 13c(b) (1994).

85. Each instance, during the relevant time period, where Nauman, Kirris and Relf, when acting as CPOs, failed to furnish accurate and appropriate statements of account to pool participants containing the information required by Regulation 4.22 is alleged as a separate and distinct violation of Section 4n(4) of the Act, 7 U.S.C. 6n(4), and Regulation 4.22, 17 C.F.R. 4.22 (2000).

COUNT VI

VIOLATIONS OF REGULATION 4.20(c):
COMMINGLING

86. Paragraphs 1 through 57 are realleged and incorporated herein.

87. Regulation 4.20(c), 17 C.F.R. 4.20(c) (2000), prohibits a CPO from commingling the property of any pool it operates with the property of any other person. Kirris and Nauman Relf, when acting as CPOs, violated Regulation 4.20(c), because they deposited investor funds intended for investment in the SFM, FPM, SCT and CTS pools into bank accounts in the name of PAI and KFI.

88. The actions and omissions of Kirris and Nauman described in this Count were done within the scope of their employment with PAI, FPM, SFM, SCT and CTS and, therefore, PAI, FPM, SFM, SCT and CTS are also liable for their violations of Regulation 4.20(c), 17 C.F.R. 4.20(c) (2000), pursuant to Section 2a(1)(A)(iii) of the Act, 7 U.S.C. 4 (1994).

89. Nauman, directly or indirectly, controlled Kirris and did not act in good faith or knowingly induced, directly or indirectly, the acts constituting the violations of Kirris alleged in this count, and thereby is also liable for Kirris' violations of Regulation 4.20(c), 17 C.F.R. 4.20(c) (2000) pursuant to Section 13(b) of the Act, 7 U.S.C. 13c(b) (1994).

90. Each act of commingling by Kirris and Nauman, while acting as CPOs, during the relevant time period is alleged as a separate and distinct violation of Regulation 4.20(c), 17 C.F.R. 4.20(c) (2000).

COUNT VII

VIOLATIONS OF REGULATION 4.21:
FAILURE TO PROVIDE DISCLOSURE DOCUMENTS

91. Paragraph 1 through 57 are realleged and incorporated herein.

92. Regulation 4.21 prohibits a CPO, registered with the Commission or required to be registered with the Commission, from soliciting, accepting or receiving funds or property from prospective pool participants unless the CPO delivers or causes to be delivered to the prospective pool participant a Disclosure Document for the pool containing the information set forth in Regulation 4.24, 17 C.F.R. 4.24 (2000), and receives an acknowledgement signed and dated by the prospective participant stating that the prospective participant received a disclosure document for the pool. During the relevant time, Kirris, Nauman and Relf violated Regulation 4.21, 17 C.F.R. 4.21 (2000), by accepting funds or property without first delivering to investors appropriate disclosure documents and obtaining signed acknowledgements of receipt of disclosure documents from investors.

93. The actions and omissions of Kirris, Nauman and Relf described in this Count were done within the scope of their employment with PAI, FPM, SFM, SCT and CTA and, therefore, PAI, FPM, SFM, SCT and CTS are also liable for their violations of Regulation 4.21, 17 C.F.R. 4.21 (2000), pursuant to Section 2a(1)(A)(iii) of the Act, 7 U.S.C. 4 (1994).

94. Each instance, during the relevant time period, where Kirris, Nauman and Relf accepted funds or property without first delivering to investors appropriate disclosure documents and obtaining signed acknowledgements of receipt of disclosure documents from investors is a separate and distinct violation of Regulation 4.21, 17 C.F.R. 4.21 (2000).

COUNT VIII

DISGORGEMENT OF ASSETS FROM THE RELIEF DEFENDANT

95. Paragraph 1 through 57 are realleged and incorporated herein.

96. Nauman, Kirris, Relf, PAI, FPM, SFM, SCT and CTS have committed a fraud upon investors in connection with the purchase and sale of commodity futures contracts, as alleged herein.

97. During the relevant time, KFI, the Relief Defendant herein, has received funds or otherwise benefited from funds which are directly traceable to the funds obtained from investors through the Defendants' fraudulent schemes.

98. The Relief Defendant has no legitimate interest in the funds, or the value of the benefits it received as a result of the Defendants' fraudulent schemes.

99. The Relief Defendant will be unjustly enriched if it is not required to disgorge the funds or the value of the benefit it received as a result of the Defendants' fraudulent schemes.

100. The Relief Defendant should be required to disgorge the funds or the value of the benefit it received which is traceable to the fraud of Nauman, Kirris, Relf, PAI, FPM, SFM, SCT and CTS.

IX.

RELIEF REQUESTED

WHEREFORE, the Commission respectfully requests that this Court, as authorized by

Section 6c of the Act, 7U.S.C. 13a-1 (1994), and pursuant to its own equitable powers:

A. Find PAI, Kirris, Nauman, Relf, FPM, SFM, SCT and CTS liable for violating Sections 4b(a)(i), (ii) and (iii), 4m(1), 4n(4) and 4o(1) of the Act, 7 U.S.C. 6b(a)(i), (ii) and (iii), 6m(1), 6n(4) and 6o(1) (1994); and Regulations 4.20, 4.21 and 4.22, 17 C.F.R. 4.20, 4.21 and 4.22 (2000);

B. Enter orders of preliminary and permanent injunction restraining and enjoining PAI, Kirris, Nauman, Relf, FPM, SFM, SCT and CTS and all persons insofar as they are acting in the capacity of their agents, servants, successors, assigns, and attorneys, and all persons insofar as they are acting in active concert or participation with them who receive actual notice of such order by personal service or otherwise, from directly or indirectly:

1. Cheating or defrauding or attempting to cheat or defraud other persons, in or in connection with any order to make, or the making of, any contract of sale of any commodity for future delivery, made, or to be made, for or on behalf of any other person if such contract for future delivery is or may be used for (a) hedging any transaction in interstate commerce in such commodity or the products or byproducts thereof, or (b) determining the price basis of any transaction in interstate commerce in such commodity, or (c) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof, in violation of Section 4b(a)(i) and (iii) of the Act, 7 U.S.C. 6b(a)(i) and (iii);

2. Willfully to make or cause to be made to other persons any false report or statement thereof, or willfully to enter or cause to be entered for such persons any false record thereof, in or in connection with any order to make, or the making of, any contract of sale of any commodity for future delivery, made, or to be made, for or on behalf of any other person if such contract for future delivery is or may be used for (a) hedging any transaction in interstate commerce in such commodity or the products or byproducts thereof, or (b) determining the price basis of any transaction in interstate commerce in such commodity, or (c)delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof, in violation of Section 4b(a)(ii) of the Act, 7U.S.C. 6b(a)(ii);

3. Operating as a CPO engaged in the business of soliciting, accepting, or receiving from others, funds, securities, or property, for the purpose of trading in any commodity for future delivery on or subject to the rules of any contract market, without being registered with the Commission as a commodity pool operator, and using the mails or any means or instrumentality of interstate commerce in connection with such business of a CPO, in violation of Section 4m(1) of the Act, 7U.S.C. 6m(1);

4. Acting as a CTA engaged in the business of, for compensation or profit, advising others, either directly or through publications, writings, or electronic media, as to the value or advisability of trading in any contract of sale of a commodity futures for future delivery on or subject to the rules of any contract market without being registered with the Commission as a commodity trading advisor, and using the mails or any means or instrumentality of interstate commerce in connection with such business of a CTA, in violation of Section 4m(1) of the Act, 7U.S.C. 6m(1);

5. While acting as CPOs and CTAs, employing any device, scheme, or artifice to defraud any participant or prospective participant, or engaging in any transaction, practice, or course of business which operates as a fraud or deceit upon any participant or prospective participant, by use of the mails or any means or instrumentality of interstate commerce, in violation of Section 4o(1) of the Act, 7 U.S.C. 6o(1);

6. While acting as CPOs, failing to regularly furnish appropriate statements of account to each participant in their operations, in a form and manner prescribed by the Commission, including complete information as to the current status of all trading accounts in which each participant has an interest, in violation of Section 4n(4) of the Act, 7 U.S. C. 6n(4) and Regulation 4.22, 17 C.F.R. 4.22;

7. While acting as CPOs, commingling the property of any pool they operate or intend to operate with the property of any other person, in violation of Regulation 4.20(c), 17 C.F.R. 4.20(c);

8. While acting as CPOs, directly or indirectly, soliciting, accepting or receiving funds, securities or other property from prospective pool participants without delivering or causing to be delivered to the prospective participant a Disclosure Document containing the information set forth in 17 C.F.R. 4.24, and failing to receive an acknowledgement of receipt of Disclosure Document from the prospective pool participant, in violation of Regulation 4.21, 17 C.F.R. 4.21;

9. Trading on or subject to the rules of any contract market; engaging in, controlling or directing the trading for any commodity interest account for or on behalf of any person or entity, whether by power of attorney or otherwise; and

10. Applying for registration or seeking exemption from registration with the Commission in any capacity and engaging in any activity requiring such registration or exemption from registration, except as provided for in Section 4.14(a)(9) of the Commission's Regulations, 17 C.F.R. 4.14(a)(9), or acting as a principal, agent, officer or employee of any person registered, required to be registered, or exempted from registration, unless such exemption is pursuant to Section 4.14(a)(9) of the Commission's Regulations, 17 C.F.R. 4.14(a)(9);

C. Enter orders of preliminary injunction restraining and enjoining the Defendants and Relief Defendant KFI and all persons insofar as they are acting in the capacity of their agents, servants, successors, assigns, and attorneys, and all persons insofar as they are acting in active concert or participation with them who receive actual notice of such order by personal service or otherwise, from directly or indirectly:

1. Destroying, mutilating, concealing, altering or disposing of any books and records, documents, correspondence, brochures, manuals, electronically stored data, tape records or other property of Defendants and Relief Defendant KFI, wherever located, including all such records concerning Defendants and Relief Defendant KFI's business operations;

2. Refusing to permit authorized representatives of the Commission to inspect, when and as requested, any books and records, documents, correspondence, brochures, manuals, electronically stored data, tape records or other property of Defendants and Relief Defendant KFI, wherever located, including all such records concerning Defendants' and Relief Defendant KFI's business operations; and

3. Withdrawing, transferring, removing, dissipating, concealing or disposing of, in any manner, any funds, assets, or other property of Defendants and Relief Defendant KFI, wherever situated, including but not limited to, all funds, personal property, money or securities held in safes, safety deposit boxes and all funds on deposit in any financial institution, bank or savings and loan account held by, under the control, or in the name of PAI, Kirris, Nauman, Relf, FPM, SFM, SCT CTS and KFI.

D. Enter an order appointing an equity receiver, to take into his or her immediate custody, control and possession all cash, cashier's checks, funds, assets, and property of Defendants, including funds or property of investors, wherever found, whether held in the name of any of the Defendants, Relief Defendant KFI or otherwise, including, but not limited to, all books and records of account and original entry, electronically stored data, tape recordings, all funds, securities, contents of safety deposit boxes, metals, currencies, coins, real or personal property, commodity futures trading accounts, bank and trust accounts, mutual fund accounts, credit card line-of-credit accounts and other assets, of whatever kind and nature and wherever situated, and authorizing, empowering and directing such receiver to collect and take charge of and to hold and administer the same subject to further order of the Court, in order to prevent irreparable loss, damage and injury to investors, to conserve and prevent the dissipation of funds, to remove Defendants from control and management of the business operations conducted by the Defendants and to prevent further evasions and violations of the federal commodity laws by the Defendants;

E. Enter an order directing that Defendants and Relief Defendant KFI provide the Plaintiff immediate and continuing access to their books and records, make an accounting to the Court of all their assets and liabilities, together with all funds they received from and paid to investors and other persons in connection with commodity futures transactions or purported commodity futures transactions, including the names, addresses and telephone numbers of any such persons from whom they received such funds from January 1997 to the date of such accounting, and all disbursements for any purpose whatsoever of funds received from commodity investors, including salaries, commissions, fees, loans and other disbursements of money and property of any kind, from January 1997 to and including the date of such accounting;

F. Enter an order requiring Defendants and Relief Defendant KFI to disgorge all benefits received including, but not limited to, salaries, commissions, loans, fees, revenues and trading profits derived, directly or indirectly, from acts or practices which constitute violations of the Act as described herein, including pre-judgment interest;

G. Enter an order requiring Defendants to make restitution by making whole each and every investor whose funds were received or utilized by Defendants in violation of the provisions of the Act as described herein, including pre-judgment interest;

H. Enter an order requiring Defendants to pay civil penalties under the Act in amounts of not more than the higher of $110,000 for each violation of the Act and Regulations, or triple the monetary gain to Defendants, for each violation of the Act and Regulations;

I. Enter an order requiring Defendants to pay costs and fees as permitted by 28U.S.C. 1920 and 2412(a)(2) (1994); and

J. Order such other and further relief as this Court may deem necessary and appropriate under the circumstances.

Date: September 6, 2000

LOCAL COUNSEL:

Joan D. Humes
Attorney Registration No. 214462
Assistant United States Attorney
600 U.S. Courthouse
300 South Fourth Street
Minneapolis, MN 55415
Telephone (612) 664-5600
FAX: (612) 664-5787

ATTORNEYS FOR PLAINTIFF

Susan J. Gradman
Trial Attorney

Mark H. Bretscher
Senior Trial Attorney

Scott R. Williamson
Deputy Regional Counsel

COMMODITY FUTURES TRADING COMMISSION
300 South Riverside Plaza, Suite 1600N
Chicago, IL 60606-6615
Telephone: (312) 353-5990
FAX: (312) 353-4502