BACKGROUND

1. The Complaint

On November 19, 1991, we issued a one-count complaint charging Miller with multiple violations of the Act and the Commission�s Rules arising out of his solicitation activities while employed as an account executive for a futures commission merchant ("FCM") from January 1987 though April 1991. The complaint charged that Miller, a registered associated person ("AP"), violated the Act and Commission Rules by committing fraud while soliciting customers to buy and to sell commodity options on behalf of Siegel Trading Company ("Siegel"), a registered FCM. The complaint asserted that, in connection with his solicitation of customers for Siegel, Miller cheated, deceived, and defrauded customers in violation of Section 4c(b) of the Act, 7 U.S.C. � 6c(b) (1988), and Commission Rule 33.10, 17 C.F.R. � 33.10 (1997), by making false, deceptive or misleading representations or omissions of material facts. The alleged misrepresentations and omissions concerned: (1) the likelihood of profits from trading in options; (2) the risks involved in trading commodity options; and (3) the performance record, experience, and expertise of Miller and Siegel. Miller�s answer denied any wrongdoing.

2. The First Hearing

The ALJ held three days of hearings in November 1993. The Division called seven customer witnesses who testified concerning their solicitation by Miller, and a Commission investigator who testified regarding her analysis of the trading results of Miller�s customers. The customers testified that, in the course of soliciting them to open accounts with Siegel and to purchase specific options, Miller made a number of claims using phrases such as "this is a sure thing" that led them to believe that they easily could double or triple their money in a short period of time. Hearing Transcript ("Tr.-1") at 13-16, 18-19, 34, 63, 69-70, 84-85, 89, 94, 107, 120, 123, 127, 141, 190, 194, 214, 236-37; Division Exhibits ("D1-Ex.") 5, 11, 14-3. The customers also testified that Miller minimized or failed to disclose the risks involved in commodity options trading, and told them that he had a great investment track record and that all or most of his customers were making money, Tr.-1 at 19-20, 39-41, 69, 89, 142, 147-48, 194. In addition, customers testified that Miller told them that the risk disclosure statement, which was communicated to customers via a taped verification telephone procedure, was merely a "formality." Tr.-1 at 18-19, 34, 132; D1-Exs. 14-3, 19-24.

Commission investigator Tena Friery ("Friery") testified concerning the performance record of Miller�s customers based upon an analysis she made of Siegel�s trading records. Tr.-1 at 167-176. Her analysis revealed that from January 1, 1984, to July 31, 1989, nearly 80 percent of Miller�s customers lost money trading options. D1-Ex. 11. In addition, Friery provided evidence regarding trading losses incurred by Miller�s customers and the commissions derived from Miller�s trades during that period. D1-Ex. 21.

Miller�s defense consisted of his own testimony and that of his assistant, Jennifer Nicole Martin ("Martin"), at Siegel. Miller denied that he told customers they could double or triple their money or that he guaranteed they would profit. Tr.-1 at 302. He also claimed that he informed his customers that more than 80 percent of all commodity speculators lose money. Tr.-1 at 304-306. Martin testified that Miller explained all risks, commissions, and other relevant factors to his customers. Tr.-1 at 274-83.

3. The Initial Decision

In his initial decision, the ALJ found that, while the customers testified honestly, Miller�s testimony was unreliable and evasive, and Martin�s testimony lacked credibility. In re Miller, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) � 26,084 at 41,598 (ALJ May 25, 1994). He further found that Miller: fraudulently induced customers to invest in commodity options by making false, deceptive or misleading statements of material fact, and by failing to disclose material facts to potential customers; knowingly concealed the truth from his potential customers to induce them to purchase commodity options; deliberately misled customers as to reasonable expectations of profit on commodity options; had no basis in fact for the recommendations he made to customers; had one objective in mind, to induce the customers to open an account and trade, thus making a commission for Miller; and used such phrases as a "no miss proposition", and "a sure thing" and assurances that customers would triple their investment to lead customers to believe that there was negligible risk in investing in these instruments. Id. The ALJ also found that when Miller solicited his customers he knew that nearly 80% of his customers lost money, and that none of his customers tripled their investment. Id. In light of Miller�s conduct, the ALJ found it unsurprising that during 1987 and 1988 alone, Miller made in excess of $1,000,000 in commission income while his customers lost $887,000. Id. The ALJ concluded that "Miller engaged in a scheme to cheat and defraud customers and to make large commission profits at the expense of his customers. Miller proved to be an expert not on how to invest in commodity options, but rather in how to deceive and defraud customers for his own benefit." Id.

Based on these findings, the ALJ held that Miller violated Section 4c(b) of the Act and Commission Rule 33.10 by fraudulently inducing customers to invest in commodity options. Id. As sanctions, the ALJ ordered Miller to cease and desist from further violations, revoked his registration as an AP, issued a permanent trading prohibition, and imposed a civil monetary penalty of $200,000. Id.

4. The First Appeal

Both sides appealed the Initial Decision. In addition to challenging the ALJ�s liability analysis, Miller argued that the sanctions imposed by the ALJ were unwarranted and excessive. Resp. App. Br. at 42-45. The Division defended the ALJ�s liability analysis and the nonmonetary portion of the sanctions. Concerning the civil monetary penalty, however, the Division argued that the ALJ�s civil monetary penalty analysis failed to consider either the financial benefit that Miller derived from his wrongdoing or the losses that his customers suffered. It urged us to vacate the ALJ�s civil monetary penalty and instead to impose one of at least $1,200,000, the amount of commission income that the Division asserted Miller earned from January 1987 to July 1989. Div. App. Br. at 10-12; DOE Ex. 21; Tr.-1 at 175-176.

On June 16, 1995, we affirmed the ALJ�s liability analysis and all of the sanctions except the civil monetary penalty. In re Miller, [1994-1996 Transfer Binder] Comm. Fut. L. Rep. (CCH) � 26,440 (CFTC June 16, 1995). We explained that, at the time the complaint was issued, Section 6(d) of the Act provided that if a civil monetary penalty were to be imposed it was required to be based on the gravity of the respondent�s violations with consideration for his net worth. Id. at 42,912. As the ALJ did not follow the procedures established by Commission precedent to develop the record on these issues, we found that a civil monetary penalty could not be imposed on the existing record, vacated the ALJ�s civil monetary penalty, and remanded the matter to the ALJ for further proceedings. Id. at 42,913-42,914.

In remanding the matter, we instructed the ALJ to: (1) assess the gravity of Miller�s violations including any factors that aggravated or mitigated his conduct; (2) consider the appropriateness of any penalty in light of Miller�s net worth; (3) look to Commission-approved penalties in analogous cases, and if there were no analogous cases, use as a starting point either the financial benefit that accrued to respondent or the losses suffered by his customers as the result of his wrongdoing; and (4) develop the record and determine an appropriate civil monetary penalty in accordance with Commission precedents such as In re Gordon, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) � 25,667 (CFTC Mar. 16, 1993), and In re Murlas, [1987-1990 Transfer Binder] Comm. Fut. L. Rep. (CCH) � 24,440 (CFTC Mar. 16, 1993). Miller, � 26,440 at 42,912-42,193 and n.5.

5. The Net Worth Hearing

Both the Division and Miller requested a hearing concerning the civil monetary penalty. On August 17, 1995, the ALJ scheduled the hearing for December 12, 1995. The hearing was later rescheduled to January 1996 at Miller�s request. Also, in August 1995, the Division requested, and the ALJ issued, a subpoena to Miller ordering him to bring all his financial records to the hearing, including tax returns from 1987 to 1994, check registers, materials relating to indebtedness, and other records relating to his ability to pay a civil monetary penalty. The Division also subpoenaed financial records from Miller�s current employer, Star Commodities, Ltd. ("Star"), and from Siegel. The hearing was held on January 25-26, 1996.

At the hearing, Miller submitted only partial tax records and failed to produce most of the financial records that were required under the subpoena such as check registers and records of expenditures. Net Worth Hearing Transcript ("Tr.-2") at 10-12, 22, 23, 27-32, 34, 88, 100; Division Exhibits ("D2-Ex.") 1, 4-10. He provided no documentation concerning his liabilities other than a handwritten list of debts that he claimed he owed to various financial institutions. Respondent Exhibit ("R2-Ex.") 3. The Division questioned Miller regarding his income and assets from 1987 until the hearing date, including his purported disposition of significant assets, i.e., his residence and his half ownership in M&B Trading Company ("M&B). Tr.-2 at 16-50, 54, 56-62, 90-95.

Miller presented the testimony of two former customers. One of the customers traded with Miller only after the period in question. Tr.-2 at 81. The other customer�s testimony was presented through a stipulation of expected testimony. The stipulation stated that the customer had traded with Miller during an unspecified time at Siegel and at Star. Tr.-2 at 110. Both customers believed that they had not been defrauded by Miller. Tr.-2 at 77-82, 110.

In its post-hearing brief, the Division provided estimates with respect to customer loss, Miller�s commission income, and his net worth. The Division estimated that between January 1, 1987 and July 31, 1989, Miller�s customers lost $1,350,623. Division Brief in Support of Proposed Findings of Fact and Conclusions of Law and in Support of Civil Monetary Penalty (Apr. 16, 1996) at 11 ("Division Post Hearing Br."). Next, the Division estimated Miller�s commission income from Siegel for the years 1988 through 1991 to total $637,771.91. Division Post Hearing Br. at 12-13; D2-Ex. 2. Finally, based on the evidence presented at the hearing, the Division estimated Miller�s net worth to be at least $1,037,137, exclusive of his residence. Division Post Hearing Br. at 17, 20. Citing Miller�s failure to provide complete and accurate financial information in response to its subpoenas and his failure to provide honest statements regarding his financial condition, the Division argued that Miller had forfeited his right to have his net worth considered in assessing a civil monetary penalty. Id. at 14. It therefore urged the ALJ to assess a penalty based solely on the extreme gravity of Miller�s violations, which it argued should be based on all of the losses by Miller�s customers during the period of his wrongdoing ($1,350,623). Id. at 19, 24. Alternatively, the Division argued that the civil monetary penalty should be based on the benefits (i.e., commissions) received by Miller from his wrongdoing ($637,000), which it said was appropriate in light of Miller�s net worth as calculated by the Division ($1,037,137). Id. at 20-21.

By contrast, Miller maintained that his violations were not sufficiently grave to warrant a civil monetary penalty. Miller�s Posthearing Brief and Proposed Findings of Fact and Conclusions of Law (May 16, 1996) at 7-15 ("Resp. Post Hearing Br."). Miller further asserted that: (i) any civil penalty would be inappropriate, as he already had been penalized sufficiently through the other sanctions imposed, id. at 4, 28; (ii) the other sanctions had effectively deterred him and others from future wrongdoing, id. at 4; (iii) he sufficiently demonstrated at the hearing that he had little ability, if any, to pay a civil monetary penalty, id. at 15-20 (citing Tr.-2 at 104-107); (iv) he had submitted evidence which showed that his net worth was actually negative, id. at 17 (citing D2-Exs. 1 and 11; R2-Exs. 1 and 3); (v) he had complied with the Division�s subpoena by providing the documents he "had in his possession, custody and control," and had never refused to produce a requested document, id. at 19; and (vi) if a civil monetary penalty were imposed, it should be based solely on the losses suffered by the seven witnesses who testified at the hearing below, id. at 6.

6. The Initial Decision on Remand

The ALJ�s initial decision on remand reduced Miller�s civil monetary penalty from $200,000 to $50,000. In re Miller, [1994-1996 Transfer Binder] Comm. Fut. L. Rep. (CCH) � 26,722 (ALJ June 21, 1996). The ALJ first addressed the gravity of Miller�s offenses. Noting that the gravity of Miller�s violations had been established in the first initial decision, the ALJ reiterated that Miller had "intentionally engaged in a scheme to cheat and defraud his customers for the purpose of gaining large commissions," a violation of the core provisions of the Act warranting serious sanctions. Id. at 43,994-43,995. He emphasized that Miller "should not be permitted to financially benefit from his wrongdoing," and therefore, it was necessary to impose a civil monetary penalty. Id. at 43,994.

Addressing the financial benefit that Miller derived from his wrongdoing, the ALJ rejected the Division�s view that it should be based on Miller�s earnings at Siegel on the ground that the Division had "failed to show a direct correlation between Miller�s fraudulent acts and the commissions he gained." Id. at 43,995. The ALJ similarly rejected the Division�s argument that the amount of customer harm (which the Division estimated at $1.35 million) was at least equal to all losing trades made through Miller from 1987 to 1989. By contrast, the ALJ accepted Miller�s argument that the relevant harm should be limited to the losses suffered by the seven customers who testified at the first hearing, and held Miller responsible only for those losses, which the ALJ estimated to total $100,000. Id.

Turning to Miller�s net worth, the ALJ did not address Miller�s failure to produce a substantial portion of the documents requested under the subpoena, simply stating that "[n]umerous financial documents were produced at the hearing in an attempt to determine Miller�s net worth." Id. at 43,996. The ALJ rejected the Division�s contention that Miller�s net worth should be based on the total commission income he earned during the period alleged in the Complaint, concluding that such an assessment was not supported by financial records. Id. The ALJ also rejected Miller�s claim that his net worth was negative. Id. Stating that the evidence presented at the hearing indicated that Miller�s assets had declined since the period charged in the complaint, and that the revocation of Miller�s registration and the imposition of a trading ban reduced Miller�s earning power, the ALJ set Miller�s net worth at "approximately $50,000." Id. The ALJ did not explain how he had arrived at this amount, stating only that evidence and testimony presented by both parties led to this conclusion. Id. The ALJ then imposed a civil monetary penalty of $50,000. Id.

7. The Second Appeal

Only Miller appeals the ALJ�s initial decision on remand. The sole issue on appeal is the appropriateness of the $50,000 civil monetary penalty imposed by the ALJ in his initial decision on remand. Miller does not challenge the ALJ�s net worth determination, but argues that the imposition of a $50,000 civil monetary penalty constitutes "prejudicial and reversible error" because it "would deprive him of any asset that he may have to live on." Resp. Br. at 4, 6. He maintains that a monetary penalty in an amount equal to his net worth "is unduly excessive and inconsistent with Commission precedent." Id. at 4. Finally, Miller asserts that his assets are "insufficient" to satisfy the ALJ�s civil penalty. Resp. Br. at 19.