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No. 34-99 August 13, 1999 |
Weekly Advisory
Commodity Futures Trading Commission Three Lafayette Centre
1155 21st Street, NW Washington, DC 20581 Telephone: (202) 418-5080
Facsimile: (202) 418-5525 |
On August 6, 1999, the Commission held
a closed meeting to discuss surveillance matters.
On August 13, 1999, the Commission will
hold a closed meeting to discuss surveillance matters.
On August 19, 1999, the Commission will
hold a closed meeting to discuss a rule enforcement
review.
Release:
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#4298-99 (E.D.N.Y CV
97 4973 (SJ) (RL))
For release:
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August 5, 1999
New York Court Bars Oscar A. Klitin and Klitin Associates II, L.P. from the Futures Industry and Orders Klitin to Disgorge Misappropriated Investors' Funds In CFTC Enforcement Action; Injunction Stems from a 1997 CFTC Action Charging Fraud
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced
today that U.S. District Court Judge Sterling Johnson, Jr. of the Eastern
District of New York entered a consent order of permanent injunction
against Oscar A. Klitin of Great Neck, New York, and
Klitin Associates II, L.P., a New York Limited
Partnership operated by Klitin as a commodity pool.
The court's order, entered on August 4, 1999, stems from a
three-count complaint filed by the CFTC on August 26, 1997 against Klitin
and Klitin Associates II, L.P. (see CFTC News Release #4044-97 August 28,
1997). The complaint charged the defendants with, among other things,
fraudulently operating a commodity pool by misappropriating more than
$200,000 in customer funds and by misrepresenting the pool's
financial condition to pool participants.
Without admitting or denying the charges in the CFTC complaint, Klitin
consented to the entry of the order which, among other things:
1)�������� permanently enjoins
the defendants from further violations of the Commodity Exchange Act and
CFTC regulations;
2)�������� orders Klitin to disgorge $115,772.86 (including prejudgment interest totaling $31,983.17); and
3)�������� prohibits the defendants from soliciting or accepting new clients or participants for commodity futures or options trading, acting in any capacity that requires registration with the Commission, and from trading on any contract market subject to Commission regulation.
By entry of a consent order on March 3, 1999, Judge Johnson appointed the
National Futures Association as the court's Monitor and directed it
to make an interim distribution to the investors in Klitin Associates II,
L.P. of the more than $100,000 that was frozen in a Klitin Associates II,
L.P. account by a court order issued on the filing of the
Commission's complaint.
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(Civ-98-70169)
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August 10, 1999
MICHIGAN FEDERAL COURT ENTERS PERMANENT INJUNCTION AGAINST THOMAS
LAMAR, OF WATERFORD, MICHIGAN, IN CFTC ENFORCEMENT ACTION CHARGING
FRAUDULENT OPERATION OF A COMMODITY POOL
Court Orders Lamar to Pay Over $2.8 Million In Restitution and
Disgorgement to Defrauded Customers and Permanently Bars Him from the
Commodity Industry
WASHINGTON--The Commodity Futures Trading Commission (CFTC) announced
today that on August 5, 1999, Judge Denise Page Hood of the U.S. District
Court for the Eastern District of Michigan entered a consent order
permanently enjoining Thomas Lamar of Waterford,
Michigan, from, among other things, violating the anti-fraud,
registration, disclosure, and reporting provisions of the Commodity
Exchange Act (CEA) and CFTC regulations.
The entry of the consent order of permanent injunction stems from a
five-count CFTC complaint against Lamar filed on February 13, 1998 (see
CFTC News Release 4108-98, February 17, 1998), which alleged that Lamar
defrauded at least 85 investors who had invested at least $2 million in
the Lamar Investments Group (LIG), a commodity futures
trading pool operated by Lamar.
Specifically, the CFTC complaint alleged that, among other things, from
about March 1989 through October 1996, Lamar made misrepresentations to
investors concerning the status and performance of LIG, reported
fictitious profits to customers through fraudulent monthly account
statements, and misappropriated funds received from investors. Lamar was
also charged with acting as a commodity pool operator and commodity
trading advisor without being registered as such with the CFTC.
In the consent order, Lamar admits the allegations of the CFTC's
complaint and agrees to pay $2,838,169 as disgorgement and restitution to
customers. In addition, Lamar also agrees to be permanently enjoined from
violating the following provisions of the CEA and CFTC regulations:
sections 4b and 4o of the CEA (anti-fraud provisions); section 4m
(requirement that commodity pool operators and commodity trading advisors
register with the CFTC); section 4n and regulation 4.21 (requirement to
file with the CFTC and provide pool participants with a disclosure
document); regulation 4.20 (requirement that pool operate as separate
legal entity and prohibition against commingling customer funds with the
funds of the commodity pool operator); regulation 4.22 (requirement to
provide account statements and annual reports to pool participants);
regulations 4.24 and 4.31(requirements that pool operator receive from
pool participants a signed acknowledgement before accepting funds and
entering into an agreement to direct trading on their behalf); and
regulation 4.30 (prohibition against accepting funds in the name of the
commodity trading advisor).
Finally, Lamar consents to be permanently banned from seeking
registration with the CFTC or acting in any capacity that requires
registration or is exempt from registration, and to a permanent
prohibition on trading commodity interests for himself or others, or
otherwise engaging in any business activities relating to commodity
interest trading.
The entry of the consent order by Judge Hood represents the successful
conclusion to a joint effort between the CFTC and the U.S. Attorney's
Office for the Eastern District of Michigan. On February 12, 1998, the
day before the CFTC filed its complaint, a grand jury issued an
eight-count indictment against Lamar alleging fraud and money laundering
violations in connection with the operation of the LIG pool. (United
States v. Lamar, No. 98-80173 (E.D. Mich. 1998)). Lamar subsequently
pleaded guilty to one count of mail fraud and one count of fraud, false
reporting and deception in commodity futures trading. On May 26, 1999,
Judge Hood sentenced Lamar to fifteen months in a halfway house, fifteen
months of home confinement, and ordered him to pay restitution to pool
customers in the amount of $2,838,169. The court's order that Lamar
pay restitution as ordered by the Court in the criminal sentencing will
satisfy the restitution and disgorgement obligations of the consent order
with the CFTC.
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August 10, 1999
CFTC FILES AN ENFORCEMENT ACTION AGAINST AND ACCEPTS OFFER OF
SETTLEMENT FROM WOLCOTT & LINCOLN L.L.C. AND DAVID
GIBSON
CFTC Finds That Wolcott & Lincoln, An FCM, Improperly
Handled Customer Money, Violated Recordkeeping Requirements, Filed False
Reports and Failed To Supervise Diligently; Gibson, As Manager of Wolcott
& Lincoln, Is Also Found Liable.
WASHINGTON - The Commodity Futures Trading Commission (CFTC) announced
today that it issued an order instituting and simultaneously settling an
administrative proceeding against Wolcott & Lincoln Futures,
L.L.C., a registered futures commission merchant (FCM), and
David Gibson, of Shawnee Mission, Kansas, the manager of
Wolcott & Lincoln.
The CFTC order finds that Wolcott & Lincoln, formerly known as
Wolcott & Lincoln Futures, Inc., mishandled customer funds; willfully
filed inaccurate and improperly executed reports with the CFTC; violated
CFTC recordkeeping requirements; and breached its duty to supervise
diligently the handling of customer funds. The order also finds Gibson
liable for Wolcott & Lincoln's violations. The CFTC's order,
among other things, revokes Wolcott & Lincoln's FCM registration,
imposes a $50,000 civil monetary penalty and requires Gibson to comply
with extensive undertakings. Wolcott & Lincoln and Gibson consented
to the issuance of the order without admitting or denying the findings
contained in it.
According to the CFTC's order, in January 1995, Wolcott &
Lincoln transferred its customer accounts to LIT Division of First
Options of Chicago, Inc. (FOC), a Chicago firm registered with the CFTC
as a FCM. FOC formed a Kansas City branch office (W&L Division) which
was staffed by former Wolcott & Lincoln employees and handled the
former Wolcott & Lincoln customer accounts, according to the order.
Wolcott & Lincoln survived as a legal entity and a registered
FCM.
The CFTC's order finds that although Wolcott & Lincoln purported
to be inactive, Wolcott & Lincoln's bank accounts continued to be
used to pass new funds from customers to the trading accounts that had
been transferred to FOC, and that in 1995, Wolcott & Lincoln ignored
proper procedures and regulatory requirements with respect to the
segregation and transfer of customer funds, allowing customer funds to be
commingled with the funds of others, in violation of Section 4d(2) of the
CEA and Commission Regulation 1.20; willfully filed with the CFTC
inaccurate and improperly executed forms which were supposed to identify
funds held in segregation for customers, in violation of Section 6(c) of
the CEA and Commission Regulation 1.10; and failed to maintain required
segregation records and other records and failed to issue commodity
statements to customers, in violation of Section 4g of the CEA and
Commission Regulations 1.10, 1.18, 1.31, 1.32 and 1.33. Further, the CFTC
order finds Gibson liable for all of Wolcott & Lincoln's
violations, as a controlling person of that firm, pursuant to Section
13(b) of the CEA.
The CFTC's order also finds that, in 1994 and 1995, Wolcott &
Lincoln and Gibson failed to supervise diligently Wolcott &
Lincoln's employees, agents and officers, in violation of Commission
Regulation 166.3, by, among other things, failing to develop or implement
an adequate supervisory system, particularly as it relates to handling
customer money. The order further finds that Gibson similarly did not
supervise diligently FOC's W&L Division.
As consented to, the CFTC's order:
1.�������� directs Wolcott &
Lincoln and Gibson to cease and desist from further violations of the CEA
and Commission Regulations;
2.�������� orders them to pay
jointly and severally a civil monetary penalty in the amount of
$50,000;
3.�������� evokes the FCM
registration of Wolcott & Lincoln; and
4.�������� requires Gibson to
comply with his undertakings to:
����������� --
�������� close and permanently
discontinue the FCM business of Wolcott & Lincoln;
����������� --
�������� have E.D. & F. Man
International, Inc., the current owner of the W&L Division, which
remains under Gibson's management, review and, if necessary, further
develop the policies, procedures and organizational structure of the
W&L Division to ensure that they are reasonably designed to deter,
detect, discipline and correct conduct of the type that was found in the
CFTC's order to violate the CEA and the Commission's
Regulations;
����������� --
�������� develop written policies
and procedures and a defined organizational structure for any FCM or
introducing broker Gibson seeks to register or of which Gibson becomes a
principal or manager in the future; and
����������� --
�������� attend eight hours of
formal training this year and next regarding the regulatory obligations
of branch offices and FCMs.
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August 10, 1999
CFTC FILES ENFORCEMENT ACTION ALLEGING COMMODITY FUTURES AND
OPTIONS FRAUD AGAINST MAX E. WALTERS
Walters Allegedly Defrauded Limited Partnership And Limited
Partner Out Of $1 Million By Making Misrepresentations Concerning Profits
And Misappropriating Funds
WASHINGTON - The Commodity Futures Trading Commission (CFTC) announced
today that it has filed an administrative complaint against Max
E. Walters of Kansas City, Missouri, alleging that Walters, a
general partner in a limited partnership, defrauded the limited
partnership and the limited partner out of more than $1 million in
connection with commodity futures and options trading.
The CFTC's complaint against Walters alleges that from August 1993
through October 1996, Walters violated the anti-fraud provisions of the
Commodity Exchange Act (CEA) and CFTC Regulations. Specifically, the
complaint alleges that Walters violated Sections 4b(a)(i), 4b(a)(ii),
4b(a)(iii) and 4c(b) of the CEA and Regulation 33.10(a), by, among other
things, misrepresenting, orally and in writing, to the limited partner
that the limited partnership was earning constant trading profits that
eventually exceeded $945,000 when, in fact, it was accumulating trading
losses that exceeded $800,000 by September 1996, and by misappropriating
limited partnership funds for his own personal trading and other personal
uses.
A public hearing has been ordered to determine whether the allegations
of the complaint against Walters are true and, if so, what sanctions, if
any, should be imposed. Possible sanctions include a cease and desist
order, a civil monetary penalty, a trading prohibition and
restitution.
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August 11, 1999
WILLIAM J. RAINER SWORN IN AS CFTC CHAIRMAN
Washington -- William J. Rainer was sworn in today as a
Commissioner and the eighth Chairman of the Commodity Futures Trading
Commission (CFTC), the federal agency that regulates commodity futures
and option trading in the U.S.
Mr. Rainer was nominated by President Clinton on June 23, 1999, and
confirmed by the Senate on August 5, 1999, to a term expiring April 13,
2004.
No Opinions Updates were issued during this period.
On August 10, 1999, the Commission approved for
publication in the Federal Register a notice of a new system of
records under the Privacy Act covering debt collection.
On October 19, 1998, the Commission published in the Federal
Register (63 FR 55784) final regulations amending its rules of
practice, CFR part 10 (1998), which govern most adjudicatory proceedings
brought under the Commodity Exchange Act, as amended (Act), other than
reparations proceedings. Effective Date: August 2,
1999. Vol. 64, No. 152, 08/09/99, p. 43071.
NOTE:
All Comment Letters must be received by the Commission no later than the closing date specified in the applicable Federal Register release. Any requests for an extension of the comment period must be made in writing - - before the expiration of the comment period - - to the Commission's Office of the Secretariat.
Comment period concerning the Commodity Futures Trading Commission's proposal to approve automatically certain exchange rule amendments upon adoption and to require their subsequent submission to the Commission in a single summary filing, rather than individually as currently mandated ends, August 16, 1999.
Comment period concerning the three systems added to the Commodity Futures Trading Commission's systems of records to be maintained under the Privacy Act ends, August 19, 1999.
Comment period concerning the Commodity Futures Trading Commission's proposed revised procedures for Commission review and approval of applications for contract market designation and of related contract terms and conditions ends, August 26, 1999.
Comment period concerning the Commodity Futures Trading Commission's
Concept Release concerning issues relating to the computation and
presentation of rate of return information and other disclosures
concerning partially-funded accounts managed by commodity trading
advisors (CTAs) ends, October 1, 1999.
Karl L. and Erika I. Reitter v. First American Discount Corp. and
Carl William Gilmore. Filed August 9, 1999. The Court received
the parties' stipulation of dismissal of this proceeding.
Accordingly, the complaint was dismissed with prejudice and this
proceeding was terminated in its entirety. Administrative Law Judge,
Bruce C. Levine. CFTC Docket No. 99-R055.
No Opinions and Orders were issued during this period.
�
No CFTC Letters were issued during this period.
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