CFTC News Release 4360-00
For Release: February 7, 2000
CFTC FILES AND SETTLES ACTION AGAINST SOGEMIN METALS INC. IN CONNECTION WITH A FRAUDULENT COMMISSION ARRANGEMENT AND KICKBACK SCHEME
CFTC Order Finds that Sogemin Metals Inc. Defrauded Two Chilean Metals Firms and Orders, Among Other Sanctions, Payment of a $500,000 Civil Monetary Penalty
WASHINGTON – The Commodity Futures Trading Commission (CFTC) announced today that on February 7, 2000, it issued an order instituting administrative proceedings against and accepting an offer of settlement from Sogemin Metals Inc. (SMI) of Stamford, Connecticut, for defrauding two Chilean metals firms through an unlawful commission arrangement and a kickback scheme. SMI is a registered introducing broker owned by SA Sogem NV, a subsidiary of Union Minière of Belgium.
The CFTC order finds that beginning in 1990, and continuing through 1994, SMI participated in a fraud upon its clients, Corporacion Nacional del Cobre de Chile (Codelco), the world’s largest producer of copper, and Empresa Nacional de Mineria (Enami), another large producer, through an unlawful and undisclosed commission arrangement.
During this time, SMI brokered futures and options transactions in base metals on the London Metal Exchange and in precious metals for Codelco and Enami. The order finds that SMI failed to disclose to Codelco or Enami that SMI's parent company, Sogemin Metals Limited (SML), a British corporation, paid return commissions to a Cayman Islands company controlled by SMI’s Chilean agent, whose principals included individuals with close family connections to the head futures traders at both of its Chilean clients.
The order also finds that during the same period, certain SMI employees arranged to receive kickbacks from these commissions and that SMI failed to diligently supervise those employees.
Based on these findings, the CFTC order finds that SMI violated the anti-fraud provisions of the Commodity Exchange Act (CEA) (sections 4b(a)(i) and 4b(a)(iii)) and CFTC regulations (sections 30.9 and 166.3).
Phyllis J. Cela, Acting Director of the CFTC’s Division of Enforcement, commented:
In this Order the Commission is reminding its registrants that they must properly conduct their business under the CEA and regulations, even when their activities involve foreign customers trading on foreign markets. Fraudulent kickbacks and supervision failures seriously compromise the integrity required of U.S. commodity professionals.
SMI, without admitting or denying the findings in the order, consented to the entry of an order that:
-- the adoption of strict monitoring of all commission rebates paid on transactions effected through SMI;
-- the complete revision of the internal procedures manual governing SMI; and
-- the creation of a compliance manual governing SMI.
Additionally, the CFTC order includes a representation by SMI that SML and/or Sogem and Union Minière have undertaken certain remedial measures, set forth in the CFTC’s order, as part of an effort to prevent the recurrence of the fraudulent conduct described in the order. The CFTC's order also notes that SMI and SML cooperated with the Commission's investigation of this matter.
# # #