CFTC News Release 4418-00 (Civ 6:00-0567)
For Release July 6, 2000
CFTC CHARGES ROBERT L. DORMAGEN AND DELTA FINANCIAL CORP. WITH FRAUD IN CONNECTION WITH THE CAPITAL GROUP III, L.P. COMMODITY POOL AND OTHER INDIVIDUAL CUSTOMERS
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on July 3, 2000, it filed an injunctive action in the U.S. District Court for the Southern District of West Virginia against Robert L. Dormagen of Crossville, Tennessee, and Delta Financial Corporation, a West Virginia corporation, charging them with fraud and registration violations of the Commodity Exchange Act and the CFTC’s regulations. Dormagen was the sole principal of Delta. Neither Dormagen nor Delta Financial has ever been registered with the CFTC in any capacity.
The CFTC complaint alleges that Dormagen, formerly of Ravenswood, West Virginia, fraudulently operated a commodity pool called Capital Group III, L.P. (CGIII), a West Virginia limited partnership. According to the complaint, Dormagen, through this activities at CGIII, defrauded 11 pool participants of approximately $175,300 by misappropriating and converting pool funds, distributing false account statements, and making material misrepresentations to pool investors. The complaint further alleges that Dormagen commingled pool funds with non-pool property, and failed to provide pool investors with monthly account statements from a commodity futures clearing firm, as required by the CFTC’s regulations.
In addition to his activities with CGIII, the complaint charges that Dormagen acted as an unregistered futures commission merchant by soliciting and accepting at least $165,000 from five individuals to trade commodity futures and options on their behalf. Dormagen allegedly defrauded these five individuals by misappropriating and converting their funds, distributing false account statements to them, and commingling their funds with the funds of non-commodity futures customers, according to the complaint. Delta Financial is charged with acting as an unregistered futures commission merchant and defrauding at least one individual based on Dormagen’s actions as an agent of Delta Financial.
Finally, the complaint alleges that Dormagen, acting as an agent and principal of Delta Financial, defrauded a single individual who sought to trade $500,000 through Dormagen. Dormagen used at least $125,000 of this customer’s funds in unauthorized commodity futures and options trading, without the customer’s knowledge, according to the complaint.
The CFTC is seeking preliminary and permanent injunctive relief, disgorgement and restitution, and civil monetary penalties of not more than the higher of $110,000 (or $100,000 for violations prior to November 27, 1996) or triple the monetary gain to the defendants, among other remedial relief.
The West Virginia State Auditor’s Office-Securities Division, the Office of the Jackson County (West Virginia) Prosecutor, and the West Virginia State Police provided valuable assistance to the CFTC during the investigation of this matter.
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