For Release: March 21, 2002
CFTC SETTLES FRAUD ACTION AGAINST WEST VIRGINIA COMMODITY POOL OPERATOR
Defendants Robert L. Dormagen and Delta Financial Corporation Permanently Barred From Trading Futures or Options
WASHINGTON, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) announced today the settlement of an injunctive enforcement action against Robert L. Dormagen of Ravenswood, West Virginia, and his company, Delta Financial Corporation (Delta). The CFTC complaint, filed on July 3, 2000 in the United States District Court for the Southern District of West Virginia, alleged that Dormagen defrauded investors of the Capitol Group III, L.P. commodity pool by misappropriating the pool’s funds, and that both Dormagen and Delta defrauded six other individuals in connection with trading futures or options with their funds (see CFTC News Release 4418-00, July 6, 2000).
Specifically, the complaint alleged that from July 1996 through July 1999, Dormagen solicited $175,300 from eleven pool investors and misappropriated nearly all of the pool’s funds. He also sent false account statements to the pool investors and committed other regulatory violations in operating Capitol Group III, L.P., according to the complaint. During the same period, Dormagen and Delta allegedly solicited approximately $165,000 from five other individuals to trade futures or options on their behalf. Dormagen and Delta then either lost those funds trading without informing the customers, or misappropriated their funds and sent them false account statements, the complaint alleged. In addition, the complaint alleged that Dormagen and Delta used about $125,000 of another investor’s funds to trade futures or options on his behalf without this customer’s knowledge or authorization, when the customer had been told by Dormagen that his funds would only be used for securities investments.
The Dormagen and Delta, in consenting to the entry of the CFTC settlement order, neither admitted nor denied the allegations in the complaint or the order’s findings. The order finds that the defendants violated the provisions of the Commodity Exchange Act alleged in the complaint, enjoins them from further violations of the Act's anti-fraud provisions, prohibits them from trading on any futures market for themselves or others, and bars them from seeking registration with the CFTC or acting in any capacity requiring CFTC registration.
In a criminal action arising out of the same facts and filed last year in the Southern District of West Virginia, Dormagen pleaded guilty to one count of unlawful monetary transaction and false statement under oath. He was sentenced to four years in federal prison and ordered to pay restitution of over $850,000. (United States v. Robert L. Dormagen, Case No. 2:01-00093, December 3, 2001). He is currently incarcerated. In the CFTC's case, the court noted that Dormagen’s customers were already covered by the restitution award in the criminal action and noted that if circumstances had been otherwise, a restitution award of $391,129.26 in the CFTC's case would have been appropriate.
Trial counsel for the CFTC in this action was W. Derek Shakabpa. The United States Attorney’s Office for the Southern District of West Virginia, Civil Division, acted as local counsel and provided valuable assistance to the CFTC in prosecuting this matter.
Susan B. Bovee, Associate Director
Division of Enforcement
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