Release: 4187-98 (CFTC Docket #94-14)
For Release: September 4, 1998
CFTC ADMINISTRATIVE LAW JUDGE (ALJ) FINDS THAT JERRY W. SLUSSER, HANS J. BRINKS, AND TWO INDIANA CORPORATIONS VIOLATED THE ANTI-FRAUD PROVISIONS OF FEDERAL COMMODITY LAW
ALJ Also Finds Registration Violations and Issues Cease and Desist Orders, Imposes Permanent Trading Bans, Revokes Registrations, and Imposes Civil Monetary Penalties Totalling $10,770,000
WASHINGTON -- In an Initial Decision issued on August 24, 1998, Commodity Futures Trading Commission Administrative Law Judge (ALJ) George H. Painter found that, during 1989, Jerry W. Slusser, formerly of Indianapolis, Indiana, and currently of Las Vegas, Nevada, and First Republic Financial Corporation (FRFC) (formerly known as Vancorp Financial Services) of Indianapolis, Indiana, misappropriated nearly $6 million of customer funds, made material misrepresentations and omissions of facts to customers, and failed to register with the Commission and make required disclosures in their operation of two commodity pools.
The ALJ found Slusser, the owner and chairman of the board of FRFC and a registered associated person, liable for FRFC's violations as a controlling person of the firm and that another of Slusser's corporations, First Republic Trading Corporation (FRTC), a registered introducing broker also of Indianapolis, aided and abetted FRFC's and Slusser's fraud.
The ALJ also found that FRFC illegally acted as a commodity pool operator (CPO) without being registered with the CFTC, that Slusser illegally acted as an associated person of a CPO without registration, and that FRFC violated CFTC regulations governing the operation of commodity pools and required disclosures to pool participants.
ALJ Orders $10 Million Fine Against Slusser, FRFR, and FRTC
The ALJ ordered Slusser, FRFC, and FRTC to cease and desist from further violations, permanently banned them from trading commodity futures, revoked the registrations of First Republic Trading and Slusser, and ordered Slusser, FRFC, and FRTC --jointly and severally -- to pay a $10 million civil monetary penalty, the largest ever assessed in a litigated Commission administrative proceeding.
ALJ Orders Hans Brinks to Pay a $770,000 Civil Monetary Penalty
The ALJ also held Hans J. Brinks, a German citizen of Berlin, Germany, who formerly resided in Indianapolis and has never been registered with the CFTC and who was also named as a respondent in the proceeding, in default for failure to appear at the hearing. The ALJ found that Brinks, as the president and chief operating officer of FRFC, had both committed fraud directly and aided and abetted Slusser's and FRFC's fraud. The ALJ ordered that Brinks cease and desist from further violations, permanently banned him from the industry, and ordered him to pay a $770,000 civil monetary penalty.
In assessing sanctions, ALJ Painter found that respondents "engaged in consistent and blatant violations of some of the most significant provisions of the law governing commodity futures transactions," that the "respondents pilfered millions of dollars from customers, using the commodities markets to carry out their scheme," and that their wrongdoing was "purposeful, and their scheme was multi-faceted and complex."
The Commission's six-count administrative complaint in Docket No. 94-14 was filed on May 26, 1994, and a hearing was held on October 27, 1997 (see CFTC News Release #3766-94, May 27, 1994).