Release: # 4235-99 (CFTC Docket No. 99-4)
For Release: February 4, 1999
CFTC ADDS ROBERT C. ROSSI AS RESPONDENT
IN ENFORCEMENT ACTION
Amended Complaint Charges Rossi Involved in Scheme to Misappropriate
Certain Profitable Energy Futures Trades of Coastal Corporation and Wrongfully Allocate Them
to Other Accounts
WASHINGTON – The Commodity Futures Trading Commission (CFTC) announced today the filing of an amendment to an administrative complaint filed December 22, 1998, to add Robert C. Rossi (Rossi) as a respondent. The original complaint alleged that Steven G. Soule (Soule), a former employee of Coastal Corporation (Coastal) in its futures trading division, violated the anti-fraud provisions of the Commodity Exchange Act (CEA), specifically sections 4b(a)(i), (ii), and (iii), by engaging in a scheme in which energy futures trades made on behalf of Coastal were misappropriated and wrongfully allocated to accounts controlled by respondents Kyler F. Lunman II (Lunman) and his company, Hold-Trade, Inc., a.k.a. Hold Trade, Ltd. (Hold Trade). This amendment was coordinated with the U.S. Department of Justice's commencement of a criminal action today against Rossi, Soule, and Lunman in Texas based on the same conduct.
According to the original complaint, Soule and a telephone clerk carried out the wrongful allocations, and Lunman and Hold Trade furthered the scheme. The amended complaint alleges that Rossi committed fraud in violation of section 4b in two fashions: pursuant to section 13(a) of the CEA, by aiding and abetting the other respondents; and pursuant to section 13(b) of the CEA, as a controlling person of floor broker entities known as Refined Energy Executions, Inc. and Refine Executions, Inc. (collectively, Refined) who knowingly induced Refined to commit violations of the CEA.
Specifically, the amended complaint alleges that Rossi, while knowing of the wrongful allocation scheme, the manner in which it was being conducted, and the persons and entities who were conducting it, assisted the scheme by permitting the use of Refined's facilities and telephone clerk. According to the complaint, Rossi received payments resulting from the scheme, and also directed that payments be made to or on behalf of certain participants in the scheme, including Soule.
The CFTC's amended complaint against Soule, Lunman, Hold Trade, and Rossi institutes a public administrative proceeding to determine if the allegations in the complaint are true, and if so, whether sanctions should be imposed. Possible sanctions include: an order directing the respondents to cease and desist from violating the relevant provisions of the CEA and CFTC regulations; a permanent trading prohibition; civil monetary penalties not exceeding $100,000 for each violation; and restitution.
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In DOJ's related action, a federal grand jury sitting in Houston, Texas returned an 18-count indictment against Rossi, Soule, and Lunman, charging them with conspiracy, commodity fraud, wire fraud and money laundering in connection with the scheme.
Geoffrey Aronow, Director of the CFTC's Division of Enforcement, made the following statement:
We welcome this opportunity to work closely with the Department of Justice in investigating and bringing charges. We greatly appreciate the relationship of close cooperation that has developed with DOJ from our work on this case. The public is well-served when civil and criminal law enforcement authorities pool their expertise and resources to pursue wrongdoers.
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