Release #4254-99 (99-Civ. 2375)
For Release: April 13, 1999
CFTC OBTAINS RESTRAINING ORDER AGAINST JOSEPH P. MCGIVNEY, SR., EDWIN A. KOZIOL, JR. AND SIX CORPORATIONS IN ILLINOIS ACCUSED OF COMMODITY FRAUD
The CFTC Complaint Alleges that the Defendants Committed Fraud in Soliciting and Accepting Funds for a Series of Commodity Pools and a Commodity Trading Hotline, and for Acting Without the Required Commission Registration
WASHINGTON — The Commodity Futures Trading Commission (CFTC) announced today that on April 12, 1999, it filed an eight-count civil complaint in the U.S. District Court for the Northern District of Illinois alleging that Joseph P. McGivney, Sr. (McGivney) of Midlothian, Illinois, Edwin A. Koziol, Jr. (Koziol) of Oak Lawn, Illinois, and a series of six corporations in which they were officers, violated the anti-fraud provisions of the Commodity Exchange Act (CEA) and CFTC regulations. According to the complaint, McGivney is a former CFTC registrant whose registrations as a commodity pool operator (CPO) and associated person were revoked by the CFTC in December 1990, after a civil injunction was entered against him in an action brought by the Securities and Exchange Commission. McGivney is currently not registered with the CFTC in any capacity. The complaint also seeks to recover funds that are directly traceable to the fraud from two other individuals, Leslie Wnukowksi of Midlothian, Illinois, and Marita McGivney of Orland Park, Illinois, and two other corporations.
The complaint alleges that McGivney operated a "Ponzi" scheme in which public investors were defrauded. According to the complaint, to effect the scheme, McGivney incorporated a series of companies, including defendants Capital Strategies, Inc., JPM2, Inc., JPM Commodities, Inc. and JPM Traders, Inc. (the Corporations), through which he solicited money from individual investors under the guise of so-called "loan" agreements between the Corporations and the investors. The agreements provided that investors would receive a pro-rata share of profits from commodity futures trading purportedly being conducted by the Corporations. Since January 1993, McGivney and the Corporations allegedly accepted nearly $1 million from at least 72 investors pursuant to these "loan" agreements.
Specifically, the complaint alleges that McGivney and the Corporations defrauded commodity investors by fraudulently soliciting funds and that they are acting, and have acted, as unregistered CPOs, in violation of section 4m(1) of the CEA. The complaint also alleges that McGivney, Koziol, and the Corporations defrauded commodity investors by misappropriating investors' funds and mailing false statements to investors, in violation of sections 4b(a)(i), 4b(a)(ii) and 4o(1) of the CEA. McGivney and the Corporations allegedly have repaid a fraction of the funds invested, and misappropriated the remaining investor funds for their own use – a portion of which the complaint alleges were diverted to Wnukowski, Marita McGivney and others.
The complaint further alleges that McGivney and the Corporations, while acting as CPOs, failed to operate their commodity pools as separate legal entities and commingled investor funds with the property of others, in violation of CFTC regulation 4.20; and failed to distribute a disclosure document to commodity pool investors, in violation of CFTC regulation 4.21(a).
In addition, the complaint alleges that McGivney and three of the corporations he formed, JPM Investments, Inc., JPM Traders, Inc. and JPM, Inc., have advertised and operated a daily telephone hotline, which disseminated specific commodity futures trading recommendations since at least 1997, without being registered with the CFTC, as required by federal commodity laws. Finally, the complaint alleges that McGivney and these three corporations, while acting as CTAs, failed to distribute a disclosure document to clients or prospective clients, in violation of CFTC regulation 4.31(a).
Based upon the allegations in the complaint and evidence presented by the CFTC, on April 12, 1999, the Honorable Judge Joan B. Gottschall issued a statutory restraining order freezing the assets of the defendants, prohibiting the defendants from destroying any of their books and records, requiring them to make their books and records available for inspection and copying by the CFTC, and temporarily prohibiting the defendants from soliciting investments in commodity futures or engaging in any futures-related activities. The CFTC also is seeking preliminary and permanent civil injunctions, an accounting, disgorgement of all benefits received, restitution to the defrauded investors and civil penalties. A hearing on the CFTC's request for preliminary relief was set for April 22, 1999.