For Release: November 19, 1999
Court of Appeals for the Second Court Issues a
Guttman v. CFTC, No. 98-4178, (2d Cir.)
WASHINGTON -- On November 16, 1999, of the United States Court of Appeals for the Second Circuit issued a decision denying the petition of Zoltan Guttman for review of sanctions imposed against him by the Commodity Futures Trading Commission ("Commission"). The Commission's order found that Guttman, former Chairman of the Board of the New York Mercantile Exchange, was secondarily liable for violating the Commodity Exchange Act and Commission regulations in connection with a series of noncompetitive commodity option trades effected on the Coffee, Sugar and Cocoa Exchange by Harold Magid in a trading account that he and Guttman jointly owned as tenants-in-common. The Commission's order affirmed most of the sanctions imposed by the administrative law judge but increased, sua sponte, the five-year trading ban to a permanent ban.
Guttman's petition for review challenged the Commission's liability findings that Guttman acted as Magid's principal and as his controlling person. Furthermore, the petition argued that the Commission erred in affirming the administrative law judge's ruling directing the attorneys to limit the cross examination of all witnesses to matters testified to on direct examination. The petition also made a number of challenges to the sanctions, arguing that the Commission abused its discretion by imposing sanctions higher than those in purportedly comparable cases. It further asserted that the Commission's announcement--made in an unrelated case by the Commission three days before Guttman filed his appeal from the ALJ's decision--that it intended to change its sanctions policy and to exercise its own judgment in imposing sanctions on appeal, rather than deferring to the sanctions assessed by the administrative law judge, deprived Guttman of his due process right to notice. The petition also argued that a permanent trading ban was an unduly harsh sanction because Guttman's liability was secondary, rather than direct.
The Court of Appeals considered each of these challenges and found them unpersuasive, holding that the weight of the evidence supported the Commission's conclusion that Guttman was liable for Magid's noncompetitive trading because he acted as the latter's principal and that the Commission acted within its discretion in its choice of sanctions. The Court also determined that the Commission properly found that the administrative law judge acted within his discretion in limiting cross examination.