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Outcome Objective 2.1
Outcome Objective 2.1: Violations of Federal commodities laws are detected and prevented.
- Annual Performance Goal 2.1: Violators have a strong probability of being detected and sanctioned.
Performance Measure 2.1.1
| Status: Effective Data Source: Agency documentation and reports maintained in the Practice Manager litigation management system. Verification: Internal reports on investigations and litigation documented and maintained in internal Enforcement systems. |
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| ACTUAL FY 2006 |
ACTUAL FY 2007 |
ACTUAL FY 2008 |
ACTUAL FY 2009 |
PLAN FY 2009 |
|---|---|---|---|---|
| 123 | 99 | 215 | 251 | 142 |
Lead Program Office
Division of Enforcement
Performance Analysis & Review
DOE met the performance target for FY 2009. Commencing in 2002, the complexity of Commission’s investigations has increased substantially over prior fiscal years (e.g., the Commission’s investigation of alleged energy market manipulation). As a result of these investigations, the complexity of the Commission’s cases filed and litigated also has increased substantially since FY 2002. The Commission’s FY 2009 Plan target for this performance measure took into account these factors, and historical performance and staffing constraints of DOE. Despite these factors and constraints, the Commission exceeded its target for this performance measure, in part due to the unprecedented market conditions during FY 2008 − FY 2009.
Performance Highlights
Although the Commission ordinarily conducts enforcement investigations on a confidential basis, in light of the unprecedented market conditions during FY 2008 − FY 2009, the Commission took the unusual step of publicly disclosing the existence of several ongoing investigations of market misconduct, including its National Crude Oil Investigation (NCI). Through the NCI, DOE is investigating practices surrounding the purchase, transportation, storage, and trading of crude oil and related derivative contracts. While the specifics of all ongoing Commission investigations remains confidential; the DOE remains focused on ensuring that the markets are properly policed for manipulation and abusive practices.
Performance Measure 2.1.2
| Status: Effective Data Source: Agency documentation and reports maintained in the Practice Manager. Verification: Final complaints for each litigation are recorded in internal Enforcement system and made public via the Commission’s Web site. |
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| ACTUAL FY 2006 |
ACTUAL FY 2007 |
ACTUAL FY 2008 |
ACTUAL FY 2009 |
PLAN FY 2009 |
|---|---|---|---|---|
| 38 | 41 | 40 | 50 | 50 |
Lead Program Office
Division of Enforcement
Performance Analysis & Review
DOE met the performance target for FY 2009. Commencing in 2002, the complexity of Commission investigations has increased substantially over prior fiscal years (e.g., the Commission’s investigation of alleged energy market manipulation). As a result of these investigations, the complexity of the Commission’s cases filed and litigated also has increased substantially since FY 2002. The Commission’s FY 2009 Plan target for this performance measure took into account these factors, DOE’s historical performance, and DOE’s staffing constraints.
Performance Highlights
Among the significant enforcement actions filed by the Commission during FY 2009 are the following:
- In re Dairy Farmers of America, Inc., et al.
On December 16, 2008, the Commission simultaneously filed and settled an administrative enforcement action against the dairy marketing cooperative Dairy Farmers of America, Inc. (DFA), its former Chief Executive Officer Gary Hanman, and its former Chief Financial Officer Gerald Bos finding that they tried to manipulate the Class III milk futures contract and exceeded speculative position limits in that contract. In re Dairy Farmers of America, Inc., et al., CFTC Docket No. 09-02 (CFTC filed Dec. 16, 2008); - CFTC v. Lee, et al.
On November 18, 2008, the Commission filed a civil enforcement action against David P. Lee, a former trader for the Bank of Montreal (BMO), charging him with fraud for mis-marking and mis-valuing the bank’s natural gas options book and deceiving the bank. The complaint also charges Optionable, Inc., and its former senior executives Kevin Cassidy and Edward O’Connor, with deceiving BMO. Robert B. Moore Jr., Lee’s former supervisor, is also named as a defendant. CFTC v. Lee, et al., No. 08 CIV 9962 (S.D.N.Y. filed Nov. 18, 2008); - CFTC v. Agape World, Inc.
On January 27, 2009, the Commission filed a civil injunctive action against Nicholas Cosmo, Agape World, Inc., and Agape Merchant Advance LLC, charging them with defrauding customers of tens of millions of dollars that were solicited for the stated purpose of investing in bridge loans and merchant advances, but instead defendants misappropriated a significant portion of those funds to engage in unauthorized commodity futures trading. CFTC v. Agape World, Inc., et al., No. 09 0351 (E.D.N.Y. filed Jan. 27, 2009); - CFTC v. Walsh, et al.
On February 25, 2009, the Commission filed a civil injunctive action against Stephen Walsh and Paul Greenwood, charging them with misappropriating at least $553 million from commodity pool participants in connection with entities they owned and controlled, defendants Westridge Capital Management, Inc., WG Trading Investors, LP, and WGIA, LLC. CFTC v. Walsh, et al., No. 09 CV 1749 (S.D.N.Y. filed Feb. 25, 2009); - CFTC v. Billion Coupons, Inc., et al.
On February 18, 2009, the Commission filed a civil injunctive action against Marvin Cooper and his company Billion Coupons, Inc., charging them with operating a Ponzi scheme that involved fraudulently soliciting approximately $4.4 million from more than 125 customers—all of whom are deaf—for the sole purported purpose of trading forex. CFTC v. Billion Coupons, Inc., et al., No. CV09-00069 JMS LEK (D. Haw. filed Feb. 18, 2009); - CFTC v. Barki LLC, et al.
On March 17, 2009, the Commission filed a civil enforcement action against Barki, LLC and Bruce C. Kramer, charging them with fraudulently soliciting, since at least June 2004 through February 2009, at least $40 million from at least 70 customers to trade forex, misappropriating at least $30 million of customer funds to pay purported profits, return principal to customers, and for personal expenses, including the purchase of a horse farm for more than $1 million, a Maserati sports car and other luxury cars, artwork, and extravagant parties. CFTC v. Barki LLC, et al., No. 3:09-cv-00106-GCM (W.D.N.C. filed March 17, 2009); - CFTC v. SNC Asset Management, Inc., et al.
On June 9, 2009, the CFTC filed a civil injunctive action against SNC Asset Management, Inc., SNC Investments, Inc., Chief Executive Officer (CEO) Peter Son, and Chief Financial Officer (CFO) Jin K. Chung, charging them with operating an $85 million fraudulent forex Ponzi scam involving approximately 500 customers, who were primarily solicited from the Korean community of the San Francisco Bay area, CFTC v. SNC Asset Management, Inc., et al., No. 09-2555PJH (N.D. Cal. filed June 9, 2009); - In re Interbank FX, LLC
On June 29, 2009, the Commission simultaneously filed and settled an administrative enforcement action against registered FCM Interbank FX, LLC (Interbank), finding that it violated rules designed to protect the confidential personal information of consumers. In re Interbank FX, LLC, CFTC Docket No. 09-11 (CFTC filed June 29, 2009); - In re Keane
On October 6, 2008, the Commission simultaneously filed and settled an administrative enforcement action against Brian Keane, a former NYMEX clerk, for fraudulently allocating favorable trades that had been filled for customers to an account from which he benefited. In re Keane, CFTC Docket No. 09-01 (CFTC filed Oct. 6, 2008); - In re Otis, et al.
On December 16, 2008, the Commission simultaneously filed and settled an administrative enforcement action against Frank Otis, former President and CEO of a DFA subsidiary, and Glenn Millar, former Executive Vice President of the subsidiary, finding that they aided and abetted DFA’s speculative position violation by directing trading of Class III milk futures in an internal sub-account designated for the DFA subsidiary. (See discussion, above, of the related enforcement action, In re Dairy Farmers of America, Inc., et al., CFTC Docket No. 09-02 (CFTC filed Dec. 16, 2008).) The Commission assessed sanctions, including civil monetary penalties (Otis $60,000 and Millar $90,000). In re Otis, et al., CFTC Docket No. 09-03 (CFTC filed Dec. 16, 2008); and - In re Moster
On February 11, 2009, the Commission simultaneously filed and settled an administrative enforcement action against Michael Moster, a former proprietary trader with the Bank of America (BOA), finding that he committed fraud by submitting false reports to BOA. The Commission assessed sanctions including: a cease and desist order; permanent trading and registration bans; and a $360,000 civil monetary penalty. In re Moster, CFTC Docket No. 09-08 (CFTC filed Feb. 11, 2009).
Performance Measure 2.1.3
| Status: Effective Data Source: Agency documentation and reports maintained in the Monthly Status Report, Practice Manager, Commission Proceedings Bulletin, and press releases. Verification: Final orders for each litigation recorded in internal Enforcement system. |
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| ACTUAL FY 2006 |
ACTUAL FY 2007 |
ACTUAL FY 2008 |
ACTUAL FY 2009 |
PLAN FY 2009 |
|---|---|---|---|---|
| 100% | 98% | 97% | 98% | 98% |
Lead Program Office
Division of Enforcement
Performance Analysis & Review
Performance target was almost met for FY 2009. During the FY 2009, DOE closed a total of 32 enforcement cases. In all but two of these closed cases, the Commission obtained sanctions (e.g., civil monetary penalties, restitution and disgorgement, cease and desist orders, permanent injunctions, trading bans, and registration restrictions) against one or more of the respondents/defendants.
Staff are required to submit all final orders for each litigation as part of closing activities for their files. These orders are recorded in internal Enforcement systems (Practice Manager).
Performance Highlights
Among the significant enforcement actions closed by the Commission during FY 2009 are the following:
- In re Dairy Farmers of America, Inc., et al., CFTC Docket No. 09-02 (CFTC filed Dec. 16, 2008) (attempted manipulation and speculative limits violations: sanctions assessed include a $12 million civil monetary penalty; a five-year futures trading bar against Hanman and Bos; two-year speculative trading bar against DFA; and order that DFA comply with certain undertakings, including: 1) retaining a monitor to ensure that DFA does not engage in speculative trading and that DFA’s Cheese Spot Call market cheese purchases are made for legitimate business purposes; 2) implementing a compliance and ethics program; and 3) providing future cooperation to the CFTC).
- In re Interbank FX, LLC, CFTC Docket No. 09-11 (CFTC filed June 29, 2009) (violations arising from disclosure of non-public customer information: sanctions assessed include a cease and desist order; $200,000 civil monetary penalty; and an order that Interbank comply with its undertaking to establish, implement, and maintain a documented comprehensive security program that addresses the protection of consumer information, and to obtain an assessment of that program from a certified security professional).
- In re Keane, CFTC Docket No. 09-01 (CFTC filed Oct. 6, 2008) (fraudulent trade allocation: sanctions assessed include a permanent trading ban and a $90,000 civil monetary penalty).
- CFTC v. Heierle, et al., No. 07-22396 CIV-LENARD/TORRES, Default Judgments (S.D. Fla. entered Dec. 19, 2008) (commodity pool fraud: sanctions assessed include permanent injunctions, approximately $3.5 million in restitution, and $6 million in total civil monetary penalties).
- CFTC v. Hudgins, No. 608CV187, Consent Order (E.D. Tex. entered April 2, 2008) (commodity pool fraud: sanctions assessed include permanent injunction, approximately $71 million in restitution, and a $15 million civil monetary penalty).
- In re ADM Investor Services, Inc., CFTC Docket No. 09-10 (CFTC filed March 26, 2009) (FCM failure to supervise: sanctions assessed include a cease and desist order; $200,000 civil monetary penalty; and an order to comply with certain undertakings, including ADMIS’s agreement to implement enhanced procedures to assure adherence to rules governing post execution allocation of trades).
- CFTC v. Renaissance Asset Management, LLC, et al., No. 1:07-CV-0200, Consent Orders (N.D. Ga. entered Feb. 13, 2009) (commodity pool fraud: sanctions assessed include permanent injunctions, $21.2 million in restitution, and a $5.8 million civil monetary penalty).
Performance Measure 2.1.4
| Status: Effective Data Source: Cooperating authorities provide notice to DOE of related civil complaints, criminal information, and indictments. Cooperative enforcement matters are noted in Practice Manager. Verification: Internal Enforcement system and the U.S. Judiciary Public Access to Court Electronic Records Services Center. |
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| ACTUAL FY 2006 |
ACTUAL FY 2007 |
ACTUAL FY 2008 |
ACTUAL FY 2009 |
PLAN FY 2009 |
|---|---|---|---|---|
| 23 | 24 | 31 | 44 | 24 |
Lead Program Office
Division of Enforcement
Performance Analysis & Review
Performance target was met for FY 2009. The Commission believes that its performance in cooperative criminal and civil enforcement was effective. During the rating period, the Commission continued to devote significant resources to cooperative enforcement with other criminal and civil law enforcement authorities. The performance of DOE, during FY 2009, was influenced by the recent and current financial downturn, which has revealed a number of fraudulent schemes, including Ponzi schemes that could stay afloat only during periods of rising asset values.
Performance Highlights
Among the significant enforcement actions filed by the Commission during FY 2009, that included related action by other civil and/or criminal authorities, are the following:
- CFTC v. Lee, et al.
On November 18, 2008, the Commission filed a civil enforcement action against David P. Lee, a former trader for the BMO, charging him with fraud for mis-marking and mis-valuing the bank’s natural gas options book and deceiving the bank. The complaint also charges Optionable, Inc., and its former senior executives Kevin Cassidy and Edward O’Connor, with deceiving BMO. Robert B. Moore Jr., Lee’s former supervisor, is also named as a defendant. On the same day the Commission filed its enforcement action, the Manhattan District Attorney Office and the United States Attorney for the Southern District of New York also filed a criminal indictment against Cassidy. The Federal Reserve Board and the SEC also filed related actions. CFTC v. Lee, et al., No. 08 CIV 9962 (S.D.N.Y. filed Nov. 18, 2008); - In re Keane
In an extensive cooperative law enforcement effort, the Commission and the New York County District Attorney’s Office, conducted an investigation of abusive trading practices on the NYMEX resulting in a series of related civil and criminal actions. During FY 2009, this cooperative effort resulted in a Commission action against Brian Keane finding fraudulent trade allocations. In the related criminal matter, Keane pled guilty on March 20, 2008 to the felony state crime of violating the anti-fraud provision of New York’s General Business Law for the same underlying conduct and received a four-month jail sentence. In re Keane, CFTC Docket No. 09-01, Speaking Order (CFTC filed Oct. 6, 2008); - In re Moster
On February 11, 2009, the Commission simultaneously filed and settled an administrative enforcement action against Michael Moster, a former proprietary trader with BOA, finding that he committed fraud by submitting false reports to BOA. Based upon the same conduct, Moster pled guilty on September 18, 2008, to a one-count violation of making false entry into the books and records of a bank in the Southern District of New York and was ordered to pay $10 million in restitution to BOA. The CFTC’s order recognizes the restitution made in the context of the criminal case, and provides that Moster must pay and satisfy any criminal restitution obligation before his payment of the CFTC civil monetary penalty. In re Moster, CFTC Docket No. 09-08, Speaking Order (CFTC filed Feb. 11, 2009); - CFTC v. Parish, et al.
On February 2, 2009, the Commission settled a civil injunctive action against Albert E. Parish and Parish Economics LLC, finding that they fraudulently solicited approximately $40 million in investments for their commodity futures pool. Parish is currently serving a sentence of more than 24 years in Federal prison for related criminal violations. In lieu of an award of restitution, the order recognizes that Parish will be subject to a criminal judgment restitution obligation in excess of $40 million. CFTC v. Parish, et al., No. 2:07-CV-01044-DCN, Consent Order (D.S.C. filed Feb. 2, 2009); - CFTC v. Hudgins
On March 13, 2008, the Commission filed a civil injunctive action against George D. Hudgins, charging him with fraudulently inducing members of the public to invest approximately $88 million in a commodity pool that traded on-exchange commodity futures and options contracts. The Commission settled its enforcement action in April 2009 (see discussion, above). In a related criminal action, Hudgins pleaded guilty on September 9, 2008, to wire fraud, embezzlement, and money laundering. He was sentenced by U.S. District Court Judge Thad Heartfield on March 13, 2009, to 121 months in Federal prison. CFTC v. Hudgins, No. 608CV187 (E.D. Tex. filed May 13, 2008); and - CFTC v. Crossfire Trading, LLC, et al.
On February 5, 2009, the Commission filed a civil injunctive action against Charles “Chuck” E. Hays and his company, Crossfire Trading, LLC, charging them with fraud and misappropriation in connection with a commodity pool Ponzi scheme. Hays was arrested by Federal authorities on the same day the Commission’s complaint was filed. CFTC v. Crossfire Trading, LLC, et al., No. 09 CIV 259 DWF/AJB (D. Minn. filed Feb. 5, 2009).
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