For Release: July 13, 2006
Federal Court Finds Ohio Corporation Carnegie Trading Group, Ltd., Inc. and its President, John Glase, Liable for Acts of Employees in Fraudulent Sales Solicitation Case Brought by U.S. Commodity Futures Trading Commission
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today that the Honorable Judge Donald C. Nugent of the U.S. District Court for the Northern District of Ohio issued a final judgment against Cleveland-based Ohio corporation Carnegie Trading Group, Ltd., Inc. (Carnegie Trading) and its President, John Glase, of Bay Village, Ohio, finding them liable for fraud in connection with the solicitation of and trading recommendations to commodity options customers of Carnegie Trading employees John Hollenbaugh and Reid Henshaw, of North Lawrence and Barberton, Ohio, respectively.
This order, entered by Judge Nugent on June 27, 2006, follows a non-jury trial held in June 2005 stemming from a CFTC complaint filed on July 23, 2004, in which Hollenbaugh and Henshaw were named as defendants. (See CFTC News Release 4966-04, August 9, 2004.)
Carnegie Trading and John Glase Found Liable for the Violations
The order, entered on June 27, 2006 by Judge Nugent against Carnegie Trading and Glase, focused on Hollenbaugh’s and Henshaw’s solicitations while they were employed at Carnegie Trading’s Canal Fulton, Ohio, branch office. Judge Nugent found that Hollenbaugh and Henshaw misrepresented the profit potential and the risks of trading options by, for example, telling potential customers that they could earn 150 to 200 percent in a couple of weeks with non-existent risk. Judge Nugent also found that Hollenbaugh’s and Henshaw’s touting of enormous profits -- coupled with their failure to inform customers that year-after-year approximately 74 to 94 percent of Carnegie Trading’s customers lost money – amounted to fraud. In addition, the judge found that Carnegie Trading employees distributed an unbalanced and misleading advertisement regarding a proposed trading program to certain customers. Because Hollenbaugh and Henshaw committed these violations within the scope of their employment with Carnegie Trading, Judge Nugent found Carnegie Trading liable.
According to the order, Carnegie Trading’s president, Glase, clearly exercised general control over the company and its branch offices throughout the relevant time period, but he failed to maintain any meaningful controls to detect and deter violations at the Canal Fulton branch office. The order holds Glase liable for the violations of the Commodity Exchange Act (CEA) as a controlling person of Carnegie Trading, as well as for his failure to supervise Hollenbaugh and Henshaw with the required diligence.
For relief, Judge Nugent ordered Carnegie Trading and Glase to pay restitution of $229,971.31 to nine Carnegie Trading customers who testified at the trial, to disgorge $32,850 in ill-gotten gains from 2002 and 2003, and to pay a civil monetary penalty of $98,550.
Hollenbaugh and Henshaw Settled Prior to Trial
Prior to trial, Hollenbaugh and Henshaw entered into settlement agreements with the CFTC in which they consented to findings that they violated the anti-fraud provisions of the CEA by their fraudulent solicitation of -- and trading recommendations to -- customers in 2002 and 2003.
Following the trial, at which they testified on behalf of the CFTC, the court entered separate consent orders of permanent injunction against Hollenbaugh and Henshaw, which permanently enjoin them from committing future commodity fraud, prohibit them from engaging in any commodity futures- or options-related activity in the future, and find them jointly and severally liable for restitution subject to offset by Carnegie and Glase. The settlements also require Hollenbaugh and Henshaw to pay civil monetary penalties of $50,000 and $75,000, respectively.
The following CFTC Division of Enforcement staff were responsible for this case: Susan Gradman, Frank Ferrara, Michael Tallarico, William Janulis, Venice Bickham, Scott Williamson, and Rosemary Hollinger.
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The CFTC encourages members of the public to bring to our attention any suspicious activities involving futures or commodity options, including matters involving foreign currency (forex) investments or suspicious Internet websites.
In addition, the CFTC publishes a series of Consumer Advisories alerting the public to warning signs of possible fraudulent activity and offering precautions individuals should take before committing funds.
Last Updated: December 26, 2017