UNITED STATES OF AMERICA
Before the
COMMODITY FUTURES TRADING COMMISSION

Michael Clark and Dominick Auciello appeal from a decision of the Appeal Panel of the Board of Governors ("Appeal Panel") of Commodity Exchange, Inc. ("COMEX") suspending Clark for three months and fining him $25,000 and suspending Auciello for five months and fining him $30,000. The Appeal Panel assessed these sanctions based upon its conclusion that Clark and Auciello had violated exchange rules by engaging in prearranged and noncompetitive trading and that Auciello had violated exchange rules by submitting falsified trading cards during the exchange investigation. Clark and Auciello challenge the procedures followed by COMEX in reaching its decision. In addition, Auciello contends that the exchange decision is not supported by substantial evidence. Finally, Clark has filed numerous post-appeal motions and further argues that there was an illegal agreement between the New York Mercantile Exchange ("NYMEX"), parent of COMEX, and his former counsel which prohibited his former counsel from representing Clark.

As explained more fully below, we affirm the exchange's decision in its entirety because there is substantial evidence to support the exchange's liability findings. In addition, we find that, even though some of the exchange procedures were not fully consistent with applicable COMEX rules, Clark and Auciello have not demonstrated sufficient prejudice to warrant vacating the Board of Governors' decision. Finally, we conclude that, although NYMEX and Clark's former counsel entered into an agreement prohibiting Clark's former counsel from representing Clark in this matter, the agreement did not deny Clark his due process rights or prejudice him in pursuing his appeal to the Commission.¹

BACKGROUND

Complaint

During the relevant time period, Clark and Auciello were floor brokers and members of COMEX who traded for customer accounts as well as their own accounts.² The complaint underlying this appeal ( the "First Complaint") was issued by the COMEX Committee on Business Conduct on March 11, 1991 (COMEX Docket Nos. 02/516/1991 and 03/516/1991).³ Count I of the complaint alleged that, in ten trading sequences executed on December 27, 1989 (Sequences 1-3), December 28, 1989 (Sequences 4-6), and January 2, 1990 (Sequences 7-10), Auciello and Clark engaged in prearranged, noncompetitive trading; executed trades for accounts in which they had a direct interest opposite a customer order; withheld customer orders from the floor for the benefit of other floor members; and failed to record trades on their trading cards in the exact chronological order of occurrence. The complaint alleged that the foregoing conduct by Clark resulted in violations of COMEX Rules 4.21 (noncompetitive trading), 4.24(e) (improper cross trading), 4.27 (prearranged trading), 4.34 (withholding orders), and 4.80 (improper carding of trades). Auciello was alleged to have violated these rules and Rule 4.31(a) (trading ahead of customer orders). The complaint also alleged that Auciello submitted falsified trading cards to the COMEX Compliance Department during its investigation of the trades in question, in violation of COMEX Rules 3.13(a)(i) and (a)(iii) (misconduct) and 4.97 (failure to produce records).

An addendum to the complaint, which lists transactions on the trading cards involved in each sequence, lists 27 transactions by Clark in Sequence 1 executed opposite Auciello and five other traders and 33 transactions by Auciello executed opposite Clark and three other traders. The Sequence 1 transactions range in size from one to 50 contracts. The addendum also lists trades in Sequence 1 by three other individuals not charged in this action.

The other sequences are much simpler. Sequence 2 involved one trade between Clark and Auciello and three sales by Clark for his own account against three other traders. Sequence 3 involved three transactions between Clark and Auciello for their personal accounts. Sequences 4-10 are generally similar to Sequences 2-3. All trades in all sequences involved COMEX's silver futures contracts, and all but a handful of trades involved the contract expiring in March 1990.

Auciello and Clark filed answers denying the allegations in the First Complaint. On July 25, 1991, before a hearing on the First Complaint was held, the COMEX Committee on Business Conduct issued a Second Complaint (COMEX Docket No. 24/615/91) against Clark alone. In that complaint, COMEX alleged that, based on two NYMEX disciplinary actions unrelated to the conduct at issue in the instant action, Clark was subject to disciplinary proceedings under COMEX Rule 3.13(b)(iii). That rule authorizes COMEX to take disciplinary action against any COMEX member sanctioned by another contract market. On August 12, 1991, Clark filed an answer admitting in part and denying in part the allegations of the Second Complaint.

Exchange Hearing

On December 4 and 5, 1991, a hearing was conducted before the Supervisory Committee "B" Hearing Panel (the "Hearing Panel").⁴ At the hearing, Clark and Auciello moved to dismiss the First Complaint on the ground that the hearing had not been scheduled within 120 days of service of the complaint as required by COMEX Rule 8.37. The Hearing Panel denied the motion. Auciello also objected to the joint scheduling of the hearing on the two complaints. Although the Hearing Panel granted Auciello's motion to sever, the same Hearing Panel heard the two complaints.

Alfred Marrazzo, a senior COMEX investigator, testified regarding the wrongdoing underlying COMEX's disciplinary action (First Complaint) against Clark and Auciello. Marrazzo explained that the investigation was initiated after he had conducted a review of the daily brokerage recaps for December 27, 1989, indicating that ten silver futures trades between Clark and Auciello had been executed noncompetitively. (Transcript of Hearing before the Supervisory Committee "B" Hearing Panel, hereinafter "Tr.", at 4.) Marrazzo also examined trading cards, order tickets, brokerage submission forms, Auciello's and Clark's account statements, and the exchange price register. Based on concerns raised by these records, COMEX asked Clark and Auciello to submit their trading records for that day and, later, for other days. (Tr. at 41, 89.)

The bulk of Marrazzo's testimony centered on the lengthy Sequence 1, and most of his testimony concerned trading card irregularities. According to Marrazzo, silver futures prices declined sharply during a ten-minute period (10:21-10:31) on December 27, 1989, the period during which Sequence 1 trades were executed. (Tr. at 44.) During this period, Auciello and Clark conducted a large number of trades. For instance, through his execution of 14 trades, Clark bought 123 silver futures contracts, including 42 lots for customer orders and 81 lots for his own account. (Tr. at 51.) During the same period, Clark also sold 150 lots, 70 of which were for customer orders and 80 of which were for himself. With the exception of one cross trade, each of Clark's 14 purchases (including two that he did not record) were executed opposite Auciello. (Tr. at 52-53.) About the same time, Auciello filled orders to sell 227 contracts, of which 220 were sell-stop orders and 42 were limit orders. (Tr. at 46.) Thirteen of the 14 sales that Auciello executed for his own account during this period were effected through trades opposite Clark. (Tr. at 48.)

In testifying about the allegedly violative trading described as Sequence 1 in the complaint, Marrazzo stated that exchange staff noted numerous irregularities in Clark's and Auciello's trading records. For instance, Marrazzo testified that trades executed between Clark and Auciello did not appear in the same chronological order on their personal trading cards (Tr. at 72); trades were recorded in different colored ink (Tr. at 54); and there were obliterations on Clark's trading cards such as size changes, time changes, and price changes. According to Marrazzo, Clark made an $18,000 profit from the Sequence 1 trading, and Auciello made $13,000. (Tr. at 94.) He also testified that, although Clark's customer order tickets typically referred to the trading card number from which the trades were allocated, many of Clark's trades with Auciello which Clark had recorded with a different pen were annotated with the letter "A." (Tr. at 54-62.)

Marrazzo also testified that the pre-printed lines and ink tone on Auciello's cards 9, 10, and 11 differed from those contained on Auciello's cards 1-8 and 12-25. (Tr. at 66-67.) He testified that, when he asked Auciello if he rewrote cards 9, 10, and 11, Auciello categorically denied rewriting the cards and claimed that the cards and all of the trades had been recorded in the proper chronological order. (Tr. at 88, 206-07.) Marrazzo further noted that brokerage forms and order tickets that were prepared for trades that Auciello recorded on trading cards 9, 10, and 11 indicated that the trades on the forms were transcribed from trading cards labeled 9, 10, 10A, 10B, and 11. (Tr. at 65-72.) ⁵

In the same vein, Marrazzo testified that the only trades contained on Auciello's brokerage forms labeled 10B were 12 trades for sales opposite Clark. The majority of these trades matched the trades Clark had recorded on his cards in a different colored pen and that were labeled "A" on Clark's order tickets. (Tr. at 71-72.) Brokerage form 10B was time-stamped approximately five hours after the purported occurrence of the trades.

On cross-examination, Marrazzo conceded that he did not have the ink on the trading cards examined by an expert; that other traders have changed a number or a letter on a trading card without engaging in wrongdoing; and that he did not interview all of Clark's employees about whether they had made any of the changes on the cards even though the cards contained different handwriting. (Tr. at 174-75, 178.) Marrazzo also admitted that he could not tell how much money Clark had made or lost from trading for his personal account against Auciello's customers. (Tr. at 174.) Finally, Marrazzo conceded that, in fast markets, trading cards sometimes get out of sequence without any wrongdoing having occurred. (Tr. at 192.) Nevertheless, on redirect, Marrazzo explained the basis for his conclusion that Auciello and Clark had engaged in prearranged, noncompetitive trading:

(Tr. at 211.) Marrazzo testified that, when he questioned Clark about the discrepancies on his trading cards, Clark explained that he "tended to be sloppy, and during busy market conditions might have recorded some trades out of order." (Tr. at 91.)

Marrazzo also testified about other allegedly violative trading sequences which involved irregularities similar to the irregularities found in Sequence 1. For example, he testified that, in trading Sequence 5, ten trades had been added to the trading cards in an apparent effort to correct an error that Auciello made in filling a customer order. (Tr. at 104.) According to Marrazzo, the original cards for trading Sequence 5 indicated that the trades had initially been recorded in pencil and then rewritten in ink. (Tr. at 104-05.)

At the hearing, Auciello denied any wrongdoing as alleged in the First Complaint. (Tr. at 257-60.) Instead, he stated that all of his trades were conducted by open outcry; that he complied with all COMEX rules in executing his trades; that he did not withhold orders from the market; and that he did not rewrite his order tickets. When Auciello was questioned about the difference in appearance of the trading cards for Sequence 1, he testified that, after using cards 1 through 8 of one pad, he misplaced his pad at his booth and his clerk handed him another pad. (Tr. at 243.) Auciello further testified that the market became active and he used the alternate pad until the market quieted down and he left the ring to allocate trades. He testified that when he got to his booth his pad had been found and he "switched back to the numbered pad that [he] was using, rather than transcribe these trades onto the pad that [he] was using." (Tr. at 244.)

Auciello also testified that cards 9 through 11, as produced to the Compliance Department during the course of its investigation and admitted into evidence in the hearing, were his original trading cards. On cross-examination, he conceded that at one point he had advised Compliance that "these cards were not copied for the purpose of making any substitutions, but were copied to give my customer, Stotler, a copy of the trading cards, which they requested. In the confusion of a very active market, these copies were returned to my clerks and were accidentally substituted as the original. We have tried to locate the original cards, but have been unsuccessful." (Tr. at 269-70.) In testifying about the trades in Sequence 5, Auciello explained that the trades on his card had been recorded "out of sequence" because he may have missed an order or made an error. (Tr. at 253.)

At the hearing, Clark also denied any wrongdoing. (Tr. at 341.) In testifying about Sequence 1, Clark explained that the different ink tones resulted from his use of different pens, or varying pressure or from holding his cards at different angles. (Tr. at 358.) When Clark was asked about the different ink tones, he testified:

(Tr. at 358.) Clark also testified that he did not know why his trading cards had a circled A on them. (Tr. at 354.)

Hearing and Appeal Panel Decisions

Following the presentation of evidence, the Hearing Panel rendered a decision on the First Complaint on June 3, 1992. The Hearing Panel found that Clark and Auciello had engaged in five of the alleged noncompetitive trading sequences as alleged in Count I.⁶ Specifically, it found that Clark and Auciello knowingly and intentionally engaged in prearranged trading, at times to the disadvantage of their customers. The Hearing Panel also found that Clark and Auciello later attempted to hide their dishonesty, with Clark altering his trading cards to reflect the prearranged trades and Auciello completely rewriting his trading cards to incorporate the prearranged trades.

For Sequence 1, the Hearing Panel concluded that, in every instance in which Clark was holding a customer order, he withheld the customer order from the market for the benefit of Auciello. Id. at 14. The Panel did not credit Clark's explanation for the appearance of different ink tones on his trading cards. Instead, the Panel concluded that the different ink tones resulted from Clark's use of a different pen to add in trades at some time after the trades were purportedly executed. Id. at 13. In addition, the Panel rejected Auciello's explanation of the differences in appearance of his trading cards. It found that the ink tone and line configuration of Auciello's cards 9 through 11 were distinguishable from those of the other cards Auciello used immediately before and after the trading in Sequence 1. For this reason, the Panel concluded that Auciello used cards from the second pack of trading cards for the recordation of trades purportedly executed during the period. Id. at 7. The Panel also determined that Clark traded opposite his customer orders. It found insufficient evidence to conclude that Auciello withheld customer orders or traded opposite his customer orders.

The Panel determined that, in an effort to conceal his prearranged trading, Clark altered his December 27, 1989 trading cards. Id. at 13. The Panel found that an inspection of Clark's and Auciello's trading cards revealed numerous recordation discrepancies. Id. at 3-4, 8. In eight instances, all involving the execution of customer orders, the Committee concluded that the appearance of different ink tones on Clark's trading cards was the result of Clark's use of a different pen to add in the trades at some time after the trades were purported to have been executed. Id. at 5.

The Panel also found that evidence that trades had been inserted on Auciello's cards out of chronological order showed that the trades in Sequences 5, 8, and 9 were prearranged and noncompetitive. The Hearing Panel concluded that the purpose of Auciello's trades in Sequences 5, 9, and 10 was to resolve errors in his handling of customer orders. In Sequence 8, the Hearing Panel determined that trades by Auciello and Clark had been recorded out of chronological order, executed noncompetitively, and prearranged. Id. at 21. It further found that, in the Sequence 8 trades, Auciello traded for an account in which he had a direct interest opposite his customer's order and withheld that order from the market for Clark's benefit.

As to the allegations in Count II of the First Complaint, the Hearing Panel found that Auciello knowingly and intentionally took three trading cards, time-stamped them, and later used these cards to add in trades that had been agreed to outside the ring by Clark. Id. at 23-24. The Hearing Panel found that Auciello rewrote his cards so that his insertion of those trades would go undetected.

The Hearing Panel fined Auciello $30,000 and imposed a five-month suspension and a cease and desist order; it fined Clark $25,000 and imposed a three-month suspension and a cease and desist order.⁷

Clark and Auciello filed timely requests for review of the First Complaint by the COMEX Appeal Panel, both of which were granted. Clark's appeal was limited to the issue of the timeliness of the hearing under COMEX Rule 8.37. Auciello's appeal sought review of the substantive aspects of the Hearing Panel's decision as well as the procedural timeliness issue. Oral argument on the appeal was held before the Appeal Panel on August 18, 1992.

The Appeal Panel issued its decision on September 12, 1996, four years after the hearing, affirming both the liability findings and the sanctions of the Hearing Panel. In reviewing the five violative trading sequences, the Appeal Panel found that the record provided ample support for the detailed findings of the Hearing Panel. On the procedural issue, the Appeal Panel held that the failure to hold the hearing in strict compliance with Rule 8.37 was, at worst, harmless error and that respondents had waived their right to require strict compliance.

Appeal to the Commission

Auciello and Clark filed appeals to the Commission from the COMEX disciplinary action and petitioned to stay the sanctions. The Commission denied their petitions to stay.⁸

On appeal, Clark and Auciello largely ignore the merits of the case, focusing instead on perceived procedural flaws in the proceedings below. First, citing the four-year period between the hearing before the Appeal Panel and the issuance of its written decision, they argue that the exchange violated Commission Rule 8.19, which provides that an exchange appellate body shall issue its written decision "promptly." Auciello contends that the delay, in addition to violating Rule 8.19, has impeded his ability to mount an effective appeal because it is difficult for counsel to interview witnesses to underlying events which occurred six years ago. Auciello further argues that the common law principles of laches, estoppel, and waiver mandate dismissal of this appeal.

Secondly, both appellants assert that the Appeal Panel decision should be vacated because COMEX failed to file timely the appellate record of the exchange proceedings with the Commission in violation of Rule 9.21(a).⁹ Clark and Auciello also argue that the exchange's failure to comply with COMEX Rule 8.37, which provides that the exchange must schedule a hearing within 120 days after service of the complaint, is grounds for vacating the decision. Clark and Auciello further argue that the exchange improperly combined the two complaints.

Separately, Auciello contends that, in its memorandum to the Appeal Panel, the COMEX Compliance Committee violated Commission Rule 8.16(a) by improperly disclosing that he had submitted and withdrawn a settlement proposal at an earlier stage of the proceeding.¹⁰ Finally, in his sole argument reaching the merits, Auciello asserts that the COMEX Compliance Department was not held to the proper burden of proof because it did not establish the alleged violations by a preponderance of the evidence.

On appeal, Clark sets forth a variety of his own procedural arguments. Clark maintains that COMEX withheld exonerating evidence from the hearings and that under Commission Rule 8.17(a)(1), 17 C.F.R. � 8.17(a)(1) (1998), the Chairman of the Appeal Panel should have been disqualified from serving because of an alleged conflict of interest. Clark also contends that the Commission cannot credit the testimony of Marrazzo, COMEX's Senior Compliance Investigator, because an ALJ had previously found his testimony unreliable in the Commission's statutory disqualification proceedings against Clark. See n.2, supra. Finally, as explained below, he alleges that he was denied fundamental fairness because of an illegal agreement between NYMEX and his former counsel.

COMEX opposes the appeals, insisting that its proceedings were consistent with fundamental fairness and that the exchange's findings are supported by substantial evidence. First, COMEX argues that appellants have not shown any prejudice from either the procedural delays or the combining of the two complaints. COMEX further argues that appellants waived any objection to the joint scheduling of a hearing on the complaints by failing to object in a timely fashion. COMEX also contends that the alleged conflict of interest of the Chairman of the Appeal Panel was too remote to warrant disqualification; that there is no evidence that the Panel Chairman was even aware of any alleged conflict; and that Clark waived his objection to the alleged conflict of interest by failing to object until the appeal before the Commission. COMEX argues that the ALJ's remarks about the unreliability of Marrazzo's testimony (the COMEX investigator) in the Commission's statutory disqualification proceedings were irrelevant because they related only to the investigator's failure to recall the underlying events.

In addition to his appeal brief, Clark has filed a motion for leave to file a reply brief to COMEX's answering brief. For the most part, Clark's proffered reply brief reiterates the arguments made in his brief on appeal from the COMEX Appeal Panel decision. Clark also contends that he did not waive his objection to the alleged conflict of interest of the Chairman of the COMEX Appeal Panel by failing to object sooner because he had not attended oral argument before the Appeal Panel and did not realize that the Chairman had a conflict of interest until Clark received the Appeal Panel decision. ¹¹

Alleged Illegal Agreement

On appeal, Clark also argues that he was denied fundamental fairness during the exchange proceedings because there was an undisclosed agreement between NYMEX and his prior counsel, Scott Brenner, prohibiting Brenner from representing Clark in this matter. Clark first referred to this agreement in his appeal brief to the Commission. He also wrote a letter to CFTC Chairperson Born dated March 8, 1997, claiming that he first found out about the agreement on August 1, 1996, when NYMEX General Counsel and Executive Vice President Ronald Oppenheimer informed him that Brenner had an agreement with NYMEX under which Brenner would not represent him in this appeal or any other legal matter involving NYMEX in the future. Clark maintained that Brenner entered into this agreement with NYMEX in December 1993 as part of a settlement of an unrelated case brought by another client of Brenner's, Edward Mandelbaum, against NYMEX. According to Clark, Mr. Oppenheimer told Clark that NYMEX would enforce the agreement with Brenner, although Mr. Oppenheimer refused to give Clark a copy of the agreement.

In its reply brief, COMEX argues that Clark dismissed Brenner as counsel only because Brenner refused to lie to the Commission and to commit other unethical conduct for Clark and that NYMEX never sought to enforce any agreement between it and Brenner. In Clark's motion for leave to file a reply to COMEX's appeal brief, Clark points out that COMEX conceded in its appeal brief that there was an agreement between NYMEX and Clark's former counsel prohibiting his representation of Clark. He attached as an exhibit an unauthenticated transcribed tape of a telephone conversation between himself and Brenner which occurred on January 6, 1997, discussing this agreement. Clark maintains that Brenner lied to the Commission about the circumstances surrounding his withdrawal from Clark's representation. Clark further claims that Brenner acted as a "double agent" for NYMEX, filed several motions for Clark, and then failed to represent him vigorously on certain unidentified key issues in this appeal.

Commission Order and ALJ Hearing

Because the alleged agreement was not a part of the record, the Commission issued an order on February 2, 1998, finding that there was insufficient evidence in the record to evaluate Clark's allegations concerning the purported agreement. In re Clark, CFTC Docket Nos. 96-E-1 and 96-E-2, slip op. at 7 (CFTC Feb. 2, 1998). For this reason, the Commission ordered the appointment of an Administrative Law Judge ("ALJ") to conduct a hearing to determine whether there was such an agreement and, if so, its effect on Clark's appeal to the Commission. Id. at 8. The Commission also ordered the ALJ to determine why Clark did not raise the issue of the agreement until February 1997 when he filed his appeal brief, even though he admittedly knew of the existence of the agreement in August 1996. Id.

In accordance with the Commission's order, ALJ Levine held a two-day hearing in this matter on February 12 and 13, 1998. As more fully discussed below, on March 11, 1998, he issued a decision finding that: (1) the parties do not dispute that NYMEX had entered into such an agreement with Clark's former counsel Brenner; (2) NYMEX subsequently advised Brenner before Clark received the Appeal Panel's decision that it would not seek to enforce that agreement; (3) Clark was not prejudiced by that agreement; and (4) while Clark did not waive the issue of the alleged illegal agreement, his delay in notifying the Commission about the agreement was indicative of a lack of prejudice. In re Clark, [Current Transfer Binder] Comm. Fut. L. Rep. (CCH) � 27,250 (ALJ Decision Mar. 11, 1998).

Shortly thereafter, Clark filed a notice of appeal from ALJ Levine's decision and moved for an extension of time to file his appeal brief. In a May 14, 1998 Order, the Commission found that ALJ Levine's March 1998 decision was not separately appealable. Instead, the Commission provided the parties an opportunity to file briefs limited to the issues raised by the ALJ's findings. In re Clark, CFTC Docket Nos. 96-E-1 and 96-E-2, slip op. at 2 (CFTC May 14, 1998). On June 4, 1998, Clark filed a brief arguing that the ALJ had not provided an opportunity for him to conduct discovery concerning the prejudice issue during the hearing on the illegal agreement and that he was not given sufficient time to prove that he was prejudiced. Further, he contends that the ALJ improperly placed on him the burden of proving the prejudice issue. Finally, Clark asserts that the agreement was illegal and has denied him due process. In its reply brief, NYMEX argues that there is ample record support for the ALJ's findings and conclusions concerning the settlement agreement.

DISCUSSION

The Commission's review of this action is governed by Rule 9.33(c), 17 C.F.R. � 9.33(c)(1998). That rule provides that, in reviewing an exchange disciplinary action, the Commission must consider whether: (1) the exchange disciplinary action was taken in accordance with the rules of the exchange; (2) fundamental fairness was observed in the conduct of the proceeding resulting in the disciplinary action; (3) the record contains substantial evidence of a violation of the rules of the exchange; and (4) the disciplinary action otherwise accords with the Act and the rules, regulations, and orders of the Commission.

A. Whether the Appeal Panel's Factual Findings Are Supported by Substantial Evidence

Only Auciello challenges the exchange's decision on the merits. Specifically, he asserts that the burden of proof was shifted to him based on the Compliance Department's allegations alone. In this regard, he also emphasizes that there is no evidence to prove the requisite element of intent to engage in prearranged trading.

The Commission's review of this appeal is governed by Rule 9.33(c)(3), 17 C.F.R. � 9.33(c)(3) (1998), which requires, among other things, that the record contain "substantial evidence" of a violation of exchange rules. Substantial evidence is "`something less than the weight of the evidence', and means only such evidence `as a reasonable mind might accept as adequate to support a conclusion'." In re First Commodity Corp. of Boston, [1986-1987 Transfer Binder] Comm. Fut. L. Rep. (CCH) � 23,694 at 33,800 (CFTC May 29, 1987)(citations omitted). Reweighing evidence is not the function of Commission review of exchange disciplinary hearings, which is limited to the question of whether the exchange's findings are supported by substantial evidence. Jaunich v. Minneapolis Grain Exchange, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) � 25,597 at 39,864 (CFTC Oct. 16, 1992).

On appeal, Auciello argues that the exchange has failed to prove that he and Clark knowingly and willfully engaged in violative behavior and thus has failed to establish key elements of the violation charged. That argument ignores the substantial evidence in support of the exchange's detailed factual findings. The record contains substantial evidence to support the exchange's determination that Auciello knowingly engaged in repeated wrongdoing and took affirmative steps to alter his trading records to cover up his wrongdoing.

As a separate matter, the Commission has previously rejected the logic that underlies Auciello's suggestion that it was improper for the Hearing and Appeal Panels to draw inferences from circumstantial evidence. In re Malato, [1987-1990 Transfer Binder] Comm. Fut. L. Rep. (CCH) � 24,084 at 34,708 (CFTC Dec. 22, 1987). There the Commission emphasized that, "[a]s experienced professionals cognizant of the customs in the pit, the members of the Floor Governors Committee are in the best position to draw inferences from the evidence presented to them." Id. See also In re Rosenberg, [1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) � 24,992 at 37,643 (CFTC Jan. 25, 1991)("As we have previously noted, direct evidence of noncompetitive trading is rarely available. Indeed, such cases generally require a careful separation of the appearance of regularity from its substance.")(citation omitted); In re Buckwalter, [1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) � 24,995 at 37,684 n.34 (CFTC Jan. 25, 1991) (to establish a trade practice violation, "[r]eliable circumstantial evidence is not only sufficient, it is the only evidence that is likely to exist in most cases").

Based on our review of the record, we conclude that the facts and circumstances underlying the challenged transactions provide a reasonable basis for the Hearing Panel to infer that the trades were prearranged and executed noncompetitively. To conclude that these transactions arose from lawful market activity, one would have to explain the existence of the numerous "coincidences" exhibited by the challenged transactions that are unlikely to arise from the normal interplay of market forces. Moreover, the Hearing Panel's decision, as affirmed by the Appeal Panel, indicates that it credited Marrazzo's testimony. Marrazzo's inferences that Auciello and Clark had engaged in prearranged trading arose from a trading pattern and audit trail evidence which included: frequent trading between Auciello and Clark on December 27 during a ten-minute period when the silver market was rapidly dropping and then recovered; rewritten trading cards; brokerage forms which did not correspond to the trading cards from which they were allegedly prepared; different ink tones and frequent obliterations on the trading cards; other irregularities such as size changes, time changes, and price changes; and the fact that all of Clark's buying during a falling market was opposite Auciello with the exception of six cross trades. Neither the Hearing Panel nor the Appeal Panel was persuaded by Auciello's argument that each unusual factor could be coincidental.

Accordingly, we find that the exchange's decision that Auciello and Clark engaged in prearranged and noncompetitive trades and that Auciello later rewrote his trading cards to conceal his wrongdoing is supported by substantial evidence.¹²

B. Adequacy of the Procedures

1. Alleged Illegal Agreement Between NYMEX and Clark's Counsel Prohibiting Clark's Counsel From Representing Clark. As discussed above, Clark argues on appeal that NYMEX, the parent of COMEX, entered into an illegal agreement with his former counsel Scott Brenner which prohibited Brenner from representing Clark and that this agreement between NYMEX and Brenner denied Clark a fair opportunity to pursue his appeal to the Commission. The ALJ found, and the parties do not dispute, that there was such an agreement. According to the ALJ, the agreement effectively barred Brenner from representing clients with claims against NYMEX, its directors, or staff.¹³

The ALJ found, however, that the agreement did not prejudice Clark in his appeal of the exchange disciplinary action.¹⁴ The ALJ concluded that, although Mr. Oppenheimer had initially advised Clark that NYMEX would seek to enforce the agreement, NYMEX had "a change of heart." Id. at 46,070. On September 6 and 7, 1996, NYMEX counsel Martin Kaminsky informed Brenner that he was free to represent Clark and that NYMEX would not seek to prevent it. (Transcript of ALJ hearing at 82-83, 106-07, 182-84, NYMEX Exhibit 16.) These conversations took place almost a week before the Appeal Panel Decision was actually served on Clark. In re Clark,� � 27,250 at 46,070.

The ALJ further found that despite the existence of the agreement, once the Appeal Panel entered its decision in September 1996, Brenner represented Clark before the Commission from September 1996 until late December 1996, when Clark dismissed him. Id. at 46,071. Specifically, during this period, Brenner engaged in settlement discussions with NYMEX on behalf of Clark and represented Clark by filing a notice of appeal, a petition for a stay, a motion to vacate the exchange decision because of COMEX's untimely filing of the record at the Commission, and a petition for reconsideration of the Commission's Order granting COMEX an extension to file the exchange record. Id. at 46,071 and n.55.

The ALJ also found that Clark discharged Brenner as his counsel in late December 1996. While Clark and Brenner offered competing versions of what caused the discharge, the ALJ found that Clark decided to discharge Brenner because he demanded more legal fees to continue representing Clark. Id. at 46,071.

In finding that Clark did not suffer any prejudice in pursuing his appeal to the Commission, the ALJ emphasized that NYMEX had informed Brenner's counsel before the Appeal Panel decision was served on Clark that it would not enforce the settlement agreement. Id. at 46,070. Second, the ALJ found that there is no evidence that Brenner withdrew as counsel in fear of enforcement or publication of the agreement. Moreover, according to the ALJ, there is no evidence that the agreement caused the end of the attorney-client relation between Brenner and Clark. Id. at 46,077. Although Clark speculated that Brenner's representation may have been less than vigorous, the ALJ found that Clark "has directed the Court's attention to no available and colorably merited relief that Brenner did not seek on behalf of his client. . . ." Id. Similarly, the ALJ also found that Clark has not shown that Brenner waived any meritorious argument by not raising it in a timely manner. Id. at 46,070-71. In addition, the ALJ found there was no evidentiary support for Clark's contention that Brenner failed to reach a settlement on his behalf with NYMEX as a result of the agreement.

Based on our review of the record of the proceedings before the ALJ, we concur in the ALJ's findings that Clark did not suffer prejudice in pursuing his appeal of the exchange disciplinary proceeding to the Commission. Similarly, we find that there is no merit to Clark's arguments that he was deprived of due process of law by virtue of the agreement between Brenner and NYMEX. Clark also maintains that the ALJ did not provide an opportunity for him to conduct discovery concerning the prejudice issue and he was not given sufficient time to develop the record on this issue. We disagree. Clark had ample opportunity during the hearing before the ALJ to identify any prejudice to him resulting from the settlement agreement but he was unable to do so. At the hearing, Clark also failed to elicit testimony from other witnesses that demonstrated prejudice to him in pursuing his appeal.

Moreover, we find no merit to Clark's argument that the ALJ improperly placed the burden of proof on him concerning the prejudice issue. Because Clark was seeking reversal of the exchange's disciplinary decision based on the existence of this agreement, it was clearly his burden to come forward with evidence sufficient to demonstrate that he was prejudiced by the agreement to warrant reversing the exchange's decision.

We next address whether Clark waived his argument by waiting from September 1996 until January 1997 to raise the issue of the settlement. Clark apparently knew of the alleged agreement as of August 1996,¹⁵ but did not mention the agreement to the Commission until he filed his appeal brief; nor did he replace Brenner immediately. Rather, in December 1996, Clark requested an extension of time to file his appeal brief because he "recently discharged his attorney." The Commission granted him the extension. While the ALJ agreed with Clark's contention that the delay in raising the issue was inconsequential, he found that the delay was indicative of a lack of prejudice to Clark. In re Clark, � 27,250 at 46,078. In this regard, he found that Clark delayed notifying the Commission of the agreement because that course of action served his self-interest. Id. For example, the ALJ found that Clark had no reason to bring the agreement to the Commission's attention when Clark first hired Brenner to represent him in this matter because NYMEX had indicated it would not enforce the agreement. Id. Likewise, the ALJ found that Clark had no reason to bring up the agreement when he fired Brenner because the agreement played no role. Id. Based on our review of the record in the proceedings before the ALJ, we concur in the ALJ's finding that Clark's failure to inform the Commission of this agreement for five months was indicative of a lack of prejudice to Clark.

2. Alleged Conflict of Interest of Chairman of the Appeals Panel. Under Commission Rule 8.17(a)(1), 17 C.F.R. � 8.17(a)(1) (1998), "no member of the disciplinary committee may serve on the committee or panel if he or any person or firm with which he is affiliated has a financial, personal, or other direct interest in the matter under consideration." Clark argues that Leo Walsh, Chairman of the Appeal Panel, had a conflict of interest because Clark paid trading fees to a clearing firm in which Mr. Walsh had had an interest and to its successor in which Walsh is a Special Limited Partner.

The Commission has held that, in determining what amounts to a disqualifying interest under Rule 8.17(a)(1), it will be "cognizant of the practical realities that attend exchange self-regulation." Malato, � 24,084 at 34,704. In this case, we find that Clark waived the alleged conflict of interest issue by failing to raise it before the exchange. Clark's failure to do so deprived the exchange of a meaningful opportunity to create a record on the existence or the extent of the alleged conflict of interest or to cure an alleged conflict. Under these circumstances, where Clark was represented by counsel, there is no justification to wait until five months after the Appeal Panel's decision to raise this issue and to raise it for the first time before this forum.

3. Delay in Appeal Panel Decision. On appeal, Clark and Auciello contend that they were denied fundamental fairness because of the four-year delay between the appellate argument before the Appeal Panel and the issuance of its decision. In addition, Clark and Auciello contend that, as a result of the delay, they cannot develop the underlying facts or locate witnesses and that memories have dimmed during this period.

Clark and Auciello have to show that the delay of the Appeal Panel's decision caused them prejudice. Malato, � 24,084 at 34,705; Jaunich, � 25,597 at 39,865 n.9. We find their showing on this point inadequate. The record of the exchange proceeding was established through the testimonial and documentary evidence that had been introduced at the hearing prior to the Appeal Panel's lengthy deliberations. Thus, any inability to locate a witness or dimming of witness memory which might have resulted from the passage of time between the appellate argument and the issuance of the Appeal Panel decision has little relevance. Furthermore, the sanctions against Clark and Auciello were stayed pending the Appeal Panel decision. Thus, neither Clark nor Auciello has shown that he was prejudiced.¹⁶

4. Joint Scheduling of the Two Cases. Clark and Auciello challenge the exchange's decision to have the same Hearing Panel hear both Clark and Auciello's cases, particularly so close together. Auciello also contends that the Hearing Panel's consideration of the Second Complaint against Clark prejudiced him. According to Auciello, the Second Complaint alleged that Clark had been sanctioned by another exchange for conduct similar to that charged in the COMEX complaint against Clark and Auciello. Auciello argues that the presentation of such derogatory information about his co-respondent to the body before which his own case was pending deprived him of a fair hearing.

These arguments are without merit. Self-regulatory bodies, as well as courts, frequently hear cases against more than one respondent and cases in which one of the respondents is charged with more than one offense. Bias or prejudice is not presumed under these circumstances. Neither Clark nor Auciello has shown that the combined hearings on the two complaints caused the Hearing Panel to harbor the type of deep-seated antagonism toward him that precludes fair judgment and requires disqualification. The decisions do not show a failure to consider the evidence against each respondent independently. Indeed, the fact that the Hearing Panel declined to find Auciello liable for five of the ten allegedly violative trading sequences strongly suggests that the Hearing Panel carefully considered each allegation of the complaint to determine whether the evidence supported it.

Moreover, Auciello delayed raising objections to the combining of the two cases until the hearing. When the Appeal Panel questioned Auciello about his reason for waiting until the hearing itself before objecting to the joint scheduling of the cases, he explained that he did not object to the combining of the two cases until the hearing as a "tactical maneuver." (Transcript of Appeal Panel Hearing at 37.)¹⁷ Under these circumstances, it appears that Clark and Auciello waived their objections to the joint scheduling of the complaints.¹⁸

5. Untimely Hearing Before the Hearing Panel. Appellants argue that the exchange decision should be vacated because COMEX failed to schedule a hearing within 120 days of service of the First Complaint as required by COMEX Rule 8.37. The Commission has held that "[a]n exchange is accorded a reasonable amount of flexibility in these matters . . . ." Malato, � 24,084 at 34,705-06. Even if the hearing were untimely, however, the record does not contain any showing of prejudice to Clark and Auciello resulting from a delay of several months. In these circumstances, we find that there is no basis to vacate the decision of the Appeal Panel.

6. Late Filing of the Exchange Appellate Record. Both appellants insist that the Commission must dismiss the exchange proceedings because COMEX filed the appellate record late. See n.8, supra. In this regard, they contend that the exchange failed to show "excusable neglect" for the late filing of the appellate record. Nevertheless, as the Commission's November 19, 1996 Order Pursuant to Delegated Authority stated, a delay of a few days in filing an appellate record does not affect the Commission's jurisdiction or its ability to render a fair and proper decision. Thus, the exchange does not have to show excusable neglect. ¹⁹ Furthermore, as the Delegated Authority Order stated, Clark and Auciello have not shown any prejudice resulting from the brief delay in COMEX's filing of the appellate record in this matter; indeed, their time to file their appellate briefs was also extended.

7. Disclosure of the Existence of Settlement Offer. Commission Rule 8.16(d), 17 C.F.R. � 8.16(d)(1998), provides that a respondent in an exchange disciplinary proceeding may withdraw an offer of settlement at any time before final acceptance by the disciplinary committee. Rule 8.16(d) further provides that, "[i]f an offer is withdrawn after submission . . . the respondent . . . shall not be otherwise prejudiced by having submitted the offer of settlement." In an earlier stage of the proceeding, Auciello had submitted an offer of settlement of the First Complaint to a separate hearing panel. In its Memorandum to the Appeal Panel, dated August 11, 1992, at p. 5, the Compliance Department relied on Auciello's submission of a settlement offer as a defense against Auciello's and Clark's contentions that the hearing was not timely held, stating: "We note that Auciello put in and withdrew an offer of settlement within the week prior to the Hearing." Auciello contends that he was prejudiced by the Appeal Panel's reference to his withdrawn settlement offer.

There is no indication, however, that the Appeal Panel was influenced by the Compliance Department's limited reference to Auciello's offer of settlement; nor were the terms of that settlement disclosed. Therefore, it does not appear that the limited disclosure of the existence of the settlement offer resulted in prejudice that would warrant dismissal of the appeal.

8. Withholding of Exonerating Evidence. Under Commission Rule 8.17(a)(2), 17 C.F.R. � 8.17(a)(2) (1998), an exchange is required to allow the respondent, prior to the hearing, to examine "all books, documents, or other tangible evidence in the possession . . . of the exchange which are to be relied upon by the enforcement staff in presenting the charges contained in the notice of charges or which are relevant to those charges." In this case, Clark argues that COMEX withheld evidence about alleged improprieties in the NYMEX proceedings underlying the Second Complaint. As discussed above, Clark did not appeal from the decision of the COMEX Hearing Panel decision on the Second Complaint which found that Clark was subject to sanctions under COMEX Rule 3.13(b)(iii) resulting from the two NYMEX disciplinary actions against him. Furthermore, any alleged irregularity in the NYMEX proceedings underlying the Second Complaint is irrelevant to this appeal of the First Complaint.²⁰

For the reasons stated above, we affirm COMEX's decision against Clark and Auciello in its entirety.

IT IS SO ORDERED.

By the Commission (Chairperson BORN, and Commissioners TULL, HOLUM, and SPEARS).

Dated: June 22, 1998

1 The Commission issued an order in this matter on February 2, 1998, appointing an Administrative Law Judge ("ALJ") to conduct a hearing to determine whether there was an illegal agreement between NYMEX and Clark's former counsel as well as the effect such an agreement had on Clark's appeal to the Commission. In re Clark, CFTC Docket Nos. 96-E-1 and 96-E-2, slip op. at 7-8 (CFTC Feb. 2, 1998). After holding a hearing, the ALJ issued a decision finding that, although such an agreement existed, Clark was not prejudiced by that agreement in his appeal to the Commission. In re Clark, [Current Transfer Binder] Comm. Fut. L. Rep. (CCH) � 27,250 (ALJ Mar. 11, 1998) (hereafter referred to as "ALJ Decision.")

2 In April 1997, the Commission issued an Opinion and Order revoking Clark's floor broker registration. In re Clark, [Current Transfer Binder] Comm. Fut. L. Rep. (CCH)

� 27,032 at 44,918 (CFTC Apr. 22, 1997). On June 17, 1997, Clark filed a motion for a stay of his registration revocation and a petition for review with the U.S. Court of Appeals for the Second Circuit. The Commission opposed Clark's motion for a stay and filed a motion to dismiss Clark's petition for review as untimely. Both motions were denied on October 6, 1997.

3 After the exchange held the hearing in this matter but prior to its issuance of the decision, COMEX became a wholly owned subsidiary of the New York Mercantile Exchange ("NYMEX"). Appeal Panel Decision at 1.

4 On December 4, 1991, the Hearing Panel met to consider the charges in the First Complaint against Clark and Auciello. Before the hearing on the First Complaint was concluded, the same Hearing Panel met again on December 5, 1991 to conduct a hearing on the Second Complaint against Clark alone. At that hearing, Robert Anderson, a NYMEX investigator, testified on behalf of NYMEX solely for purposes of introducing the NYMEX decisions sanctioning Clark. Later that same day, the Hearing Panel continued the hearing on the First Complaint.

5 Auciello's clerk, John Piacente, testified that the trading cards 9, 10, and 11 in evidence were not the cards from which brokerage form 10B was transcribed. (Tr. at 138-45.)

6 The Hearing Panel found that there was insufficient evidence to find a violation for Sequences 2, 3, 4, 6, and 7.  Because those trading sequences are not in issue on appeal, this opinion does not address them.

7 On December 18, 1991, the Hearing Panel issued its decision on the Second Complaint (COMEX Docket No. 24/615/91), finding that Clark was subject to two NYMEX disciplinary proceedings--NYMEX Docket No. 88-06, which was settled and resulted in a three-month suspension and $35,000 fine, and NYMEX Docket No. 90.02, which resulted in a three-and-one-half year suspension and a fine of $75,000. As a result of these NYMEX disciplinary proceedings, the Hearing Panel found that Clark was subject to sanctions under COMEX Rule 3.13(b)(iii); it suspended Clark for nine months. The Appeal Panel affirmed the Hearing Panel's decision on September 8, 1992. Clark did not file an appeal to the Commission from this decision.

8 On October 30, 1996, six days after the record of the exchange proceedings was due, COMEX sought an extension of time to file the record. The exchange explained that an extension was needed because its lead counsel was "currently in trial in federal court in Florida." Clark opposed COMEX's request for an extension and filed a motion asking the Commission to set aside the COMEX decision. In an Order Pursuant to Delegated Authority dated November 19, 1996, the Deputy General Counsel for Opinions and Review granted COMEX's request for a two-week extension and denied Clark's motion to vacate the COMEX decision. In that Order, the Deputy General Counsel stated that a delay of a few days in filing an appellate record does not affect the Commission's jurisdiction or its ability to render a fair and proper decision. As a separate matter, the Order noted that granting COMEX's request for an extension of time to file the record also extends the time for Clark to file his appeal brief and he therefore suffers no prejudice. Clark filed a petition for reconsideration of the Order, which we hereby deny.

9 Commission Rule 9.21(a), 17 C.F.R. � 9.21(a) (1998), provides that, "[w]ithin 30 days after service of the notice of appeal, the exchange must file two copies of the record of the exchange proceeding . . . with the Proceedings Clerk, and serve a copy on the appellant . . . ."

10 Commission Rule 8.16(d), 17 C.F.R. � 8.16(d) (1998), specifies that a respondent "shall not be otherwise prejudiced by having submitted the offer of settlement."

11 In addition to Clark's motion to file a reply brief to COMEX's answering brief on appeal and his petition to reconsider the Delegated Authority Order denying his motion to vacate the appeal because of COMEX's untimely filing of the appellate record, Clark has filed numerous post-appeal motions. On March 11, 1997, Clark filed a motion to exclude Marrazzo's testimony and his investigative report because the ALJ in the statutory disqualification proceeding found his testimony unreliable. On that same day, Clark also filed a motion to supplement the record with a letter to Chairperson Born dated March 8, 1997. In that letter, Clark describes in detail NYMEX's alleged illegal agreement with Brenner prohibiting Brenner from representing Clark. He also outlines numerous claims about improprieties in the NYMEX proceedings. COMEX opposed both of these motions, contending that these motions merely repeat the same arguments Clark made in his appeal brief or are irrelevant because they pertain to the NYMEX proceedings which are not in issue in this appeal. Clark then filed two motions for leave to file reply briefs to COMEX's opposition to both of his motions. COMEX opposed both of Clark's motions for leave to file a reply. Clark then filed two additional motions for leave to file further replies to COMEX's opposition to his original motions for leave to file a reply.

12 For the most part, Clark raised procedural objections to the exchange proceedings as described above. The closest he came to the merits was challenging the exchange's reliance on Marrazzo's testimony to establish the alleged violations. Clark's argument, however, is based solely on the fact that the ALJ in the statutory disqualification proceedings had found Marrazzo's testimony unreliable. In In re Clark, however, the ALJ refused to credit Marrazzo's testimony solely because he could no longer recollect the transactions underlying the complaint. In re Clark, [1994-1996 Transfer Binder] Comm. Fut. L. Rep. (CCH) � 26,305 at 42,506 (Initial Decision Feb. 3, 1995). In contrast, in this proceeding, Marrazzo was clearly able to recount in detail his investigation of the wrongdoing. Therefore, this argument is unpersuasive.

13 The ALJ stated that the attorneys who executed this agreement "did so in blatant violation of the New York Code of Professional Responsibility and the ABA Model Rules of Professional Conduct." In re Clark, � 27,250 at 46,067. Since Clark was not prejudiced by the agreement in this matter, that finding is irrelevant, and there is no need for the Commission to address the issue.

14 As we noted in the February 2, 1998 order, the records shows that Clark was represented fully by another attorney (Jeffrey T. Golenbock) during the exchange proceedings, which were complete by August 1992 but for the Appeal Panel decision. Clark contends that Brenner was his attorney of record as of May 1994 and that the agreement was entered into in November 1994. Thus, Brenner did not actively participate as Clark's counsel during the exchange proceedings. For this reason, we find that Clark was not prejudiced by the existence of such an agreement during his defense in the exchange disciplinary proceeding.

15 Letter from Clark to Chairperson Born, dated March 8, 1997, at 1.

16 With respect to Auciello's contention that the doctrines of estoppel, laches, and waiver mandate dismissal of this appeal, estoppel and laches require resulting prejudice, while waiver requires an affirmative relinquishment. As discussed above, Auciello has not shown prejudice, nor is there any indication here of an affirmative relinquishment of the exchange's rights.

17 Clark's counsel also explained his delay in objecting: "That's a tactical matter." (Appeal Tr. at 34.)

18 COMEX explained that the two cases were combined because under COMEX rules hearings on a complaint must be heard by a hearing panel different from the hearing panel that receives offers of settlement and that COMEX had only two hearing panels available.

19 The Commission's Order Pursuant to Delegated Authority stated: "Because the filing of a notice of appeal has jurisdictional implications, filing deadlines are strictly construed and, indeed, may be extended only on a showing of excusable neglect." Order at 2. The timeliness of filing of the appellate record has no such jurisdictional implications.

20 We note that in our February 2, 1998 Order at p. 4, n.7, we denied Clark's petition for reconsideration of the Order Pursuant to Delegated Authority dated November 19, 1996, in which the Deputy General Counsel for Opinions and Review granted COMEX's request for a two-week extension of time to file the record and denied Clark's motion to vacate the COMEX decision. We also deny Clark's motion to exclude Marrazzo's testimony and investigative report because this motion merely repeats the same argument that Clark made on appeal. We grant Clark's motion to supplement the record with the Letter to Brooksley Born and his motion for leave to file a reply to COMEX's appeal brief. Finally, we deny Clark's repetitive motions to file replies and further replies to COMEX's memoranda in opposition to his motions.