Commodities Verdict Seen As Feds’ Loss, Market’s Gain
CHICAGO (AP) _ Commodities traders and Chicago Mercantile Exchange officials Tuesday said the government’s inability to convict traders on major fraud charges would redeem the repuration of the Merc.
Business was brisk in the Swiss franc futures pit - one day after a federal jury convicted two Swiss franc traders of relatively minor trading violations and acquitted a third.
The jury failed to reach verdicts on scores of more serious charges, including a racketeering count against one defendant and mail and wire fraud charges against all three.
″I’m concerned about anything that might damage the reputation of Chicago’s Mercantile Exchange,″ said Sol Kaufman, an independent trader of currency futures. ″I think to a certain degree this verdict will redeem that reputation.″
Federal prosecutors have said they plan to retry the defendants on the remaining counts.
But several lawyers preparing to defend other commodities traders who face similar charges in trials set for September said they were heartened by Monday’s verdicts.
″It puts into serious question the government’s basic claim that what happened here is that customers were defrauded on a wholesale basis,″ said James Streicker, attorney for indicted yen futures trader Michael Smith.
Defense lawyers said the government’s failure to win a conviction on the racketeering count would dissuade other traders charged with racketeering from pleading guilty to reduced charges.
″We in the defense community will have had the luxury of seeing how this first case was tried, because from everybody’s point of view, this was a successful defense,″ said Terrence P. Gillespie, who represents Robert Bailin, another indicted yen trader.
Prosecutors did not return telephone calls Tuesday.
Anton Valukas, the former U.S. attorney who announced the commodity fraud indictments last August, said the verdict was ″like kissing your sister.″
But Valukas, now in private practice, said he was not disappointed.
″In terms of the overall investigation and prosecution, my sense is that you await the outcome of all of the cases and then you can sit back and talk about whether it was appropriate or not appropriate,″ he said.
Leo Melamed, chairman of the Merc’s executive committee, noted that the guilty verdicts on eight counts - seven against floor broker Robert D. Mosky and one against independent trader Danny Scheck - represented a total of $200 in funds lost to their customers through trading irregularities.
Melamed said the Merc did not condone any wrongdoing but added: ″It has to be put in perspective.
″When you’re talking about violations of a couple hundred dollars against half-a-trillion dollars fraud in the savings-and-loan industry or hundreds of millions in Housing and Urban Development, we clearly don’t believe this is as major a federal crime as some of these other things that are going on.″
The jury found independent trader David Zatz innocent on two counts of trading violations. The panel also acquitted Mosky of 20 counts of mail and wire fraud, and failed to reach a verdict on the racketeering count against him.
They returned verdicts on only 30 of the 116 counts in the federal indictment.
Each commodity-fraud count carries a maximum sentence of five years in prison and a $100,000 fine, prosecutors said.
The two-month trial was the first to result from a sweeping undercover FBI investigation of corruption at the Merc and the larger Chicago Board of Trade, the world’s two biggest futures exchanges.
In all, 48 people have been indicted since August. Sixteen have pleaded guilty to reduced charges, including two Swiss franc traders who testified against Mosky, Scheck and Zatz.
Two other groups - 13 soybean traders from the Board of Trade and 15 yen traders from the Merc - are scheduled to go on trial in September.