Prosecutors Exult Over Commodities Fraud Verdict
CHICAGO (AP) _ Federal prosecutors savored their first major victory in an investigation of the world’s biggest commodity exchanges - the conviction of 10 soybean traders on charges of defrauding customers.
A jury Wednesday convicted eight Chicago Board of Trade traders of racketeering conspiracy and all 10 defendants of fraud.
Convictions on those same charges eluded prosecutors last summer in a trial involving three Swiss franc traders from the Chicago Mercantile Exchange.
″Every bit of criticism that has been leveled at us within the defense bar and within the industry I think has been answered by this verdict,″ said Assistant U.S. Attorney Ira Raphaelson.
The soybean traders were accused of cutting improper, after-hours deals among themselves to cover any pesonal trading losses by passing them on to customers. Traders can trade on their own accounts or on behalf of customers.
Both trials, plus a third involving 12 Japanese yen traders that is nearing its conclusion, resulted from an unprecedented fraud investigation in which FBI agents posed at corrupt traders at the Merc and the Board of Trade.
The soybean traders were among 48 people from the Board of Trade and the Merc who were indicted in 1989.
As a result of Wednesday’s convictions, ″people are going to have greater confidence in the future when they invest in these type of markets,″ said U.S. Attorney Fred Foreman.
Thomas Russo, a New York commodities attorney and a former staff member of the Commodities Futures Trading Commission, said the verdict was bound to make traders reluctant to commit even tiny rule infractions.
″If a technical violation can be subject to a racketeering charge, it will make people think twice before doing anything that may be questionable,″ he said.
Some of the soybean traders acknowledged breaking rules. Their lawyers argued that traders sometimes need to commit violations to fill customer orders but contended their clients’ actions did not amount to racketeering or fraud.
″There was no evidence on the (racketeering) conspiracy,″ said George Collins, lawyer for Bradley Ashman. He indicated an appeal was likely.
Convicted were Ashman, William Barcal III, Edward Cox III, Martin Dempsey, Thomas Kenney, John Ryan, Charles Bergstrom, Joel Fetchenhier, Sheldon Schneider and John Vercillo.
The defendants were found guilty on 283 of the 339 counts. The most serious offense, racketeering conspiracy, carries up to 20 years in prison and a $250,000 fine. The other major charges carried terms as high as five years.
No sentencing date was set.
Of those indicted, 20 have pleaded guilty to charges ranging from trading violations to racketeering. One pleaded no contest. Two others were convicted of relatively minor infractions.