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Commodity Futures Trading Commission 

CEA CASES 

NAME: CONSOLIDATED GROWERS EXCHANGE, INC., AND HARVEY A. BAUM 

DOCKET NUMBER: 92 

DATE: MARCH 22, 1960 

DOCUMENT TYPE: COMPLAINT 

UNITED STATES DEPARTMENT OF AGRICULTURE 

BEFORE THE SECRETARY OF AGRICULTURE 

In re: Consolidated Growers Exchange, Inc., and Harvey A. Baum, Respondents 

CEA Docket No. 92 

Complaint and Notice of Hearing Under the Commodity Exchange Act 

There is reason to believe that the respondents, Consolidated Growers 

Exchange, Inc., and Harvey A. Baum have violated the Commodity Exchange Act (7 

U.S.C. 1958 ed., Chapter 1) and the rules and regulations promulgated 

thereunder, and in accordance with the provisions of section 6(b) of the said 

act (7 U.S.C. 1958 ed., § 9) this complaint and notice of hearing is issued 

stating the charges in that respect as follows: 

I 

Respondent Consolidated Growers Exchange, Inc., a corporation with offices at 

6 Harrison Street, New York 13, New York, is now and has been at all times 

material to this complaint a clearing member of the New York Mercantile Exchange 

and a registered futures commission merchant under the Commodity Exchange Act. 

II 

Respondent Harvey A. Baum, an individual whose business address is 6 Harrison 

Street, New York 13, New York, is now and was at all times material to this 

complaint a member of the New York Mercantile Exchange and the president of the 

respondent corporation. At all such times the operations of the said 

corporation, hereinafter described, were under the direction and control of 

respondent Harvey A. Baum. 

III 

The New York Mercantile Exchange is now and was at all times material to this 

complaint a duly designated contract market under the Commodity Exchange Act. 

IV 

During March, April, and May 1959, the respondent corporation carried 

accounts on its books and records which bore the designations "CGE/E. Larocque" 

and "CGE/Dominion Banana and Potato Company", and during the said period the 

respondent corporation executed transactions in commodity futures on the New 

York Mercantile 

Exchange and entered such transactions in such accounts. Such transactions were 

capable of being used for hedging transactions in interstate commerce, or 

determining the price basis of transactions in interstate commerce, or for 

delivering commodities sold, shipped, or received in interstate commerce. The 

said designations indicated that the accounts were joint accounts of respondent 

Consolidated Growers Exchange, Inc., and E. Larocque, and of respondent 
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Consolidated Growers Exchange, Inc., and the Dominion Banana and Potato Company, 

respectively, and upon inquiry the respondents so informed the Commodity 

Exchange Authority. In truth and in fact, the said accounts were not joint 

accounts but were individual accounts of one E. Larocque and of the Dominion 

Banana and Potato Company, respectively. By reason of such acts, the 

respondents knowingly and wilfully violated section 4 of the Commodity Exchange 

Act (7 U.S.C. 1958 ed., § 6), and section 1.37 of the rules and regulations 

thereunder (17 CFR 1.37). 

V 

Between May 1955 and August 1959, the respondent corporation failed to keep a 

record in permanent form showing, for each commodity futures account carried by 

it, the true name and address 

of the person for whom such account was carried and the principal occupation or 

business of such person, as required by section 1.37 of the rules and 

regulations under the Commodity Exchange Act (17 CFR 1.37). On numerous 

occasions during such period, the Commodity Exchange Authority informed the 

respondents that such a record was necessary under the aforesaid regulation, and 

the respondents' failure to maintain such a record was a knowing and wilful 

violation of the said regulation and of section 4 of the Commodity Exchange Act 

(7 U.S.C. 1958 ed., § 6). 

VI 

On or about March 26, April 1, April 2, April 16, April 29, April 30, May 1, 

May 4 and May 5, 1959, the respondents knowingly commingled customers' funds 

with funds of the respondent corporation in that, on the said dates, the 

respondents deposited funds belonging to E. Larocque or to the Dominion Banana 

and Potato Company, or both, customers of the respondent corporation, in the 

respondent corporation's general bank account, or used such funds to margin or 

guarantee the trades of the respondent corporation. By reason of such acts the 

respondents wilfully violated section 4d(2) 

of the Commodity Exchange Act (7 U.S.C. 1958 ed., § 6d(2)) and sections 1.20 and 

1.21 of the rules and regulations thereunder (17 CFR 1.20, 1.21). 

VII 

On approximately 61 days between April 2, 1959, and December 2, 1959, the 

respondents failed to prepare and maintain a daily segregation record setting 

forth the amount of money, securities, and property of customers required to be 

kept in segregation in accordance with the provisions of section 4d(2) of the 

Commodity Exchange Act (7 U.S.C. 1958 ed., § 6d(2)). On numerous occasions 

prior to and during such period the Commodity Exchange Authority informed the 

respondents that section 1.32 of the rules and regulations (17 CFR 1.32) 

required the preparation and maintenance of such a record, and the respondents' 

failure to prepare and maintain the same, as above described, was a knowing and 

wilful violation of the said sections of the act and the regulations. 

VIII 

Between January and May 1959, the respondents executed transactions in 

commodity futures on the New York Mercantile Exchange for the accounts of 

customers, but failed to keep full, complete, 

and systematic records of all such transactions, in that, in connection with 

numerous transactions, such records did not identify or make possible the 

identification of the floor broker who executed the transactions on behalf of 

the respondent corporation nor the clearing member on the opposite side of such 
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transactions, as specifically required by section 1.35 of the rules and 

regulations (17 CFR 1.35). The respondents were aware of the provisions of the 

said regulation, and their failure, as above described, was a knowing and wilful 

violation of the said regulation and of section 4g of the Commodity Exchange Act 

(7 U.S.C. 1958 ed., § 6g). 

Wherefore, it is hereby ordered that this complaint and notice of hearing be 

served upon each of the said respondents. The respondents will have twenty (20) 

days after the receipt of this notice of hearing in which to file with the 

Hearing Clerk, United States Department of Agriculture, Washington 25, D. C., an 

answer with an original and five copies, fully and completely stating the nature 

of the defense and admitting or denying, specifically and in detail, each 

material and relevant allegation of this complaint. Allegations not answered 

will be deemed admitted for the purpose of this proceeding. Failure to file an 

answer will constitute an 

admission of all the material allegations of this complaint and a waiver of 

hearing. The respondents are hereby notified that unless hearing is waived, 

either expressly or by failure to file an answer and request a hearing, a 

hearing will be held at 10:00 a.m., local time, on the 19th day of April 1960, 

in New York, New York, at a place therein to be specified later, before a 

referee designated to conduct such hearing. At such hearing the respondents 

will have the right to appear and show cause, if any there be, why an order 

should not be made suspending or revoking the registration of respondent 

Consolidated Growers Exchange, Inc., as a futures commission merchant, and 

directing that all contract markets refuse all trading privileges to each of the 

respondents for such period of time as may be determined. 

It is ordered that this complaint and notice of hearing be served on the 

respondents at least twenty (20) days prior to the date set for hearing. 

Done at Washington, D. C., 

March 22, 1960 

/s/ Clarence L. Miller 

Clarence L. Miller 

Assistant Secretary 

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