Page 1 

Commodity Futures Trading Commission 

CEA CASES 

NAME: GREAT WESTERN DISTRIBUTORS, INC., NATHANIEL E. HESS, CHARLES S. BORDEN, 

THOMAS F. HAYNES, and HARTLEY L. HARRIS 

CITATION: 10 Agric. Dec. 783 

DOCKET NUMBER: 48 

DATE: JUNE 20, 1951 

DOCUMENT TYPE: DECISION AND ORDER 

(No. 2817) 

In re GREAT WESTERN DISTRIBUTORS, INC., NATHANIEL E. HESS, CHARLES S. BORDEN, 

THOMAS F. HAYNES, and HARTLEY L. HARRIS. CEA Doc. No. 48. Decided June 20, 

1951. 

Denial of Trading Privileges -- Violation of Sections 6(b) and 9 of Act -- 

Attempt to Manipulate Prices -- Attempt to Corner and Cornering Commodity

Where the complaint charges that respondents attempted to manipulate prices 

of a commodity in interstate commerce and for future delivery on or subject to 

the rules of a board of trade in violation of sections 6 (b) and 9 of the act, 

that they attempted to corner and that they cornered such a commodity in 

violation of section 9 of the act, the Judicial Officer ordered that, effective 

on the 30th day after the date of this order, all contract markets shall deny 

all trading privileges to three of the respondents for a period of one year, and 

that the proceeding should be dismissed as against two of the respondents. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Weight of Evidence Showing Dominance or Control of Futures Market

The weight of the evidence is that respondents not only had a dominant and 

controlling position in the December futures market but that it acquired such a 

position knowingly and utilized its control intentionally to put on a "squeeze," 

that is, to pressure December futures prices upwards by means of its 

monopolistic powers over futures and cash storage eggs in Chicago. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Relevance of Position in Previous Period to Control of Market

Respondents' position in the December 1947 market during previous months such 

as October 1947, is not relevant to the question of control of the market in 

December. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Gross Position as Determining Control of Market

It makes little difference to the question of control of the market whether 

respondents' long futures position is regarded as net, i.e., by subtracting its 
Page 2 

small short December 1947 position from its long December 1947 position. It is 

the gross long or short position that the trade 

looks to and the rules of the Chicago Mercantile Exchange do not permit the 

offsetting of existing contracts. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Factors Not Eliminating Presence of Domination or Control of Market

Dominance or control is not negatived because it was unnecessary for a 

majority of the shorts to have recourse to respondents for futures or cash 

storage eggs. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Effect of Availability of Commodity upon Manipulation of Market

The availability, for delivery in Chicago under the rules of the Chicago 

Mercantile Exchange, of fresh eggs or eggs stored outside of Chicago, at a 

greater cost than Chicago storage eggs, merely tends to limit the extent of 

manipulation possible, but does not automatically disprove manipulation or 

attempted manipulation. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Effect of Partial Liquidation of Long Position upon Manipulation of Market

Partial liquidation of respondents' long position by the sale of some 

December 1947 futures during December 1947 does not exclude the presence of a 

manipulative venture, as implied by respondents. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Circumstantial Proof of Manipulative Intent

Although there may be natural corners or squeezes without manipulative 

intent, manipulative intent can be demonstrated satisfactorily from a legal 

standpoint by circumstances alone, and the facts and circumstances in this case 

are more than adequate to warrant such a conclusion. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Actions Showing Manipulation of Prices

Putting on a "squeeze" deliberately, that is, taking and maintaining during a 

delivery month a large long line in relationship to known deliverable supplies 

in the market together with ownership or control over a substantial part of the 

deliverable supplies for the purpose of pressuring prices upward by means of the 

relative scarcity of supplies and futures thus created, is an undoubted 

manipulation in violation of the act and constitutes at the very least an 

attempt to manipulate prices. * 
Page 3 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Widening Spread between Futures Prices as Constituting Manipulation

Because respondents' plan was to pressure December futures prices upward to 

widen the spread between December and January futures prices, rather than merely 

for the purpose of raising December futures prices alone, does not absolve the 

transactions from the taint of manipulation. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Definition of "Manipulation"

Whatever definition of "manipulation" may be selected, it necessarily should 

include expressly or by implication the effecting of a price which would be 

different if the price-influencing efforts were absent, that is, not only the 

raising or lowering of prices by means directed to either such 

end but the prevention of prices from going up or going down according to free 

supply and demand conditions. It cannot be believed that it is not manipulation 

under the act to employ monopolistic methods to support and pressure prices for 

one month's futures in order to widen the spread between prices for that month's 

futures and the next month's futures. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Transactions as Falling within Definition of Corner

A corner in which respondents owned all the storage eggs in Chicago and 

prevented all the shorts from making delivery would be a perfectly tight corner, 

but the term applies alike to conditions less rigid in the way of control. The 

facts that respondents had contracts calling for two or three times the cash 

storage egg supply in Chicago, that it owned a substantial part of the cash 

supply, and that this was a dominant part of the supply in view of respondents' 

large, dominant and controlling long position, met the definition of "corner" 

used by the United States Supreme Court in United States v. Patten, 226 U. S. 

525, 539, 540. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Possibility of Existence of Corner in One Market

There may be a corner in one market. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Dispensable Element of Corner

The fact that respondents did not carry a large long line beyond the close of 

trading with widespread defaults by the short or large scale deliveries of fresh 

eggs, is not an indispensable element of a corner. * 
Page 4 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Constitutional Law -- Constitutionality of Commodity Exchange Act

Respondents' contention that the act is unconstitutional for vagueness of the 

words "manipulate" and "corner" is untenable; although it is not appropriate for 

an administrative tribunal to adjudicate the constitutionality of an act 

committed to it for administration, reference may be made to Bartlett Frazier 

Co. v. Hyde, 65 F. (2d) 350 (C.C.A. 7th, 1933), cert. denied, 290 U.S. 654, in 

which the court resisted a similar attack. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Inapplicability of Section 9(b) of Administrative Procedure Act to Complaint 

in this Proceeding

The complaint charges that the violations alleged were intentional and the 

weight of the evidence supports the charges. Even in criminal prosecutions for 

violations of a statute, other than cases of moral turpitude, evil intent is not 

requisite, it being necessary only that actions be intentional as distinguished 

from accidental or inadvertent; therefore, "willfulness" as used in section 9(b) 

of the Administrative Procedure Act is present, and prior notice and opportunity 

to demonstrate or achieve compliance before the issuance of the complaint were 

not required. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

 

Suspension of Trading Privileges -- Authority of Secretary to Suspend for 

Attempted Manipulation of Market Price

Unless the Congressional intent, as revealed in the act itself and in the 

legislative history, is to be completely disregarded, section 6(b) of the act 

should be regarded as vesting in the Secretary the authority to suspend the 

trading privileges of one who has attempted to manipulate the market price of a 

commodity in violation of the act; furthermore, section 6(b) authorizes 

administrative proceedings against any person who ". . . is violating or has 

violated . . ." any of the provisions of the act, and attempts to manipulate, 

attempts to corner, and corners are violations of section 9. The legislative 

history shows that the criminal penalties were additional to administrative 

sanctions. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

Complaint as Not Including Charges of Failure to File Reports

Concerning the protestations that all required reports were filed, etc., it 

should be said that the violations charged and found did not include failure to 

file reports. Violations of regulations or provisions of the act other than 

those charged are not essentials of the violations charged and found. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

 
Page 5 

Mr. Benjamin M. Holstein for Commodity Exchange Authority. Mr. Bernard Tomson 

of Bernstein, Weiss, Tomson, Hammer, and Parter, of New York, New York, and Mr. 

George L. Siegel of Arvey, Hodes, and Mantynband, of Chicago, Illinois, for 

respondents. 

Decision by Thomas J. Flavin, Judicial Officer 

PRELIMINARY STATEMENT

This is a disciplinary proceeding under the Commodity Exchange Act (7 U.S.C. 

Chapter 1), instituted by a complaint issued under section 6(b) of the act (7 

U.S.C. 9) on July 12, 1948, by I. W. Duggan, Acting Secretary of Agriculture, 

hereinafter called the complainant. The respondents are Great Western 

Distributors, Inc., and four of its officers and employees. The corporation has 

its principal offices in New York and a branch office in Chicago and is a 

registered futures commission merchant under the act with membership trading 

privileges on the Chicago Mercantile Exchange, a contract market. Respondent 

Nathaniel E. Hess is vice president of the corporation and directs and manages 

its business. He is a registered floor broker under the act and a member of the 

Chicago Mercantile Exchange. Respondent Charles S. Borden is manager of the 

Chicago office of the corporate respondent and is also a registered floor broker 

and member of the Chicago Mercantile Exchange. Respondent Thomas F. Haynes is 

secretary of the corporate respondent, and Hartley L. Harris had 

some connection with the corporation at the time mentioned in the complaint. 

The Complaint 

The complaint charges that respondent Great Western Distributors, Inc., 

attempted to manipulate the price of a commodity in interstate commerce and for 

future delivery in violation of sections 6(b) and 9 of the act (7 U.S.C. 9, 13), 

and attempted to corner and did corner a commodity in interstate commerce and 

for future delivery in violation of section 9 of the act (7 U.S.C. 13). These 

charges are based upon allegations that during November and December, 1947, the 

corporate respondent purchased and held large quantities of December 1947 egg 

futures on the Chicago Mercantile Exchange and established a dominant and 

controlling long position in such futures; that this position was maintained and 

strengthened as the close of trading in December futures approached; that the 

respondent stood for and received substantially all the eggs delivered on the 

Chicago Mercantile Exchange in satisfaction of December 1947 futures and 

purchased and held large quantities of cash eggs; that as a result of these 

purchases and deliveries the respondent obtained possession and control of the 

supply of deliverable eggs in Chicago and the surrounding area; that it offered 

such eggs for sale only at prices which rendered it unprofitable for short 

sellers to purchase them for delivery and compelled such sellers to cover their 

sales by the purchase of futures at prices fixed by the respondent and that by 

means of these transactions the corporate respondent attained a position where 

it could and did demand eggs or purchase futures in order to fulfill such 

contracts. The complaint further alleges that these transactions were carried 

out by the individual respondents in their capacity as officers and employees of 

the corporation, and that the operations were undertaken for the purpose and 

with the intent of widening the difference between the price of December 1947 

and January 1948 egg futures contracts and increasing or preventing a decrease 

in the price of eggs deliverable in satisfaction of December 1947 futures 

contracts. 

The Answers 

On August 2, 1948, respondent Hartley L. Harris filed a separate answer. On 

December 22, 1948, an answer was filed on behalf of all the respondents. The 

answer admits the descriptive and jurisdictional statements in the complaint but 

denies the charges and the allegations upon which the charges are based. In 

support of these denials, the answer alleges that during the 
Page 6 

period in question the corporate respondent also sold December egg futures; that 

its long position in such futures steadily decreased after December 3, 1947; 

that it received eggs in satisfaction of December futures after trading in such 

futures had ceased on December 23, 1947; and that under the rules of the Chicago 

Mercantile Exchange deliveries on futures contracts could be made from numerous 

cold storage warehouses in and outside Chicago and on track in Chicago, and that 

fresh eggs could also be delivered on such contracts. The answer further 

alleges that the corporate respondent is engaged in the business of selling and 

distributing eggs and that it bought and sold eggs during the period in question 

in the normal course of its business and at the usual profit; that prices of 

December 1947 egg futures decreased after December 5, 1947, and that prices of 

cash eggs decreased after December 11, 1947; and that the difference or spread 

between the prices of December and January futures during the period in question 

was due to causes other than the trading operations of the corporate respondent. 

By way of affirmative defense, the answer asserts that all trading in egg 

futures was conducted in accordance with the provisions of the act and the rules 

of the Chicago Mercantile Exchange. It is also asserted that during the period 

in question the respondents filed daily and weekly reports through which the 

Commodity Exchange Authority was fully informed of their activities, that such 

activities were also subject to scrutiny by representatives of the Commodity 

Exchange Authority who supervised trading on the Chicago Mercantile Exchange and 

that, despite this information in the hands of the complainant, the corporation 

was not directed to liquidate any portion of its holdings or informed that its 

position might be manipulative, nor was its trading criticized in any manner. 

The answer concludes with a request that the complaint be dismissed either 

before or after hearing. 

On July 21, 1949, the respondents filed a supplemental answer which asserts 

that the complaint fails to allege any of the grounds set forth in section 6(b) 

of the act (7 U.S.C. 9) as a basis for proceeding under that section. This 

supplemental answer also alleges that the Secretary of Agriculture did not, 

prior to institution of the proceeding, notify the respondents of the facts or 

conduct which formed the basis of the charges against them or afford them an 

opportunity to demonstrate or achieve compliance. It is further asserted in 

this connection that the conduct of the respondents was not wilful, that since 

the matters complained of occurred more than six months prior to issuance of the 

complaint, there was no question of the public health, interest or safety 

involved, 

and that under such circumstances the filing of the complaint without prior 

notice to the respondents rendered the proceeding unlawful. On October 18, 

1949, while the hearing was in progress, the respondents filed a second 

supplemental answer to the complaint admitting that respondent Nathaniel E. Hess 

exercised management and control over the business of the corporate respondent 

and that the transactions in question were carried out under his direction and 

supervision, and denying that they were carried out under the direction and 

supervision of any of the other individual respondents except that Charles S. 

Borden acted as floor broker for the corporate respondent during such period. 

The Hearing 

Will Rogers, Office of Hearing Examiners, United States Department of 

Agriculture, was assigned as referee in the proceeding and presided at the 

hearing. The respondents were represented by Bernard Tomson of Bernstein, 

Weiss, Tomson, Hammer, and Parter, New York, and by George L. Siegel of Arvey, 

Hodes, and Mantynband, Chicago. Benjamin M. Holstein of the Office of the 

Solicitor, United States Department of Agriculture, appeared as counsel for the 

complainant. The hearing began in Chicago on July 26, 1949, and continued 

intermittently thereafter during the months of July, October and December, 1949. 
Page 7 

Seventeen witnesses testified for the complainant and 10 for the respondents. 

Fifty-one exhibits were introduced in evidence on behalf of the complainant and 

50 on behalf of the respondents. At the conclusion of the hearing on December 

9, 1949, counsel for both parties rested. 

Post-Hearing Procedure 

Complainant and respondents filed briefs after the hearing within the time 

allotted by the referee. On July 11, 1950, respondents also filed a document 

entitled "Respondents' Reply Brief." This brief has also been considered. 

The referee's report adopted substantially the recommendations of the 

complainant and proposed that the respondents Great Western Distributors, Inc., 

Nathaniel E. Hess and Charles S. Borden be found to have violated the act as 

charged in the complaint but that the complaint be dismissed as to respondents 

Thomas F. Haynes and Hartley L. Harris for lack of connection with the 

transactions in issue. 

The respondents Great Western, Hess and Borden filed numerous exceptions to 

the referee's report and oral arguments upon 

the exceptions was held before me in Washington, D.C., on December 19, 1950. 

A brief summary of the principal points in evidence and of the contentions of 

the parties will be helpful. 

Evidence Concerning Deliverable Supply 

Oscar W. Olson, the business manager of the Chicago Mercantile Exchange, 

testified that under the rules of the Exchange (Government Exhibit 2) December 

1947 futures contracts were refrigerator egg contracts which could be satisfied 

by the delivery of refrigerator eggs, sometimes called "storage" eggs, stored in 

approved cold storage warehouses located in Chicago or at certain points outside 

Chicago, or by the delivery of fresh eggs if they were in refrigerator cars on 

track at Chicago or in approved cold storage warehouses in Chicago, that out-oftown deliveries were subject to certain time limitations and other restrictions 

including discounts and allowances for freight charges, and that deliveries of 

fresh eggs would be without premiums to the delivering party (pp. 35-44). 

Various members of the trade who appeared as witnesses for both sides 

testified as to their practice and experience concerning deliveries in 

satisfaction of futures contracts. In general, this testimony was to the effect 

that fresh eggs or eggs located in warehouses outside Chicago were seldom 

delivered in satisfaction of December contracts (pp. 265-268, 298-299, 367-369, 

385, 389-390, 767, 841). Delivery records maintained by the Commodity Exchange 

Authority substantiated this testimony (pp. 248-250; Government Exhibit 17). 

The witnesses explained that the allowances on out-of-town deliveries and the 

premium value of fresh eggs made such deliveries economically impractical. 

Evidence Concerning Transactions and Market Position of Great Western 

Most of the evidence with respect to the corporate respondent's transactions 

and positions in the market is in the form of tabulations and charts. The 

complainant introduced exhibits showing Great Western's daily transactions in 

December 1947 futures during November and December, 1947, the daily total of all 

open contracts in such futures for the same period, and the daily percentage of 

such total held by Great Western (Government Exhibits 4, 7, 8, 24, 26). 

Exhibits were also introduced showing Great Western's acquisitions and 

dispositions of cash eggs and the increase in its cash egg inventory during 

December 1947, the distribution as between Great Western and other owners of 

deliverable 
Page 8 

eggs in Chicago warehouses on December 31, and the same distribution with 

respect to all cash eggs in warehouses in Illinois and four other mid-western 

states on that date (Government Exhibits 9, 10). The complainant also 

introduced evidence as to the disposition, in January 1948, of all cash eggs 

acquired by Great Western in December 1947 (Government Exhibit 13). 

Dr. W. Edwards Beach, an economist employed by the Department of Agriculture 

as Chief of the Trading and Reports Division, Commodity Exchange Authority, 

offered expert testimony for the complainant. He stated that, in his opinion, 

Great Western had a dominant and controlling long position in the market 

throughout December 1947 (pp. 522, 532). He also testified that the increase in 

the corporate respondent's December inventory of storage eggs indicated a 

withholding from sale (pp. 523-532, 572, 706; Government Exhibits 33, 35). 

W. T. Buster, Assistant Chief of the Compliance and Trade Practices Division, 

Commodity Exchange Authority, testified that Great-Western realized a profit of 

$ 182,088 as a result of its December 1947-January 1948 futures operations (p. 

419; Government Exhibits 22, 23). 

Gerson Levin, who testified as an expert for the respondents, admitted that 

Great Western's futures position was large but denied that it was controlling 

(pp. 1086, 1177). He questioned certain Government exhibits because they were 

based upon Great Western's gross rather than its net futures position and 

because they showed Great Western's futures position only during November and 

December rather than during the entire life of the December future (pp. 1128-

1130, 1132, 1138, 1207-1209, 1215-1216; Respondent's Exhibits 42, 45). 

Respondent Hess testified that he did not withhold eggs from sale (p. 892). 

Evidence of Conversation Between Hess and Seitz 

Andrew E. Seitz, an employee of the Commodity Exchange Authority, testified 

for the complainant that he interviewed respondent Hess privately in the 

latter's New York offices in February 1948, at which time Mr. Hess described in 

detail how he had appraised the cash egg situation in December 1947, how he 

planned and initiated the operation in question, how a shortage developed, how 

Great Western advanced its prices on futures and cash, and how it finally 

liquidated its futures at a profit and disposed of its remaining cash eggs in 

January (pp. 102-121, 1443-1444). Edward R. Tracy, an auditor in the New York 

office of the Commodity Exchange Authority, corroborated the time and place of 

this interview as testified to by Mr. Seitz (pp. 1446-1457). 

Mr. Hess denied that any interview occurred at the time and place specified by 

Mr. Seitz. He admitted having been interviewed at another time and place and 

gave a completely different version of what he told Mr. Seitz on that occasion 

(pp. 882-892, 918-922, 928, 944, 1021, 1411-1414). Mr. Hess' denials were 

corroborated generally by Mr. Harris (pp. 1028-1030). 

Evidence of Statements Made to L. D. Schreiber 

Ludwig D. Schreiber, President of L. D. Schreiber and Company, brokers and 

dealers in butter and eggs, testified that during negotiations for the sale of 

71 carlots of eggs to Great Western in December 1947, Mr. Hess told him that he 

(Schreiber) was selling eggs too cheaply. Hess denied making this statement. 

Schreiber also testified that on two subsequent occasions Hess suggested an 

increase in the price at which Schreiber was offering the eggs to purchasers 

under an arrangement with Hess. Hess admitted these attempts to raise the price 

(pp. 292-295, 396, 941-942). 

Evidence Concerning Prices and Price Movement 

Most of the evidence with respect to prices and price movements is also in 

the form of charts and tabulations showing the relationship between December 

1947 and January 1948 futures prices with the December-January relationship for 

a number of years commencing in 1932 and showing the relationship between 
Page 9 

December 1947 futures prices and cash egg prices with such relationship for a 

period of years commencing also in 1932. In general, comparisons as between 

1947 and these other years showed price relationships in 1947 different than 

those in all other years except certain years during World War II. 

Dr. Beach testified that Great Western's controlling position in the market 

in December 1947 was the cause of an abnormal difference or spread between the 

prices of the December and January futures (pp. 459-468, 655-656; Government 

Exhibit 26). He also testified that an abnormal relationship between the price 

of fresh eggs and the price of December futures prevailed toward the close of 

trading in December 1947 due to Great Western's operations (pp. 510-514; 

Government Exhibits 31, 32). 

C. C. Warren, Assistant Chief of the Commodity Programs Division, Poultry 

Branch, Production and Marketing Administration, testified for the complainant 

as a price expert. He stated that the available measures of supply of and 

demand for eggs in December 1947 indicated that prices should have been lower 

than those in December 1946 or in October and November, 1947. He 

 

also characterized the December 1947 relationship between fresh egg prices and 

refrigerator egg prices as abnormal (pp. 1603-1613, 1624-1631, 1654-1655, 1672-

1676, 1680-1685; Government Exhibits 41, 42, 43). 

Mr. Levin testified for the respondents that, in his opinion, Great Western's 

position in the market in December 1947 was not the cause of the increase in the 

spread between the futures prices, that the December-January futures price 

spread was mot unusual in December 1947, that prevailing prices were justified 

by the current supply and demand situation, by the general price level, and by 

changes in seasonal egg production (pp. 1086-1128, 1138-1141; Respondents' 

Exhibits 17-20, inclusive). He testified further that the futures price spread 

in December 1947 was not comparable with similar spreads in the thirties, and he 

disagreed with Dr. Beach's testimony that the price spreads in December 1944 and 

December 1945 were due to wartime regulations. He also maintained that the 

fresh-futures price relationship in December 1947 was not abnormal (pp. 1146, 

1153-1174, 1364, 1367, 1474; Respondents' Exhibits 32, 33, 35, 37, 38, 39, 40): 

Evidence Concerning Existence of Corner and Attempted Manipulation 

Dr. Beach analyzed the transactions and market position of Great Western in 

detail and testified that they constituted a corner of cash eggs and December 

futures in an attempt to manipulate the price (pp. 436-456, 520, 526-534). Four 

members of the trade testified generally to the effect that a trader in the 

position of Great Western would create a tight market, or that there was in fact 

a tight market or a "squeeze" in December 1947 (pp. 273-280, 300, 310-311, 391-

392, 488-492, 499-507, 852-858). 

Mr. Levin testified that, in his opinion, Great Western did not corner the 

egg market in December 1947 (pp. 1082-1083). Five members of the trade offered 

similar testimony on behalf of the respondents (pp. 757, 781-782, 799-800, 820-

821, 835-836). Hess and Borden testified generally that they did not attempt to 

manipulate or corner and that Great Western's futures and cash eggs were offered 

"at or near going prices." 

Evidence Concerning Interstate Commerce 

Trade witnesses who appeared for the complainant testified that eggs arrive 

in Chicago from production areas outside, the State of Illinois, are bought and 

sold in Chicago, and are then shipped to consuming areas all over the country 

(pp. 270, 299, 393; Government Exhibits 20, 37; Respondents' Exhibits 2, 3). 

 

Contentions and Issues 
Page 10 

The complainant contends that the market position of the corporate respondent 

was large, dominant, and controlling, especially toward the close of trading in 

December 1947, because of its concentrated long interest in December futures and 

its ownership of a large part of the cash storage eggs in Chicago, that it 

temporarily withheld cash and futures from sale, that these operations were 

planned, intended, and carried out by the respondents in order to effectuate a 

corner and manipulate the prices of eggs and egg futures to their financial 

advantage, and that the operations did in fact cause a "squeeze" or corner in 

the Chicago cash egg and egg futures market and caused a price movement in favor 

of Great Western which would not otherwise have taken place. As a corollary to 

these propositions, the complainant contends also that there can be a corner in 

one city or one market, that the economic factors affecting the delivery of eggs 

in satisfaction of futures contracts cannot be ignored, and that because of 

these economic factors deliverable supplies of cash eggs consist of storage eggs 

located in Chicago warehouses and do not include out-of-town eggs or fresh eggs. 

The respondents contend that Great Western's position was not dominant or 

controlling, that its December futures contracts were being offered on the 

Exchange, that the cash egg transactions were the usual operations incident to 

the corporate respondent's business, that there was no withholding of cash or 

futures from sale, that there was no intent to corner or manipulate the price, 

that the price which prevailed for cash and for futures was economically 

justifiable and not unusual or abnormal, and that there was no "squeeze" or 

corner for these reasons and for the additional reason that, under Exchange 

rules, out-of-town eggs and fresh eggs could be delivered in satisfaction of 

futures contracts. 

FINDINGS OF FACT

1. Respondent Great Western Distributors, Inc., hereinafter called the 

corporation or Great Western, is a corporation organized under the laws of the 

State of New York with its principal place of business located at 110 North 

Franklin Street, Chicago, Illinois. The business of the said corporation 

includes the purchase and sale of eggs in wholesale quantities and the purchase 

and sale of egg futures on the Chicago Mercantile Exchange. At all times 

material to these findings, the said corporation was registered as a futures 

commission merchant under the Commodity Exchange Act and had membership trading 

privileges on 

 

the Chicago Mercantile Exchange. The said corporation is so registered and has 

such privileges at the present time. 

2. The Chicago Mercantile Exchange was a duly designated contract market at 

all times material to these findings. 

3. Respondent Nathaniel E. Hess, an individual, was at all times material to 

these findings and is now a registered floor broker under the Commodity Exchange 

Act, vice president of Great Western, and a member of the Chicago Mercantile 

Exchange, such membership being registered for the use of Great Western. The 

said Nathaniel E. Hess formulated the policy of the corporate respondent and 

determined, directed, controlled, and supervised the transactions hereinafter 

described. 

4. Respondent Charles S. Borden, an individual, was at all times material to 

these findings and is now a registered floor broker under the Commodity Exchange 

Act, manager of the Chicago branch of Great Western, and a member of the Chicago 

Mercantile Exchange, such membership being registered for the use of the 

corporation. The said Charles S. Borden executed the futures transactions and 

made some of the cash transactions hereinafter described, was aware at all times 

of the position of the corporation in the egg futures and in the cash egg market 

in November and December, 1947, and knew the purpose and effect of the 

transactions in egg futures and cash eggs executed for the account of the 

corporation during that period. 
Page 11 

5. Respondent Thomas F. Haynes was at all times material to the issues herein 

and is now secretary of Great Western. He is not shown to have any connection 

with the transactions material to the issues herein. 

6. Respondent Hartley L. Harris was at all times material to the issues 

herein and is now a registered floor broker under the provisions of the 

Commodity Exchange Act and a member of the Chicago Mercantile Exchange. During 

the months of November and December, 1947, and January 1948, he took no active 

part in the business of Great Western. 

7. Great Western's trading in the December 1947 egg future on the Chicago 

Mercantile Exchange started on October 29, 1947. Commencing about November 12, 

1947, it began a purchasing program which built up its long position to 292 

carlots on December 2, 1947. It also had a small short position in the December 

future. On November 12, Great Western's holdings constituted 6.1 percent of the 

total open long contracts in the December future and on December 2, 1947, its 

292 carlots long position was 

 

39.5 percent of the total long interest. During this period and also during 

December 1947, Great Western maintained a short open contract position in 

January 1948 egg futures approximately equal to its long open contract position 

in December 1947 egg futures. Great Western was engaged in a futures trading 

operation called a "spread" or "straddle" with the objective of profiting by a 

change in the differential between December 1947 and January 1948 futures 

prices. 

8. The following table shows Great Western's trading in the December 1947 egg 

future during December 1947, total open contracts and Great Western's percentage 

of the total open contracts (Government Exhibits 4, 7): 

Great 

Purchases Sales Great Great Western's 

Date of of Western's Western's Total Percentage

December December Long Short Open of Total 

Futures Futures Position Position Contracts Open 

Contracts 

Dec. 1 20 3 272 816 33.3

" 2 28 8 292 740 39.5

" 3 15 35 291 19 717 40.6

" 4 9 38 282 39 661 42.7

" 5 34 15 282 20 568 49.6

" 8 1 37 282 56 554 50.9

" 9 20 6 282 42 517 54.5

" 10 16 17 281 43 509 55.2

" 11 9 5 274 34 495 55.4

" 12 1 2 272 33 470 57.9

" 15 10 16 256 23 431 59.4

" 16 1 21 236 23 405 58.3

" 17 16 235 7 365 64.4

" 18 6 221 7 336 65.8

" 19 2 39 179 5 235 76.2

" 22 57 113 5 153 73.9

" 23 5 84 25 26 96.2

" 24 21 

" 26 20 " 29 7 " 30 6 

" 31 

9. The following table shows total stocks of shell eggs in storage in 

Chicago, both deliverable and undeliverable on futures contracts, stocks of 

shell eggs in storage in Chicago owned by 

 
Page 12 

Great Western, Great Western's percentage of total stocks, and Great Western's 

long position in its percentage relationship to the stocks of such eggs owned by 

persons other than Great Western (Government Exhibit 9): 

Total Owned by Great Great Western's 

Stocks Great Western's Long Position 

Shell Eggs Western Percentage in Relationship 

(Approx.) (Approx.) of Total to Stocks Owned 

by Other Persons

Dec. 1 316 18 5.7 

" 2 297 17 5.7 104.3

" 3 274 81 29.3 150.0

" 4 257 78 30.2 157.5

" 5 239 70 29.1 166.9

" 8 218 61 27.7 178.5

" 9 199 57 28.5 198.6

" 10 181 53 29.1 219.5

" 11 162 54 33.0 251.4

" 12 151 52 34.3 274.7

" 15 134 50 36.9 301.2

" 16 132 49 36.8 281.0

" 17 129 49 37.6 290.1

" 18 129 57 43.9 306:9

" 19 119 58 48.5 293.4

" 22 119 61 51.0 194.8

" 23 114 65 56.7 51.0

" 24 114 69 60.0 

" 26 107 70 64.9 " 29 106 82 76.7 " 30 105 77 72.9 

" 31 103 82 78.8 

10. At all times from December 2 until the last day of trading in the 

December future, December 23, the combined cash and long futures holdings of 

Great Western exceeded total stocks of refrigerator eggs in Chicago warehouses 

and during most of this period its combined holdings were twice as large as 

storage stocks (Government Exhibits 33, 34). On and after December 11, its 

total holdings of cash and long futures exceeded total holdings in the hands of 

all other persons, and on the last two trading days it held approximately twice 

as many cash eggs and long futures as all other persons combined (Government 

Exhibit 35). 

11. The combined December long futures plus stocks of refrigerator eggs in 

Chicago of persons other than Great Western relative to December short futures 

is shown in the table below. The minus quantities shown represent carlot 

deficits of refrigerator eggs stored in Chicago which would not be satisfied by 

the shorts except by recourse to Great Western for covering futures purchases or 

for Chicago-stored refrigerator eggs (or by the use of fresh eggs or 

refrigerator eggs stored in approved warehouses outside of Chicago). 

December 2 -- 12

" 3 -- 78

" 4 -- 64

" 5 -- 93

" 8 -- 68

" 9 -- 98

" 10 -- 110

" 11 -- 131

" 12 -- 140

" 15 -- 148

" 16 -- 129

" 17 -- 147

" 18 -- 142
Page 13 

" 19 -- 113

" 22 -- 50

12. (a) Great Western's weekly sales of cash eggs during November and 

December and the relation of sales to the average weekly inventory were as 

follows (computed from statistics in Government Exhibits 8, 9, 12, 37). 

Week Sales Average Percent of

(carlots) Inventory Sales to 

(carlots) Inventory 

Nov. 3-9 2 

" 10-16 24 " 17-23 12 41.8 28.7

" 24-30 24 44.0 54.6

Dec. 1-7 26 52.8 49.2

" 8-14 21 55.4 37.9

" 15-21 7 52.6 13.3

" 22-28 2 * 66.2 3.0

" 29-31 8 ** 80.3 6.2.

* Consigned to Great Western's New York office. 

** Includes 3 carlots fresh eggs. 

Between December 10 and December 28, a period of two and one-half weeks which 

included the crucial last few days of futures trading, Great Western sold only 

seven carlots of eggs to Chicago buyers. Two additional carlots were consigned 

to its New York office during this period and eight additional carlots were sold 

for out-of-town delivery. Out of the 64 carlots shown as sold in December, only 

30 were sold for delivery in Chicago. The other 34 carlots were sold to out-oftown buyers or transferred to Great Western's New York office. December 18, 19, 

22 and 23 were the last four days of trading in the December future. Great 

Western sold one carlot for delivery in Chicago on December 17, and then sold no 

more eggs to Chicago buyers until after trading in the December future had 

expired (Government Exhibit 37). The reduction in sales as the close of futures 

trading approached was not due to any shortage of eggs in the hands of Great 

Western as is apparent from the fact that its inventory increased while its 

sales decreased. 

(b) During the month Great Western also received or "stopped" 49 out of a 

total of 51 carlots of eggs delivered in Chicago in satisfaction of December 

futures which was 96 percent of all such deliveries. Great Western made no 

deliveries on its short December position. On December 30, it sold five carlots 

of refrigerator eggs which were delivered back to it on the following day in 

satisfaction of its long position. The 82 carlots which it owned on December 31 

were all deliverable and represented 97.5 percent of all the deliverable eggs in 

Chicago warehouses on that date. On that date also, eggs held by Great Western 

in warehouses in Chicago and Detroit represented 66 percent of all the eggs, 

deliverable and undeliverable, in warehouses in the States of Indiana, Illinois, 

Michigan, Ohio, and Wisconsin. 

13. On December 3, 1947, respondent Hess approached L. D. Schreiber, a dealer 

in eggs, and told the latter that he (Schreiber) was selling eggs too cheaply. 

After some negotiations, respondent Hess purchased 71 carlots of refrigerator 

eggs from Schreiber for the account of Great Western. These eggs had been 

delivered to Schreiber in satisfaction of November 1947 futures contracts and 

were located in approved cold storage warehouses in Chicago. After their 

purchase by Great Western, Hess and Schreiber entered into an arrangement 

whereby Schreiber offered the eggs for sale to others and reimbursed Great 

Western at an agreed price for sales made under this arrangement On two 

occasions thereafter, Hess suggested to Schreiber that there be an increase in 

the price at which these eggs were being offered by Schreiber, but Schreiber 

refused to raise the price and discontinued the 
Page 14 

 

offerings after about 10 carlots had been sold under the arrangement. 

14. In December 1947, Great Western temporarily withheld December futures and 

cash storage eggs from the market. 

15. (a) The December 1947 futures contract on the Chicago Mercantile Exchange 

was a refrigerator egg contract and represented the purchase and sale of 

refrigerator eggs for delivery in December 1947. Under the rules of the Chicago 

Mercantile Exchange, December 1947 futures contracts could be satisfied by the 

delivery of refrigerator eggs located in approved cold storage warehouses in the 

city of Chicago or outside of Chicago or by the delivery of fresh eggs located 

in approved Chicago warehouses or on track in Chicago. 

(b) The delivery of refrigerator eggs in warehouses outside of Chicago was 

subject to allowance by the seller of the futures contract to the buyer thereof 

of 22-1/2 cents per case plus freight from the point of delivery to Chicago. 

Delivery in warehouses outside of Chicago could not be tendered after 9 a.m. 

December 22, 1947, although trading in December futures continued until the 

close of business December 23, 1947, and delivery of Chicago storage eggs or 

fresh eggs could be made thereafter for the remainder of the month. 

(c) In the fall and winter months, the price of fresh eggs is normally higher 

than the price of refrigerator eggs. In December 1947, except for the last day 

or two of futures trading, the price of fresh eggs was substantially higher than 

the price of refrigerator eggs. Under the rules of the Chicago Mercantile 

Exchange, the seller of a December 1947 futures contract who delivered fresh 

eggs in satisfaction thereof could not collect any premium from the buyer of the 

contract by reason of such delivery. 

(d) Street stocks or floor stocks were not deliverable as such in 

satisfaction of December 1947 futures contracts. To the extent that such stocks 

were composed of fresh eggs, such fresh eggs were deliverable, but only if they 

were assembled in carlots containing the minimum number of individual lots of 

specified sizes and placed in an approved cold storage warehouse in Chicago or 

in refrigerator cars on track in Chicago at the expense of the person making 

delivery. 

16. By reason of the penalties and premiums described immediately above in 

Finding of Fact 15, deliveries in satisfaction of refrigerator egg futures 

contracts are normally and usually made by delivering refrigerator eggs located 

in approved cold storage 

 

warehouses in Chicago. This was true in December 1947. Deliveries of fresh 

eggs or out-of-town storage eggs, because of the additional expense involved, 

are infrequent and indicative of a squeeze or tight market situation. 

Therefore, in determining whether there has been a corner or manipulation, or 

attempts to achieve any such end, the deliverable Chicago-stored refrigerator 

eggs should be considered the deliverable supply. 

17. The production of eggs increases in the late fall and winter months. Due 

to the progressive increase in fresh-egg production in December and January, 

there is a progressive decline in demand for refrigerator eggs in those months, 

and those remaining on the market in January are generally disposed of at 

reduced prices for processing. The situation in the winter of 1947-1948 was as 

described above. In December 1947, the egg trade, including respondent Hess, 

expected a good volume of fresh eggs to reach the market in January. 

18. Despite the facts shown in Finding 17 immediately above, the 82 carlots 

of eggs in the Chicago inventory of Great Western on December 31, 1947, acquired 

at December prices either as cash purchases or in satisfaction of futures were 

delivered by Great Western on its short January contracts resulting in a loss on 

those eggs. Some could have been delivered by Great Western on its short 

December contracts or some could have been sold as cash eggs at December prices. 
Page 15 

Great Western knew that it was likely that disposition in January would entail a 

loss on these eggs. 

19. The following table shows closing prices during December 1947 for 

December futures and the amounts by which the January futures prices were less 

than December futures prices, that is, the "spread": 

Date Closing prices Spread

December futures 

Dec. 1 53.50 1.82

" 2 53.00-53.05 3.22

" 3 53.60 3.70

" 4 54.10-54.25 3.87

" 5 55.45-55.50 4.22

" 8 55.25 4.12

" 9 54.60-54.65 4.05

" 10 54.65 4.20

" 11 54.65 4.47

" 12 52.75 4.50

" 15 53.10-53.25 4.72

 

 

Date Closin

g 

prices

Spre

ad 

December futures Dec. 16 52.50 5.00

" 17 50.50-50.65 4.50

" 18 52.00 5.00

" 19 51.30-51.40 5.20

" 22 52.75 6.87

" 23 53.50 8.12

20. (a) During the last week of trading in the December 1947 future, the 

weekly average spread between the prices of the December and January futures was 

5.94 cents per dozen, which was more than three times the comparable spread in 

the ten years 1933-1941 and 1948, more than twice that in 1946, and 

substantially in excess of that in 1932. In 1944 and 1945, the comparable 

spread was 6.19 cents per dozen and 6.28 cents per dozen, respectively. 

(b) The net increase in the average weekly spread between December and 

January futures prices over a period of seven weeks immediately preceding the 

close of trading in the December 1947 future was 5.67 cents per dozen. This 

increase was greater than that in any comparable period between 1932 and 1948. 

It was more than five times as great as the increase in the corresponding period 

during seven years, 1933-1935, 1937, 1938, 1940, 1941; more than twice as great 

as the increase in 1932, 1945, and 1946; and substantially greater than in 1944. 

During the corresponding period in the years 1936, 1939, and 1948, the spread 

between the prices of these two futures decreased, the price of the December 

future declining in relation to that of the January future. 

(c) Because of conditions incident to the war, including ceiling regulations 

established by the Office of Price Administration and the absence of free 

trading in the egg market, the December-January futures price spreads which 

prevailed in December 1944 and December 1945 do not furnish a basis for price 

comparison purposes with other years. Because of a concentrated large long 

interest in the December 1946 future coupled with a corresponding short position 

in the January 1947 future by the same person, the December-January futures 

price spread which prevailed in December 1946 does not furnish a basis for price 

comparison purposes with other years. 
Page 16 

21. (a) On December 11, 1947, the differential between the price of fresh 

eggs in Chicago and the price of the December future was 6.85 cents per dozen. 

From that date until the last 

 

day of trading in the December future, the price of fresh eggs fell while the 

price of the December future first fell then rose during the last week of 

trading so that, on the last trading day in that future, the price of the future 

was within one-half cent of the price of fresh eggs. 

(b) During the years 1932 to 1941, inclusive, and 1944 to 1946, inclusive, an 

opposite movement between the price of fresh eggs in Chicago and the price of 

the December future during the last week of trading in that future occurred only 

in 1941. During the years 1932 to 1941, inclusive, and 1944 to 1947, inclusive, 

the price of fresh eggs and the price of the December future reached equality in 

December only in 1932 and 1941. A congested market situation existed in 

December 1932 and December 1941. The following table gives the prices for 

December futures and fresh eggs on the last trading day for these years 

(Government Exhibit 32) : 

Year Future Cash 

1932 28-1/2 28 

1933 15-3/8 19 

1934 22-1/2 29-1/2 

1935 19-7/8 25 

1936 26-1/2 28-1/2 

1937 21-1/4 24-1/2 

1938 21-7/8 24-1/2 

1939 13.90 19 

1940 20.65 22-1/2 

1941 33.75 33-1/4 

1944 40.60 44.42 

1945 42.95 49.30 

1946 34.50 40.75 

1947 53.50 54.00 

22. (a) The daily market letters issued by James E. Bennett & Co., Commission 

Merchants, Produce Division, made the following statements on the egg market on 

the days indicated: 

December 11, 1947. "The December deal continues very tight with only 52 cars 

traded today and an open commitment of 509 cars at start of business today. On 

yesterday's trading of 121 cars the commitment was reduced only 6 cars, and it 

appears that the big interest holding the largest block of deliverable eggs, and 

also apparently long the December contract are standing firm, and at the same 

time merchandising each day a fair percentage of their holdings." 

December 18, 1947. "However, the open interest in the December contract is 

still large -- 357 cars this morning after delivery, and there were only 32 

trades in this contract today and there are only 3 more trading days left for 

December eggs. Of the 77,665 cases still in Chicago, at least 30,000 cases 

belong to the large interest that is reportedly long the December contract, and 

there is considerable talk of the shorts being unable to deliver, and they may 

be forced to pay higher prices to cover." 

December 19, 1947. "The withdrawals in Chicago today amounted to only 371 

Cases, and practically everybody is entirely on fresh eggs, and about the only 

possibility existing for a renewed interest in storage would be some sub zero 

weather that might reach down into the deep south, and be extended long enough 

to choke off the fresh production. The only support in the market is through 

one large broker who owns the bulk of the deliverable eggs in Chicago and who 

has been stopping all of the recent deliveries. However, this broker has a 

spread out -- short Januarys and long Decembers, and the fact that shorts are 

unable to deliver Decembers in any quantity has widened the spread to around 525 
Page 17 

points, and at this difference they apparently are willing to uncouple the 

spread." 

December 22, 1947. "At the start of business today there were 235 cars 

Decembers still open, against which there were only 9 deliveries and tomorrow is 

the last day of trading. The deliveries today were stopped by the broker who 

has accepted all recent deliveries and who is also reportedly long the December 

contract. Of the 81 cars of Decembers traded today, 59 of these were sold by 

this broker, who was very firm in his asking prices on a scale up. There are 

not more than 100 cars of deliverable eggs in Chicago, and with one cash 

interest in control of the majority of them, look for continued tightness until 

trading terminates in the December contract tomorrow. Whether or not they will 

be retendered on the December contract or carried into January at a 6 cent 

discount is highly problematical." 

December 23, 1947. "There were only 4 cars of eggs tendered today against 

the December contract, all of them going to the same cash interest that has 

taken all recent deliveries, and who own bulk of the deliverable eggs in 

Chicago. These people were firm in their asking price today for the December 

eggs and the shorts were practically forced to cover bulk of the Decembers 

between 53.25 and 53.50 range." 

December 24, 1947. "There also about 100 cars of storage eggs hanging over 

the market in the hands of one broker, who may 

 

or may not elect to deliver early in January, and with the very limited demand 

for storage eggs, this could prove very bearish." 

December 30, 1947. "While the sharp break in the fresh egg market today may 

tend to stimulate business, at the same time weather conditions are moderate, 

and we must look for progressively increasing production, and with fresh eggs 

currently selling at 50 cents, don't see much on the upside for January storage 

eggs, and we must also take into consideration the fact that one large eastern 

house still has on hand approximately 75 cars of storage eggs that could be 

delivered at any time in January. There was one car of fresh eggs delivered 

today against December contracts, leaving 7 cars still open in this delivery." 

(b) The Uhlmann Grain Company's "Weekly Commodity Letter" had this to say in 

its issue of December 15, 1947: 

"The December contracts, in our opinion, are not being liquidated rapidly 

enough, and we do not understand why longs will not accept present prices 

because any eggs that may be delivered to them may have to be redelivered on 

January contracts for about 5 cents per dozen less. On the other hand, we also 

do not understand why shorts, who have no eggs to deliver, will not cover, 

because there does not appear to be enough storage eggs of deliverable grade to 

fill even half of the open commitment if the longs remain stubborn." 

23. On February 24, 1948, respondent Hess was interviewed with respect to 

Great Western's operations in November and December, 1947, by Andrew E. Seitz, 

an investigator in the New York office of the Commodity Exchange Authority. 

During the course of this interview Mr. Hess stated that he often conducted 

operations between spots and futures or between different futures options which 

depended for profits on a narrowing or widening of the differences, that in this 

case operations were instituted in November by the purchase of spot eggs and 

November futures and by the sale of January futures. At the time of 

institution, he said that eggs were plentiful and the differences between spots 

and future at a low point. Mr. Hess told Seitz that he believed that all he 

would have to do would be to "sit and wait" for market developments, that some 

of the November contracts were liquidated by the receipt of cash eggs on 

expiration of the contracts and that others were transferred into December 

futures contracts. Hess told Seitz also that cash eggs were continually sold to 

customers in their regular business operations. He said that during December a 

shortage of eggs developed. He said, also, that 
Page 18 

 

cash eggs were received in delivery against some of the long December futures 

until the shortage became acute and the shorts were no longer able to buy the 

eggs to deliver. He claimed that the December futures price was gradually 

raised by himself but that he continually offered to sell all of his December 

futures (at his prices) "so that there was no corner" in the market. His prices 

found no takers, he said, so they were continually, though slightly, raised, and 

he claimed that he finally liquidated the futures at an increase in the 

differential of 4-1/2 to 5 cents. He maintained, however, that he continually 

offered to sell cash eggs to those short of December futures and that "therefore 

no corner existed." The January short futures position was maintained, he 

explained, so that any excess of spot eggs remaining after completion of the 

December operations could be easily liquidated. 

24. The prices of December futures in December 1947 reflected prices of 

refrigerator eggs in December 1947. 

25. The supply of eggs in the United States and in the Chicago market in 

December 1947 exceeded supplies in October and November, 1947, and in December 

1946. The demand for eggs in the United States and in the Chicago market in 

December 1947 was less than the demand in October and November, 1947, and in 

December 1946. The production of eggs in the month of December has, for several 

years prior to and including 1947 and 1948, shown a generally progressive 

increase relative to January production. 

26. Great Western had a large, dominant and controlling position during 

December 1947 in the December 1947 futures market with its concentrated long 

interest and its ownership of a substantial part of storage eggs in Chicago 

deliverable upon the egg futures contracts. During December 1947 up into the 

last day of trading, December 23, 1947, Hess and Borden intentionally maintained 

for Great Western a large, dominant and controlling position in the December 

1947 future market and intentionally so employed this position and Great 

Western's cash stocks of storage eggs in Chicago so as to apply pressure upward 

on December 1947 futures prices and storage egg prices in Chicago for the 

purpose of widening the spread between December 1947 and January 1948 futures 

prices. 

27. December 1947 futures prices during December 1947 were supported and 

increased above what they would have been by means of the activities of Hess and 

Borden on behalf of Great Western described above, and the spread between 

December 1947 

and January 1948 futures prices was widened as a result of these efforts. 

28. Cash eggs bought and sold in the city of Chicago are produced in Illinois 

and in states outside of Illinois, moved into Chicago for storage and 

consumption, and arc shipped from Chicago to states outside of Illinois. 

CONCLUSIONS

I

The complaint charges that respondents attempted to manipulate the price of a 

commodity in interstate commerce and for future delivery on or subject to the 

rules of a board of trade in violation of sections 6(b) and 9 of the act, that 

they attempted to corner and that they cornered such a commodity in violation of 

section 9 of the act. n1 

n1 Section 6(b). "If the Secretary of Agriculture has reason to believe 

that any person . . . is violating or has violated any of the provisions of 

this Act . . . or has manipulated or is attempting to manipulate the market 
Page 19 

price of any commodity, in interstate commerce, or for future delivery on 

or subject to the rules of any board of trade . . . ." 

Section 9. "Any person who . . . shall manipulate or attempt to 

manipulate the price of any commodity in interstate commerce, or for future 

delivery on or subject to the rules of any board of trade, or who shall 

corner or attempt to corner any such commodity . . . ." 

Many of the facts outlined above concerning Great Western's December 1947-

January 1948 futures trading operation are not in dispute. For example, it is 

not controverted by the respondents that Great Western was long December and 

short January approximately the same amount, that is, that it had out a "spread" 

or "straddle" which depended for profit upon a widening of the differential 

between December and January futures prices, that Great Western maintained a 

long December position from December 2 through December 10 which at all times 

was between 290 and 280 carlots, that it continued to maintain a long position 

in excess of 200 carlots from December 11 through December 19 after which date 

there were only two trading days in the future remaining, that it went into the 

last day of trading, December 23, with a long position of 113 carlots, that 

during December Great Western held a steadily increasing percentage of the total 

open interest, that Great Western obtained ownership of a substantial part of 

the stocks of storage eggs in Chicago during December, that Great Western's long 

December contracts plus its stocks of storage eggs in Chicago greatly exceeded 

stocks of storage eggs in Chicago owned by other persons, that during most of 

the month Great Western's long position alone exceeded the total stocks of 

storage eggs in Chicago, and that Great Western received 96 percent of all 

deliveries made upon the December futures contracts. 

Although the basic facts as to Great Western's large long interest in 

relationship to available deliverable supplies of storage eggs in Chicago and 

its holdings of cash storage eggs cannot be denied, the respondents insist that 

Great Western's position was not dominant and controlling. The undisputed facts 

demonstrate that Great Western had such a position during December. Its 

percentage of the total open long contracts climbed steadily from 33.3 percent 

on December 1 to 76.2 percent on December 22. At the same time it held a 

substantial portion of the cash storage eggs in Chicago and, from December 2 

through December 22, there were numerous short contracts which could not be 

offset or satisfied by delivery of Chicago storage eggs without recourse to 

Great Western for cash eggs or futures. Certainly Great Western held a dominant 

and controlling position on the long side in the December 1947 futures market. 

What interest Great Western had in the December market during previous months, 

such as October, which the respondents think should be considered, is not 

relevant to the question of its control of the market in December. It makes 

little difference, either, if Great Western's long position is regarded as net, 

that is, by subtracting its small short December position from its long December 

position. It is the gross long or short positions that the trade looks to and, 

as a matter of fact, the rules of the Chicago Mercantile Exchange do not permit 

the offsetting of existing contracts. Dominance or control is not negatived, as 

suggested by the respondents, because it was not necessary for a majority of the 

shorts to have recourse to Great Western for futures or cash storage eggs. 

II

The respondents argue throughout the proceeding that there could be no 

control of the market by Great Western, no manipulation or corner and no attempt 

to do so because out-of-town storage eggs and fresh eggs could be delivered by 

the shorts upon their contracts. The overwhelming weight of the evidence, 

including testimony by the respondents' witnesses, is that such deliveries were 

not usual because they are too expensive in relationship to deliveries of 

Chicago storage eggs. The allowance of 22-1/2 cents per case plus a freight 

rate averaging one cent a dozen from nearby points (pp. 207-208), for example, 

would amount to about $ 315 per carlot, a very sizable figure. Freight rates 

from more distant points of course would be higher. Moreover, out-of-town 

storage eggs could not be tendered for delivery after 9 a.m. on December 22. 
Page 20 

Fresh eggs are normally higher priced than refrigerator eggs and were so in 

December 1947. No premium was 

 

allowed for delivery of fresh eggs upon refrigerator egg contracts. 

Respondents' argument then that no manipulation or corner could take place or 

that no attempt to do so could be had so long as out-of-town storage eggs and 

fresh eggs were available to the shorts is of little merit. It is similar to 

the argument sometimes made that rules of commodity exchanges providing for 

fixing limits on daily prices and for determining a fair market price plus a 

penalty where shorts default prevent the existence of manipulation or corners or 

attempted manipulation on the long side. Such rules may tend to discourage 

manipulation and corners by putting a ceiling upon the extent of manipulation 

possible and upon the profits that might be expected from a "squeeze" or corner, 

but their existence does not automatically disprove manipulation or attempted 

manipulation. Similarly here, the availability for delivery of supplies more 

costly than Chicago storage eggs merely tends to limit the extent of 

manipulation possible. 

III

We think that the weight of the evidence is that Great Western not only had a 

dominant and controlling position in the December futures market but that it 

acquired such a position knowingly and utilized its control intentionally to put 

on a "squeeze," that is, to pressure December futures prices upwards by means of 

its monopolistic powers over futures and cash storage eggs in Chicago. The 

respondents disclaim any such purpose. They insist that there was no 

manipulative intent present. They point to Great Western's sales of cash and 

futures during December, they claim that its cash and futures were for sale at 

all times during December, and they say that Great Western was engaged in normal 

business practices. 

First, it should be observed that, despite the respondents' confusing 

attempts to describe the transactions in issue in terms of merchandising and 

"hedges", the essential characteristics of Great Western's December 1947-January 

1948 egg futures operation are speculative in nature. Whether Great Western's 

holdings of cash eggs were or were not large from the standpoint of a 

merchandiser of cash eggs, they were large and of great importance in 

relationship to other available deliverable storage eggs in Chicago and Great 

Western's large long line of December futures. 

As to Great Western's sales of cash eggs during December, it is not 

surprising that some cash eggs were sold and such sales are not inconsistent 

with manipulation. Great Western is a merchandiser of eggs. It held on, 

however, to a large part of the 

 

deliverable storage eggs in Chicago, and it is significant, as shown by Finding 

of Fact 12(a), that Great Western made very few sales of its Chicago storage 

eggs to Chicago buyers after December 10. As the critical last few days of 

trading in the December future approached, it made no sales to Chicago buyers. 

It sold one carlot on December 17 and sold no more to Chicago buyers until after 

trading closed on December 23. It carried into January 82 carlots of storage 

eggs acquired at December prices which were delivered on its January short 

contracts at lower January prices. Some of the eggs were cash purchases and 

others were acquired by delivery to Great Western on its long Decembers. The 

market generally and respondent Hess expected January prices to be lower than 

December. It is not a normal business practice nor a normal futures trading 

practice to hold a commodity for disposal at a time when the price is expected 

to be lower. The respondents place the blame for part of their December 

inventory of cash eggs upon deliveries by the shorts. Great Western was 

practically the only long to take delivery. When asked on cross-examination why 

he did not liquidate Great Western's long position to avoid the acquisition of 
Page 21 

eggs for disposal at lower January prices, Mr. Hess answered only that he 

"didn't want to" (pp. 1008-1009). According to his testimony, Hess bought the 

71 cars from Schreiber on December 3, 1947, to have cash eggs for Great Western 

to sell. Yet he admitted the several attempts to raise the prices for these 

eggs described in Finding of Fact 13 and a number of these cars were not sold 

but were delivered on Great Western's short January contracts. The respondents 

make another point that according to Warren's evidence the market for cash 

storage eggs was poor in the latter half of December. There certainly was a 

demand in Chicago for such eggs from the shorts on the December contract. The 

only conclusion we can come to as to the alleged offers to sell cash eggs at all 

times during December is that the respondents were trying to make cash storage 

eggs in Chicago difficult or impossible to acquire for delivery upon December 

futures contracts in its price-raising venture. 

As to its sales of futures during December, it is to be noted that it also 

made heavy purchases and continually maintained a long position liquidated at a 

much slower pace than the rate of liquidation of the total open interest. The 

respondents seem to imply that any partial liquidation of Great Western's long 

position or any sale of futures excludes the presence of a manipulative venture. 

This is completely fallacious defense although it has sometimes succeeded in the 

past in beclouding a, manipulative picture. It is not necessary for the crime 

of conspiracy to monopolize 

 

trade under the Sherman Act to show power and intent to exclude all competition 

( American Tobacco Co. v. United States, 328 U.S. 781, 789 (1946)), just as it 

is not necessary for the crime of embezzlement that the embezzler steal all the 

money in his custody. Sales of part of a long position do not mean that the 

remaining long position is not dominant, controlling and being used for 

manipulative purposes. The extensive liquidation on December 23 and Great 

Western's offers to sell at 53.50 on the last day of trading, far from being 

evidence of normal trading or the absence of a manipulative scheme, are weighty 

indications of the kind of manipulation charged. Offering to sell just ahead of 

the market or at a price which represents a manipulated price, as we shall see 

shortly, is no meritorious defense. Concerning the protestations that its 

futures were for sale at all times, the facts as to its long position are 

uncontroverted. Great Western was pushing the market, was pressuring prices, 

and there can be little doubt that, as reported in Finding of Fact 22, the "near 

going prices" referred to by the respondents as offering prices by Great Western 

were on the "up" side on an ascending scale. 

IV

Of course, there may be natural corners or squeezes without manipulative 

intent. n2 Manipulative intent is sometimes difficult to prove. Nevertheless, 

it can be demonstrated satisfactorily from a legal standpoint by circumstances 

alone. Wright v. Securities and Exchange Commission, 112 F.(2d) 89, 92, 93 

(C.C.A. 2d, 1940); see Note, Manipulations of the Stock Markets Under the 

Securities Laws (1951) 99 U. of Pa. L. Rev. 651. In this case, the facts and 

circumstances alone are more than adequate to warrant such a conclusion. But 

when there are added the admissions of Hess to Seitz, the evidence is 

practically conclusive on the question of manipulative intent. The respondents 

seek strenuously to discredit Seitz's testimony, but we agree with the referee 

that this testimony is much more credible than that of Hess on the matter. 

Seitz testified that he visited Great Western's New York offices on three 

occasions to interview Hess on Great Western's December 1947 operations, that he 

saw Hess on these three occasions, February 17, 20, and 24, 1948, that he had 

brief conversations with Hess and Harris on February 17 and on February 20 in an 

office on the west side of the suite but that on February 24, 1948, he had a 

private interview with Hess in an office on the east side of the suite at which 

time Hess made the statements set out in Finding of Fact 23. Seitz testified 

that the interview lasted about 

 
Page 22 

an hour and then he made a memorandum of the interview within two or three days 

thereafter. This memorandum was introduced in evidence (Government Exhibit 6). 

He testified further that the dates for these interviews were ascertained from 

time records required to be kept in connection with his official duties and that 

another Commodity Exchange Authority employee, Edward R. Tracy, accompanied him 

on February 17 and February 24. Tracy testified that on February 24 he was at 

Great Western's New York office with Seitz and that Seitz left him for about an 

hour in order to interview Hess. Tracy also testified that he did not see 

Harris in Great Western's offices on February 24. 

n2 See e.g., VII Report of the Federal Trade Commission on the Grain 

Trade (1926) 248. 

On the other hand, Hess testified that he saw Seitz on only two occasions, 

that nothing of importance took place during the first visit but that on the 

second visit he had a conversation with Seitz in the west office, that his 

secretary was present part of the time and that Harris was present during the 

entire interview. He described the conversation as consisting of an explanation 

by him of Great Western's straddle and hedge techniques which he thought Seitz 

might be seeking for a Government publication, but he denied making the 

statements attributed to him by Seitz. Harris corroborated Hess to the extent 

that he testified that Hess did not make these statements but he could recall 

only the general subject-matter of the conversation. Neither Hess nor Harris 

made any memorandum of the interview and relied upon their memories. Seitz 

testified at the hearing on July 26, 1949, when Hess was present but Harris did 

not know of Seitz' testimony as to what was said by Hess until about October 10, 

1949, and Hess did not inform his counsel that Seitz version was not true at the 

time Seitz was testifying or while Seitz was available for cross-examination. 

Hess' delay in making known his denial or lack of agreement with Seitz as to 

what he, Hess, said, the improbability that Seitz on an official investigation 

would be satisfied with the simple exposition of the elementary principles of 

hedging and straddling which Hess claims is all that he discussed in an 

interview lasting an hour, Hess' evasive tactics and reluctance on crossexamination -- all these tend to make more believable the testimony of Seitz 

supported as it is by a memorandum prepared within two or three days thereafter. 

Harris' memory or his credibility appear to be less than perfect because his 

separate answer to the complaint states that he severed his connection with 

Great Western on May 1, 1948, but in his testimony he stated that he left the 

firm's employ on February 1, 1948 (pp. 1027-1028). 

Putting on a "squeeze" deliberately, that is, taking and maintaining during a 

delivery month a large long line in relationship 

 

to known deliverable supplies in the market together with ownership or control 

over a substantial part of the deliverable supplies for the purpose of 

pressuring prices upward by means of the relative scarcity of supplies and 

futures thus created, is in our opinion an undoubted manipulation in violation 

of the act and constitutes at the very least an attempt to manipulate prices. 

VII Report of the Federal Trade Commission on the Grain Trade (1926) 244; Baer 

and Saxon, Commodity Exchanges and Futures Trading (Harper & Bros. 1949) 83; 

Baer and Woodruff, Commodity Exchanges (Harper & Bros. 1935) 146; Emery, 

Speculation on the Stock and Produce Exchanges of the United States (Columbia U. 

1896) 175; Hoffman, Future Trading Upon Organized Commodity Markets in the 

United States (U. of Pa. Press 1932) 315-316; Cotton Prices Hearings Before a 

Subcommittee of the Committee on Agriculture and Forestry United States Senate 

Pursuant to S. Res. 142, 70th Cong., 1st Sess. (1928), particularly pages 169, 

203-214, and the Report of the Subcommittee on Agriculture and Forestry on S. 

Res. 142; Hearings Before Senate Committee on Agriculture and Forestry on H. R. 

6772, 74th Cong., 2d Sess. (1936), particularly pages 124 and 162. Because 

Great Western's plan was to pressure December futures prices upward to widen the 

spread between December and January futures prices rather than merely for the 
Page 23 

purpose of raising December futures prices alone does not absolve the 

transactions from the taint of manipulation. This type of market operation is 

not as novel as the respondents seem to think it is, it was thoroughly explored 

in the case of cotton during the subcommittee hearings pursuant to S. Res. 142, 

70th Cong., 1st Sess., referred to above, and it was described by the Chairman 

of the Senate Committee on Agriculture and Forestry on the floor of the Senate 

during the progress of the legislation which became the Commodity Exchange Act. 

n3 

n3 "MR. SMITH . . . It was also testified that some of the big traders 

would sell Europe and buy America, which is called a straddle. The same 

thing was done in the grain market. Not only would they sell Europe, or 

buy, as the case might be, to their advantage, and sell America, a 

straddle, as it is called, but they would have enough of the commodity and 

enough money to put one down and the other up, and then reap the reward of 

the manipulation. It went so far that they would straddle from one month 

to another month; that is, they would buy one month and put the price for 

that month out of all relation to the price of a near month, and then they 

would put in their 'spot' wherever they had created an advantageous place 

to put it." 80 CONG. REC. 7910 (1936). 

Page 256, Vol. VII. Report of the Federal Trade Commission on the Grain 

Trade (1926), has this to say: 

"While the ordinary conception of a corner or squeeze considers only the 

holdings of the dominant long interest in the near or current option, it is 

not necessary that the interest in question be a wide-open speculator. The 

bought near option may be protected by a sold deferred option. The spread 

will limit losses and, if the deferred price is favorable, will make it 

feasible to take grain on delivery in the squeezed near month without being 

under pressure to dispose of it promptly." 

V

Not only did respondents Great Western, Hess and Borden attempt to manipulate 

December 1947 egg futures prices but the weight of the evidence in our opinion 

is that they succeeded. Dr. Beach testified that Great Western's large, 

dominant and controlling long December position, together with its ownership of 

a substantial part of the storage egg supply in Chicago coupled with the January 

short sales by Great Western, caused a widening of the spread between December 

and January futures prices. He found almost perfect correlation between the 

widening of the spread and Great Western's increasing percentage of the total 

open December interest. Finding 20 shows that the average weekly spread between 

December and January futures prices for the last week of trading in the December 

1947 future and the net increase in the average weekly spread between December 

1947 and January 1948 futures prices over a period of seven weeks immediately 

preceding the close of trading were abnormal. Finding 21 shows that the 

relationship between December futures prices and prices for fresh eggs was 

abnormal. Both Dr. Beach and Warren, as did also witnesses for the respondents, 

testified that normally refrigerator egg prices are lower than prices of fresh 

eggs during the fall months and that as the season advances and as refrigerator 

eggs decline in quality and fresh egg production begins to increase, the 

differential between fresh egg and refrigerator egg prices generally widens. 

Despite this normal situation, there was a rise in price for December futures 

during the last few days of trading while fresh egg prices were declining in 

Chicago so that on the last day of trading there was only a one-half cent 

difference. Together with Hess' admission to Seitz, this evidence is more than 

enough to conclude that the December 1947 futures price was manipulated on the 

upward side by Great Western's tactics. 

Respondents point out that the December 1947 futures price was 53.60 on 

December 2, that it went up to 55.50 on December 5, then declined until it went 

to a low of 50.50 on December 17, and gradually went up for the next three or 
Page 24 

four days to 53.50. They argue that because of the declines and the 

fluctuations, there was no manipulation of price by Great Western. They dispose 

of the complainant's evidence as to the abnormally wide spread between the 

December and January futures prices by claiming that there is no standard of 

normality and they similarly discard the fresh-futures price relationship as a 

test of artificiality in futures prices. Whether prices of December futures 

were consistently and steadily 

 

driven up at all times during trading in December is not the exclusive yardstick 

for determining whether the prices were manipulated. Whatever definition of 

"manipulation" may be selected, it necessarily should include expressly or by 

implication the effecting of a price which would be different if the priceinfluencing efforts were absent, that is, not only the raising or lowering of 

prices by means directed to either such end but the prevention of prices from 

going up or going down according to free supply and demand conditions. We 

cannot believe that it is not manipulation under the act to employ monopolistic 

methods to support and pressure prices for one month's futures in order to widen 

the spread between prices for that month's futures and the next month's futures. 

n4 But, in any event, during the last few days of trading, the critical period 

in any squeeze, the price did rise significantly. Respondents minimize this 

rise and the substantial equality between fresh and December futures prices on 

the last day of trading by saying that there is historically a small rise in 

futures prices at such a time and a tendency for fresh and futures prices to 

approach each other. The reason given is the necessity of the shorts to make 

covering purchases (Respondents' Brief, p. 23), an admission which is 

inconsistent with the respondents' defense that all prices in issue were the 

result of supply and demand conditions generally for eggs and free trading 

opinion as to such conditions. In December 1947 the necessity of the shorts to 

cover was created by Great Western's concentrated long interest and its holdings 

of deliverable supplies deliberately employed for this purpose. 

n4 In United States v. Socony-Vacuum Oil Co., 310 U. S. 150, 223 (1940), 

the Court said that "market manipulation in its various manifestations is 

implicitly an artificial stimulation applied to (op at times a brake on) 

market prices, a force which distorts those prices, a factor which prevents 

the determination of those prices by free competition alone." In the 

Twentieth Century Fund's The Security Markets (1935) 144, the following 

definition of manipulation is used: ". . . the word manipulation will mean 

planned effort by an individual or group of individuals to make the market 

price of a security behave in some manner in which it would not behave if 

left to adjust itself to uncontrolled or uninspired supply and demand." 

Dictionary definitions or those culled from other authorities which speak 

only of forcing prices up or down are not complete or are inaccurate unless 

they are interpreted to mean the effecting of a price which is higher or 

lower than it ought to be. A price which is maintained artificially by 

deliberate efforts when it should be lower is a manipulated price just as 

much as a price which has been raised artificially from a pre-existing 

market price. 

On the side of affirmative defense, the respondents presented an expert 

witness, Gerson Levin, a former employee of the United States Department of 

Agriculture, who introduced considerable evidence to show that the December 

futures price in December was ". . . pretty well in line with what we term the 

supply-demand situation." He supplied data concerning the production, supply, 

and demand for eggs, withdrawals of eggs from storage, the relationship 

 

between egg prices and corn, hog and cheese prices in December 1947 as compared 

with previous years, and changes in the seasonal production pattern for eggs. 
Page 25 

He was of the opinion that there was a very strong, firm market situation in 

December 1947. 

Examining Levin's evidence we find that his production, supply, and demand 

data are relative to prior periods, which would indicate that his conclusions as 

to December 1947 prices being fair market prices would be relative to the prices 

during the prior periods. He reaches his price conclusions, however, only by 

relationship to prior production, supply and demand data and makes no general 

economic study to show that futures prices in December were justified 

absolutely, not relatively, by economic conditions generally in December 1947. 

More close study of Levin's production data designed to disclose a production 

decline shows that the data were not available to enter into trading opinion in 

December 1947. The data used, revised estimates by the United States Department 

of Agriculture, were not issued until January 1948 or later. The data available 

to form trading opinion in December 1947 indicated more layers on farms as of 

December 1, 1947, than December 1, 1946, which would be generally associated 

with lower prices. 

Levin's evidence as to a decline in supply is weak. He shows receipts in 

three groups of markets in the last quarter of 1946 and 1947, together with 

percentage changes between the years and between the weeks in 1947 (Respondents' 

Exhibits 17, 20, 21). Supplies in the Pacific Coast markets and the group known 

as the Four Markets (New York, Chicago, Philadelphia, Boston) were more abundant 

in December 1947 than they were in December 1946 (p. 1317; Respondents' Exhibit 

17). In the Midwest Primary Markets and in the Four Markets, the weekly trend 

in December 1947 was up (pp. 1626-1628; Respondents' Exhibits 20, 21). The Four 

Markets group in which supplies were not only more abundant but were rising 

includes Chicago. Levin did not give supply figures for Chicago separately nor 

did he investigate the supply situation for Chicago. Warren, however, 

demonstrated for the complainant that during most of December 1947 receipts in 

Chicago were approximately 40 percent greater than they were in December 1946 

and constituted about one-third of all receipts in the Four Markets group (p. 

1603; Government Exhibit 41). Mr. Warren testified that Chicago receipts should 

rank high in the order of importance in determining market supplies and that the 

trade in Chicago considered Chicago receipts independently and not as merely 

part of the Four Markets group (pp. 1623, 

 

1665). Mr. Levin did not explain the basis upon which he included figures from 

the Pacific Coast, a deficit producing area which does not normally ship eggs to 

Chicago, and omitted figures for Chicago, the market with which this proceeding 

is concerned (p. 1318). 

The supply data presented by Mr. Levin also failed to include Eastern Auction 

Markets receipts (p. 1318). Mr. Warren testified that Eastern Auction Markets 

receipts were important indicators of supply, and were posted by the Chicago 

Mercantile Exchange and widely used by the trade including Chicago dealers (pp. 

1600, 1668). Receipts in this group of markets in December 1947 ranged from 7 

to 17 percent above December 1946 (pp. 1669-1671; Government Exhibit 40). The 

only indication of reduced receipts was in the Midwest Primary Markets. Mr. 

Warren testified that the Midwest Primary Markets figures represent only 7.3 

percent of the eggs produced in the states covered and from past experience he 

would say that declines in receipts shown by these figures do not necessarily 

indicate lower egg supplies for the United States. He believed that these 

figures should rank low in evaluating the overall supply picture, especially 

since four other recognized measures of supply showed increases (pp. 1623-1624, 

1667). 

The demand data offered by the respondents consist of statistics showing 

movement into retail channels in three cities, Chicago, San Francisco and Los 

Angeles (Respondents' Exhibits 22, 23). It is presented in the same form as the 

supply data. These demand data fail to prove that any increase in demand took 

place. During most of December 1947 consumption in San Francisco and Los 

Angeles was below consumption in December 1946. In both of these cities the 
Page 26 

trend in relation to the previous year was downward, and the weekly trend in 

December 1947 was also downward. In Chicago, consumption during the entire 

month of December 1947 was definitely below that of the previous year. No trend 

is discernible, either in relation to the previous year or previous weeks (pp. 

1625-1626; Respondents' Exhibits 22, 23). It would also seem that the Chicago 

figures should rank first in importance because of the size of Chicago compared 

with either San Francisco or Los Angeles. Mr. Levin did not give any additional 

weight to the Chicago data on account of this factor (pp. 1343-1345). 

Mr. Levin investigated only three measures of supply. Out of a total of five 

recognized measures of supply, four showed more receipts in December 1947 than 

in December 1946. Among these four is the Chicago market. We also find that, 

insofar as the evidence shows seasonal changes or weekly trends, it indicates 

that during most of December 1947 receipts were either rising or 

 

steady. We find further that all currently available measures of demand showed 

less consumption in December 1947 than in December 1946 and that they also 

showed the seasonal consumption trend either declining or steady during most of 

December 1947. Mr. Warren analyzed this evidence of supply and demand in 

detail, and stated as follows: "So, on balance, weighing the available supply 

data and weighing the available demand data, I think I have to conclude that 

with respect to those measures only egg prices in December of 1947 have full 

reason to be lower than they were in October and November of 1947 and also lower 

than they were in December, 1946" (pp. 1629-1630). 

Mr. Levin admitted, as was obvious, that receipts in Chicago in December 1947 

were in excess of receipts in December 1946 and that consumption was below. His 

answer to the question as to how that situation justified a higher price was 

that "prices aren't dependent only on the receipts figures at Chicago" (p. 

1350). In the face of the fact that the over-all picture was substantially the 

same as that in Chicago, this explanation is not an answer. 

Levin also finds support for the December 1947 futures prices in the 

withdrawals of storage stocks. He introduced evidence to demonstrate that 

withdrawals as a percent of the previous year were greater than storage holdings 

as a percent of the previous year. The conclusion he would draw from these data 

is one of rapid depletion of stocks and heavy demand resulting in a strong 

market situation for refrigerator egg prices in December. 

Whatever deductions might be made from these data for periods prior to midDecember 1947, the conclusion of Levin does not apply to the critical period in 

the trading in the December 1947 future. As Mr. Warren pointed out in his 

testimony, there was a decline in withdrawals prior to mid-December and 

thereafter withdrawals became insignificant with withdrawals, for example, of 

only 8,000 cases on December 17 out of stocks of 167,000 cases. Such a decline 

in withdrawals is of course logical and consistent with the approaching end of 

the season for storage eggs for consumptive purposes and with the other market 

factors in evidence such as the downward movement of fresh egg prices. 

Respondents seem to concede that the nation-wide market for storage eggs was 

poor after mid-December because they invoke Warren's evidence as the reason for 

their relatively few sales of storage eggs after mid-December in answering the 

complainant's charge that Great Western withheld its cash eggs from the market 

in the cornering effort. This concession of the respondents which is clearly 

demonstrated by the evidence, namely that the market for 

 

storage eggs generally, that is nation-wide, was poor after about the middle of 

December 1947, explodes their basic affirmative defense that December 1947 

futures prices were the result only of supply and demand conditions which caused 

a "very strong, firm market." 

Levin's evidence also added rationalization for December 1947 refrigerator 

egg futures prices by showing that these prices were low in relationship to 
Page 27 

corn, hog and cheese prices in December 1947 as compared with such relationships 

over a period of years. First of all, Levin uses monthly averages of prices and 

uses the average of each day's closing prices for his December futures price 

which tends to cover up any manipulative price movements. He admits that corn 

and hogs were in short production in 1947; that an unusual price rise in the 

price of corn occurred in November-December, 1947, and that the demand for pork 

was high. The average price of corn in December 1947 was approximately twice as 

high as the average price in any other year. The fact that there were low eggcorn, egg-hog and egg-cheese ratios in December 1947 relative to other years 

proves little or nothing insofar as justifying December 1947 futures prices is 

concerned. Moreover, the price ratios for other years vary radically and no 

sound or reliable deduction as to the appropriate level for December futures 

prices can be drawn from this type of evidence. 

An additional defense invoked by Levin is changes in the egg industry during 

recent years, including a change in the seasonality of egg production. He 

emphasized that January production of eggs has risen to 8 percent of the year's 

output whereas in the twenties and thirties January production was only 5 or 6 

percent of annual production. On the other hand, he stated that the whole 

period of December 1947-January 1948 was highly inflationary, that the index of 

prices paid farmers for January 1948 was at its all time high. He concludes 

somewhat illogically it would appear that the December futures prices in 

December were economically justified and a fair market value. If Levin intended 

to imply that the spread between December 1947 futures prices and January 1948 

futures prices should be greater than the historical spread because of increased 

production of eggs in January in recent years, the implication is not warranted 

because part of the change in the pattern of the egg industry is that production 

in December has also increased and at an even greater rate than the rate of 

increased production in January (pp. 1765-1777; Government Exhibits 50, 51). 

And what bearing his reference to the high index of prices paid farmers in 

January 1948 has on December 1947 futures prices is difficult to see when on 

other points the 

 

respondents cite lower egg prices to producers in January than in December to 

justify the width of the spread in December between December and January futures 

prices. He quotes also from a publication of the United States Department of 

Agriculture, the September 1946 issue of the "Poultry and Egg Situation," for 

which the witness had some responsibility when he was an employee of the 

Department. This publication points out changes in the seasonality of 

production of eggs and concludes that there has resulted a "leveling out of egg 

consumption and prices." How this change and this publication support a wider 

than normal spread between December and January futures prices is not only 

elusive but seems the converse of what should be deduced from the publication. 

In the posthearing procedures, the respondents insist that December futures 

prices in December represented free trading opinion as to the value of eggs in 

December and that January futures prices in December represented free trading 

opinion as to the value eggs would have in January. They seek to bolster this 

view by reference to the spread between average prices received by farmers for 

eggs in December and average prices received by farmers in January which was 

greater than the spread between December and January futures prices on December 

23, 1947. The respondents' comparison is between unlike objects. We are 

concerned with December and January futures prices for refrigerator eggs in 

December. The respondents would have us believe that free trading opinion was 

that eggs in general on December 23 were worth 8 cents a dozen more than eggs 

would be worth just a week later. The width of the spread was due to 

manipulation and the manipulative effect of the squeeze is seen in the fact that 

prices for storage eggs in Chicago dropped immediately after the squeeze was 

over. According to the James E. Bennett & Co.'s market news letter of December 

26, 1947 (contained in Government Exhibit 21), the market was working on a 46-

cent price for storage eggs compared with 53.50 on December 24. 
Page 28 

We cannot place as much faith in Olson's testimony that there was a liquid 

market in December as the respondents do. Olson had found it necessary to warn 

Borden in early December that Great Western's commitments in the market "were 

large enough, and that they should not make any further purchases" (pp. 1705-

1706). He also suggested to Borden near the close of trading in December that 

Great Western's transactions be closed out. Moreover, Mr. Olson's definition of 

"liquid market" leaves plenty of room for manipulation. He described a liquid 

market as one that enables "a seller to sell a fair quantity of the commodity 

without 

 

too large a change in the market and enables a purchaser to buy a fairly large 

quantity of the commodity without changing the market materially -- a market 

that has a fair quantity of bids and offers" (p. 94). [Emphasis supplied.] 

On this entire part of the case, the respondents' defense is so wholly 

unrealistic as to admit of no effect upon December futures prices by Great 

Western's holdings, conceded to be large by Levin, even though no manipulative 

intent be considered present. The attempted justification of December prices, 

apart from Great Western's activities, in terms of supply, demand and other free 

market factors, fails by a wide margin to meet or overcome the evidence that 

December futures prices were prices manipulated by the respondents. 

VI

There is no definition of corner in the act. Numerous authorities on the 

subject are cited, principally text-writers, giving descriptions or definitions 

of corners. We have concluded that Great Western had a large, dominant and 

controlling position during December 1947 in December futures by virtue of its 

concentrated long interest and its ownership of a substantial portion of the 

deliverable supplies of storage eggs in Chicago, that it intentionally utilized 

its controlling and dominant position to "squeeze" up December futures prices 

and that it-succeeded. A number of shorts were placed in the position of having 

to come to Great Western for covering purchases of futures at the "squeezed-up" 

prices or for cash storage eggs, the prices for which, of course, followed 

futures prices. The only alternatives were the delivery of more expensive outof-town eggs, which was not available after 9 a.m. on December 22, or the 

delivery of fresh eggs which was also more costly than delivery of Chicago 

storage eggs. By the end of December, Great Western owned practically all the 

deliverable storage eggs in Chicago -- the typical aftermath of a cornering 

operation. 

The facts and circumstances come under the designation of "corner." In United 

States v. Patten, 226 U.S. 525, 539-540 (1913), a decision cited by both 

complainant and the respondents, the Court described a corner as follows: 

"Upon the second argument the defendants contended, and counsel for the 

Government expressly conceded, that 'running a corner' consists, broadly 

speaking, in acquiring control of all or the dominant portion of a commodity 

with the purpose of artificially enhancing the price, 'one of the important 

features of which,' to use the language of the Government's brief, 'is the 

 

purchase for future delivery, coupled with a withholding from sale for a limited 

time;' and as this definition is in substantial accord with that given by 

lexicographers and juridical writers, we accept it for present purposes although 

observing that not improbably in actual usage the expression includes modified 

modes of attaining substantially the same end. [Emphasis supplied.] 

The complainant and the respondents also cite S. S. Huebner's article on 

"Corners" in the Encyclopaedia of Social Sciences (1937 ed.). Levin, 

respondents' expert witness, quoted a part of the first paragraph of the article 

as follows: 
Page 29 

"A corner may be defined as a plan of manipulation whereby one operator or 

more secures possession of all or substantially all of a given commodity or of 

the shares of a given issue of stock available for delivery upon the outstanding 

contracts of short sellers, in order to compel such sellers to settle at an 

arbitrary and abnormal settlement price imposed by the operator of the scheme." 

The complainant adds the following material from another paragraph : 

"With respect to produce markets it is important to note another twofold 

classification of corners: those which involve the actual cornering of the 

nation's supply of the commodity and those which are operated in some one 

exchange center only with a view to 'squeezing the shorts' by making it 

impossible for them to deliver on contracts for a particular month. The latter 

type of corner occurs frequently and as a rule does not affect consumers 

seriously. The manipulator merely acquires control of the deliverable supply of 

the commodity in the particular city where the produce exchange is located. He 

keeps his program secret until near the end of the month. Short sellers for the 

option for that particular month are obliged to make delivery by the last 

business day of the month. If they are unable because of lack of time to bring 

adequate shipments into the city the short sellers are not in position to meet 

their commitments and are therefore required to settle their contracts with the 

manipulator on his own terms." [Emphasis supplied.] 

Levin admitted the applicability of this material to the subject-matter of 

the proceeding but preferred the more general statement he used as the one "more 

commonly accepted . . . than the specific one" (p. 1235). Under these and 

practically all the definitions 

 

and descriptions referred to by the parties, Great Western ran a corner on the 

December 1947 storage egg futures market unless it should be regarded as 

necessary to a corner that Great Western own all the cash storage eggs in 

Chicago and prevent all the shorts from making delivery. Such a corner would be 

a perfectly tight corner but the term corner applies alike to conditions less 

rigid in the way of control. Great Western had contracts calling for two or 

three times the cash storage egg supply in Chicago and it owned a substantial 

part of the cash supply, a dominant part of the supply in view of its large, 

dominant and controlling long position. This meets the definition used by the 

United States Supreme Court in United States v. Patten, supra. 

The respondents set up numerous reasons for the absence of a corner. Some of 

these have been decided against the respondents above, e.g., their arguments 

that Great Western did not have a controlling and dominant position and that 

there was no artificial or manipulated price. In addition, there is the 

contention that there can be no corner because there were available deliverable 

supplies of out-of-town storage eggs and fresh eggs. This view is based upon 

the theory that as long as there are deliverable supplies anywhere, at least in 

the United States, there can be no corner because it is the responsibility of 

the shorts at whatever the cost to obtain and deliver such supplies. It is true 

that some of the spectacular corners in grain of years ago involved control of 

the commercial visible supply of the grain in the United States. Some of the 

descriptions of corners by the text-writers are based upon these widely 

publicized corners. That is not to say, however, that a manipulative operation 

of lesser size which does not need such scope for the manipulator's objectives 

is not a corner in violation of the act. There may be a corner in one market. 

In United States v. Patten, 187 Fed. 664, 668 (1911), the court adopted as the 

definition of "corner" the definition in Eddy on Combinations ( §§ 72, 73) as 

follows: 

"Broadly speaking, a 'corner' is the securing of such control of the 

immediate supply of any product as to enable those operating the 'corner' to 

arbitrarily advance the price of the product . . . . Ordinarily a 'corner' is 

created by operations upon boards of trade or stock exchanges and by dealings in 

options and futures." [Emphasis supplied.] 
Page 30 

Dr. Beach testified that in his opinion a corner consisted of "the purchase 

and holding of a large and controlling long position in a future, usually 

coupled with the acquisition and withholding from sale for a limited time of 

such a substantial part of the cash 

 

supply readily available for delivery that holders of short futures contracts 

are squeezed and must come to the cornerer to settle or cover their contracts 

upon terms determined by the cornerer. In effect the short sellers must buy 

from the long interest what they have sold to him" (pp. 437-438). [Emphasis 

supplied.] Lawson et al v. Boyden et al., 160 III. 613, 43 N.E. 781 (1896), 

dealt with a corner where the No. 2 corn in Chicago was' controlled and in 

Samuels v. Oliver, 130 111. 84, 22 N.E. 499 (1889), the court described as a 

corner the control of the cash wheat in St. Louis by long interests. See also 

Huebner's article on "Corners" in the Encyclopaedia of Social Sciences, supra. 

In addition, in this case, out-of-town storage eggs could not be tendered for 

delivery after 9 a.m. on December 22, 1947. Therefore, such supplies did not 

exist for delivery purposes after that time. Fresh eggs, while deliverable, 

cost more than storage eggs and their availability does not mean that there was 

not a corner in Chicago storage eggs, the subject of the contract. 

Another point raised by the respondents is that there was no corner because 

Great Western liquidated heavily on the last day or two of trading so that when 

trading closed on December 23 the small stocks of Chicago storage eggs were 

sufficient for deliveries for the few short contracts outstanding. In other 

words, the respondents suggest that because Great Western did not carry a large 

long line beyond the close of trading with widespread defaults by the shorts or 

large scale deliveries of fresh eggs, there was no corner. Here again, the 

respondents are setting up as indispensable elements of a corner characteristics 

of some notorious corners of the past. The exchange rules n5 provided for a 

price settlement on defaults at a fair market price plus a penalty which 

amounted only to a minimum of 1/8 of a cent and a maximum of 3 cents a dozen. 

Any operation of the all-out type hailed by the respondents as the only true 

corner would have been glaringly visible, would have been more likely to cause 

institution of disciplinary proceedings by the Exchange, might not have been as 

profitable as what was done, and was not necessary from the respondents' 

standpoint who were interested in widening the spread between December and 

January rather than a corner in December solely for the sake of cornering 

December. The operation involved here, the "squeeze", is a variety of corner 

and the terms are generally used synonymously. n6 

n5 Government Exhibit 1, p. 51. 

n6 "A "squeeze' is a little corner occurring in futures for one month." 

Baer and Woodruff, supra. at p. 146. "It is not in the big movements, but 

in the half corners or 'squeezes' that manipulation is most effective . . . 

." Emery, supra, at p. 175. "While we have never had a corner since 1910, 

we have had in recent years a succession of annoying premiums on the near 

deliveries. The trade calls these minor corners a 'squeeze.' Such an 

operation - differs from a corner in that the managers will always supply 

whatever contracts are wanted, but at a price. They select a certain 

difference, say 200 points premium, and at that figure they will supply all 

the near month contracts desired." Hubbard, W. Hustace, Cotton and the 

Cotton Market (D. Appleton & Co. 1927) 396. 

"The term 'squeeze', however, is used to indicate something like an 

intentional corner that falls short of it in completeness and in price 

enhancement. From the point of view of profits obtained the squeeze is 

likely to be more successful than the corner, because the cornerer suffers 

from inability to 'bury the corpse'; i.e., to dispose of the grain taken on 

futures without greatly depressing prices. The great accumulation of cash 

grain generally found in the hands of the cornering interest must often be 

disposed of at a sacrifice, involving a loss almost, if not quite, equal to 
Page 31 

the gain on the futures sold to the shorts who cover in the pit." VII 

Report of the Federal Trade Commission, supra, at p. 244. 

In the Senate Committee Hearings, particularly pp. 124-125, on H.R. 

6772, 74th Cong., 2nd Sess., "corner" and "squeeze" are used 

interchangeably in connection with the proposed provision, now 7 U.S.C. § 

7a(4), for a period after trading for delivery. In fact, this part of the 

act mentions only "squeeze" and "market congestion" and does not use the 

term "corner." 

See Kent v. Miltenbarger, 13 Mo. App. 503, 506 (1883), for the following 

description of "corner": "It appears that delivery is always contemplated, 

not as a thing which will be necessarily insisted upon, but as a thing 

which the purchaser may insist upon. It sufficiently appears that this is 

the one thing which gives vitality to such contracts and which enables 

those who, during a particular month are on the successful side of them to 

get up what is known as a 'corner'." This happens when a much greater 

amount of any given commodity has been sold for future delivery within a 

given period than can be purchased in the market. The buyers, who are 

called in the slang of the exchanges the 'longs' then insist upon delivery, 

and by this means succeed in running up the prices to a fictitious point, 

at which the 'deals' are "rung out" between the dealers by the payment of 

differences, or where the purchasers insist upon it, by actual delivery." 

[Emphasis supplied.] 

 

VII

The respondents attack the statute as unconstitutional for vagueness of the 

words "manipulate" and "corner." It may not be appropriate for us to adjudicate 

the constitutionality of an act committed to us for administration ( Panitz et 

al. v. District of Columbia, 112 F(2d) 139 (App. D.C. 1940)), but we may refer 

to Bartlett Frazier Co. v. Hyde, 65 F.(2d) 350 (C.C.A. 7th, 1933), cert. denied, 

290 U.S. 654, in which the court said of a similar attack: 

"If there were merit in this suggestion it would seem that in the Olsen case 

the court would not have failed to discover it. In several instances the 

opinion employs the word 'manipulation' . . . [The court then quoted passages 

from the opinion in the Olsen case in which the term "manipulation" was used.] 

Even if we were disposed to attribute to the term undue uncertainty or 

indefiniteness, Chicago Board of Trade v. Olsen would forbid." 

Another objection raised is failure to comply with Section 9(b) of the 

Administrative Procedure Act (5 U.S.C 1008) n7 in the 

 

issuance of the complaint. The complaint charges that the violations alleged 

were intentional and the weight of the evidence supports the charges. Even in 

criminal prosecutions for violations of a statute, other than cases of moral 

turpitude, evil intent is not requisite, it being necessary only that actions be 

intentional as distinguished from accidental or inadvertent. See e.g., United 

States v. Perplies, 165 F.(2d) 874, 875 (C.C.A. 7th, 1948). Therefore, 

"willfulness" as used in Section 9(b) of the Administrative Procedure Act is 

present, and prior notice and opportunity to demonstrate or achieve compliance 

before the issuance of the complaint were not required. 

n7 "Except in cases of willfulness or those in which the public health, 

interest, or safety requires otherwise, no withdrawal, suspension, 

revocation, or annulment of any license shall be lawful unless, prior to 

the institution of agency proceedings therefor, facts or conditions which 

may warrant such action shall have been called to the attention of the 

licensee by the agency in writing and the licensee shall have been accorded 
Page 32 

opportunity to demonstrate or achieve compliance with all lawful 

requirements." 

A further bar to this proceeding is urged on the ground that the complaint 

states no violation of section 6 (b) of the act because this part of the act 

does not cover past attempts to manipulate and does not mention corner or 

attempt to corner which are contained only in section 9 dealing with violations 

punishable by criminal proceedings. The administrative remedies authorized by 

the act extend to past attempts to manipulate the market as well as to current 

attempts. Section 6(b) of the Grain Futures Act provided that the Secretary of 

Agriculture could suspend the trading privileges of a person if he "is 

violating" any of the provisions of the act or if he "is attempting to 

manipulate the market price" of grain in violation of the act. Section 9 of the 

act contained no provisions with respect to manipulation. In Cutten v. Wallace, 

80 F.(2d) 140 (C.C.A. 7th, 1935), the court held that the Secretary of 

Agriculture could not suspend the trading privileges of a person for a past 

attempt to manipulate the market since, under the Grain Futures Act, the 

Secretary's jurisdiction only empowered him to prevent current attempts to 

manipulate the market. Although the court thought that it was "rather difficult 

to understand" why Congress only proscribed present attempts to manipulate the 

market, the court said that it was "for Congress to amend its legislation." 

Pending the outcome of the review of the Cutten case by the Supreme Court, H. 

R. 6772 (which became the Commodity Exchange Act) was introduced to correct the 

"manifest mistake" n8 in the Grain Futures Act disclosed by the Cutten case. 

Before the Commodity Exchange Act was enacted into law, the Supreme Court on May 

18, 1936, affirmed the decision of the circuit court in Wallace v. Cutten, 298 

U.S. 229. On June 15, 1936, the Commodity Exchange Act was enacted, and Section 

6(b) of the Grain Futures Act was amended to authorize the Secretary to suspend 

 

the trading- privileges of a person who "is violating or has violated any of the 

provisions of this Act, or any of the rules and regulations made pursuant to its 

requirements, or has manipulated or is attempting to manipulate the market price 

of any commodity, in interstate commerce, or for trade . . ." Also, provisions 

proscribing manipulation were added to section 9 of the act. Viewed in the 

light of its legislative history, it is plain that Section 6(b) of the Commodity 

Exchange Act should be interpreted to permit the Secretary of Agriculture to 

suspend the trading privileges of one who has attempted to manipulate the market 

price of a commodity. Several Senators, including Senator Pope, explained in 

detail the grave defect that the Cutten case revealed in the Grain Futures Act 

n9 and made plain the necessity for changing the statute in view of the Cutten 

decision. The House Committee on Agriculture also explained that the Grain 

Futures Act was amended "to clarify the language of section 6 of the act in its 

application to manipulations of and attempts to manipulate the market price of 

any commodity." n10 Unless the Congressional intent, as revealed in the act 

itself and in the legislative history, is to be completely disregarded, section 

6(b) of the act should be regarded as vesting in the Secretary the authority to 

suspend the trading privileges of one who has attempted to manipulate the market 

price of a commodity in violation of the act. 

n8 80 CONG. REC. 1451 (1936). 

n9 80 CONG. REC. 1451, 6159, 6160, 7847, 78.12, 7853, 7858 (1936). 

n10 H. R. 421, 74th Cong., 1st Sess. (1936) 8. 

Furthermore, section 6(b) authorizes administrative proceedings against any 

person who ". . . is violating or has violated . . ." any of the provisions of 

the act and attempts to manipulate, attempts to corner and corners are 

violations of section 9. The legislative history shows that the criminal 

penalties were additional to administrative sanctions. n11 
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n11 Senator Pope, a member of the Senate Committee on Agriculture and 

Forestry, explained on the floor the provisions of H.R. 6772 (which became 

the Commodity Exchange Act) and said (80 CONG. REC. 6160 (1036): 

"As the law now is, a speculator may go into the market, violate the 

rules of the exchange and of the Government commission, manipulate the 

trading, make false reports, corner the market on some commodity, and make 

millions of dollars in profits; and if he gets all that done before a 

complaint is filed against him he may escape without any penalty. * * * The 

present bill amends the law by making it applicable to past' offenses, and 

enlarges the penalty to a maximum fine of $ 10,000 and 1 year's 

imprisonment, besides losing trading privileges in the market." [Emphasis 

supplied.] 

VIII

The respondents further submit that they filed all reports required by the 

Commodity Exchange Authority, that they violated no regulations and that 

Commodity Exchange Authority representatives in Chicago found nothing wrong with 

Great Western's 

 

activities. There is no need at this stage to point out that matters such as 

those in issue are not simple. Full investigations are necessary and appraisal 

of all the pertinent facts, including some such as Great Western's holdings of 

cash storage eggs which were not required to be reported. The investigation of 

Great Western's transactions began shortly- after January 1948 and continued 

until a month before the issuance of the complaint (pp. 80-81). The fact that 

the Commodity Exchange Authority representatives in Chicago did not charge the 

respondents during December 1947 with violations of the act is certainly no 

proof of the absence of violations. Concerning the protestations that all 

required reports were filed, etc., the violations charged and found did not 

include failure to file reports. Violations of regulations or provisions of the 

act other than those charged are not essentials of the violations charged and 

found. 

IX

At the expense of having a long decision, we have sought to set out and 

discuss all the important considerations in the case. Naturally any arguments, 

objections, suggestions, exceptions, etc., of the respondents that are 

inconsistent with this decision and order are overruled whether or not 

specifically mentioned. 

As shown by Findings of Fact 5 and 6, respondents Haynes and Harris were not 

connected with the matters in issue and should be dismissed as respondents. 

Hess, however, was the directing and supervising officer for Great Western. 

Borden disclaims individual responsibility but he was manager of Great Western's 

Chicago office, he communicated with Hess daily, he maintained complete records 

in the Chicago office of Great Western's cash and futures transactions, he acted 

as floor broker in the futures transactions involved and bought and sold cash 

eggs for Great Western, he was warned by Olson as to futures purchases by Great 

Western, and he was clearly aware of the plan being carried out and he 

participated therein. He 's equally chargeable with the corporation and Hess 

for the violations found. 

The violations found are serious and of wide-spread effect. They were 

accomplished deliberately by professionals who knew what they were doing. 

Indeed, Great Western, Hess and Borden were found to have manipulated butter 

prices on the Chicago Mercantile Exchange in a decision and order of the 

Assistant Secretary of Agriculture on March 10, 1941, C.E.A. Docket No. 21. 

After careful consideration, it is concluded that all trading privileges of 

Great Western, Hess and Borden should be suspended for a period of one year. 
Page 34 

It appears from a document filed on April 11, 1951, by the complainant (1) 

that Great Western filed a statement on September 21, 1950, notifying the 

Commodity Exchange Authority that its corporate name was changed to Great 

Western Food Distributors, Inc., (2) that the Great Western Food Distributors, 

Inc., is but a continuation of the corporation organized in 1933 as Great 

Western Distributors, Inc., without any change but that of the name of the 

corporation, and (3) that Great Western Food Distributors, Inc., was registered 

as a futures commission merchant for the balance of the year 1950 and is so 

registered for the year 1951. Accordingly, any order in this proceeding should 

run against Great Western Food Distributors, Inc., instead of Great Western 

Distributors, Inc. 

ORDER

Effective on the 30th day after the date of this order, all contract markets 

shall deny all trading privileges to the respondents Great Western Food 

Distributors, Inc., Nathaniel E. Hess, and Charles S. Borden, for a period of 

one year. The proceeding is dismissed as against Thomas F. Haynes and Hartley 

L. Harris. 

Copies of this decision and order shall be served by registered mail or in 

person upon the parties and each contract market under the act. 

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