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Commodity Futures Trading Commission 

CEA CASES 

NAME: GENERAL FOODS CORPORATION, CHARLES W. METCALF, DANIEL F. RICE AND COMPANY, 

DANIEL F. RICE, LAWRENCE J. RYAN, AND PHILIP R. O'BRIEN 

CITATION: 6 Agric. Dec. 288 

DOCKET NUMBER: 34 

DATE: APRIL 28, 1947 

DOCUMENT TYPE: DECISION AND ORDER 

(A.D. 1451) 

 

In re GENERAL FOODS CORPORATION et al. CEA Doc. No. 34. Decided April 28, 1947. 

Violations of Act -- Attempt to Manipulate Price of Rye Futures and Actual 

Rye and to Corner Them -- Manipulation of Price of Rye Futures and Actual Rye -- 

Exceeding Trading Limits -- Suspension of Registration -- Suspension of Trading 

Privileges

In this disciplinary proceeding under the Commodity Exchange Act (7 U. S.C. 

Chapter 1), involving charges by the Government that respondents had 

individually and collectively manipulated and cornered and attempted to 

manipulate and corner rye futures and actual rye in Chicago, and that one of the 

respondents exceeded the trading limits in rye futures in violation of the 

provisions of the act, it is determined (1) that respondents D. F. R., D. F. R. 

and Company, P. R. O. and L. J. R. collectively and individually attempted to 

manipulate the price of rye futures and actual rye; (2) that respondents G. F. 

Corporation, C. W. M., D. F. R., D. F. R. and Company, P. R. O., and L. J. R. 

collectively and individually attempted to and did manipulate the price of rye 

futures and actual rye by virtue of the 2,000,000 bushel transaction in May 

1944; and (3) that respondent G. F. Corporation also exceeded the trading limits 

in one instance, and, therefore, it is concluded that the trading privileges of 

D. F. R. and D. F. R. and Company and the registration of D. F. R. and Company 

be suspended for 6 months, that the trading privileges of G. F. Corporation and 

C. W. M. should be suspended for 30 days, that the trading privileges and the 

registration of L. J. R. should be suspended for 10 days. * 

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

Index-Digest in this issue of Agriculture Decisions. -- Ed. 

Violation of Act -- Evidence -- Failure to Prove Manipulation Without Proof 

of Artificially Enhanced Prices

In the absence of evidence that rye futures prices on the Chicago Board of 

Trade were artificially enhanced by manipulative means, the charges by the 

Government that respondents artificially enhanced prices of rye and rye futures 

cannot be sustained. * 

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

Index-Digest in this issue of Agriculture Decisions. -- Ed. 

Official Notice -- Advertence to Expertise of Referee or Deciding Officer Not 

Adequate Substitute for Evidence

It is not for the referee or judicial officer to take official notice of 

matter subject to comprehensive economic study without the benefit of 

explanation by witnesses and without opportunity for each party to dispute the 

influences sought from the data by the other party, and advertence to the 
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expertise of the referee or the deciding officer is an inadequate substitute in 

this type of a proceeding for evidence introduced in the usual way. * 

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

Index-Digest in this issue of Agriculture Decisions. -- Ed. 

Violation of Act -- Essentiality of Proving Commission of Act or Specific 

Intent Equivalent to Mens Rea

Since the holding of a large supply of rye by one of the respondents or its 

failure to liquidate its stock or part of it was not in itself prohibited, and 

since no other link with remaining respondents is established, this respondent 

cannot 

 

 

be found to have collectively violated the act because even in an administrative 

proceeding such as this, some intent must be shown either by mere doing of a 

prohibited act or by the more exacting standard of a specific intent equivalent 

to the mens rea of criminal law.* 

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

Index-Digest in this issue of Agriculture Decisions. -- Ed. 

Violation of Act -- Efforts To Corner Failing To Affect Prices Upward as 

Constituting Attempts To Manipulate or Attempt To Corner Under the Act

Although manipulative practices such as cornering efforts that fail to 

enhance the price or cause price fluctuation may be classified as 

"manipulation," it seems that such cornering efforts are covered by the act as 

attempts to manipulate or attempts to corner. * 

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

Index-Digest in this issue of Agriculture Decisions. -- Ed. 

Violation of Act -- Establishment of Concerted Action in Absence of Express 

Agreement

The absence of a specific pleading of agreement among alleged collective 

violators is not fatal to a complaint. * 

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

Index-Digest in this issue of Agriculture Decisions. -- Ed. 

Jurisdiction of Secretary -- Imposition of Administrative Sanctions for Past 

Attempts To Manipulate or Corner

Section 6 (b) of the act supported by the incorporation by reference of 

section 9 confers upon the Secretary jurisdiction in this proceeding to consider 

or impose administrative sanctions for past attempts to manipulate or to corner, 

and this is borne out by the legislative history of the section, particularly by 

the committee hearings. * 

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

Index-Digest in this issue of Agriculture Decisions. -- Ed. 

Constitutional Law -- Constitutionality of Act -- Delegation of Legislative 

Power -- Due Process Clause of Fifth Amendment

Respondents' attack upon the constitutionality of the act on the ground of an 

improper delegation of legislative power and in violation of the due process 

clause of the Fifth Amendment is not well taken, for, even in the absence of 

power to decide these questions, they are well settled by now in favor of the 

constitutionality of the act. * 
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* Reference to other points involved in this case will be found in 

Index-Digest in this issue of Agriculture Decisions. -- Ed. 

Violation of Act -- Attack Upon Validity of Complaint as to Matter of Form

Respondents' contention that complaint is invalid on the ground that it reads 

"There is reason to believe" instead of "I have reason to believe" and because 

the complaint reads "In re General Foods" instead of "Secretary of Agriculture 

v. General Foods . . ." has no merit in substance and relates to mere matters of 

form. * 

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

Index-Digest in this issue of Agriculture Decisions. -- Ed. 

Messrs. Charles W. Bucy, John S. Griffin, and Ben Ivan Melnicoff, of 

Washington, D. C., for the Government. Messrs. Edward R. Adams and William 

Simon, of Miller, Gorham, Wescott & Adams, of Chicago, Illinois, for General 

Foods Corporation; Messrs. James A. Sprowl and Albert E. Jenner, of Poppenhusen, 

Johnston, Thompson & Raymond, of Chicago, Illinois, for Charles W. Met-calf; Mr. 

Lee A. Freeman, of Rooks & Freeman, of Chicago, Illinois, for Daniel F. Rice and 

Daniel F. Rice & Company; Mr. Frederick M. Bradley, of Washington, D. C., for 

Daniel F. Rice & Company ; Mr. Joseph B. Crowley, of Bowden, Taylor & Norville, 

of Chicago, Illinois, for Lawrence J. Ryan; and Messrs. Howard W. Vesey and 

William A. Clinsburg, of Vesey, Wheeler & 

 

 

Prince, of Washington, D. C., for Philip R. O'Brien. Mr. Jack W. Bain, Referee. 

Decision by Thomas J. Flavin, Judicial Officer

DECISION AND ORDER

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

C. Chapter 1), involving charges by the complainant (usually called the 

Government herein) that the respondents, General Foods Corporation and Charles 

W. Metcalf of New York City, and Daniel F. Rice and Company, Daniel F. Rice, 

Lawrence J. Ryan, and Philip R. O'Brien of Chicago, had individually and 

collectively (1) attempted to corner and did corner actual rye in Chicago 

particularly rye deliverable on futures contracts under the rules of the Chicago 

Board of Trade, (2) attempted to corner and did corner the May 1944 rye futures 

on the Chicago Board of Trade, and (3) attempted to and did manipulate prices of 

rye futures contracts and actual rye on and subject to the rules of the Chicago 

Board of Trade. The complaint also alleged that respondent General Foods 

exceeded the trading limits in rye futures on May 8, 1943. 

The complaint alleges the activities engaged in by respondents that gave rise 

to the charges of manipulation and corner and attempted manipulation and corner. 

In brief outline, the complaint states (1) that General Foods started buying rye 

futures on the Chicago Board of Trade in December 1942, took deliveries on its 

futures during 1943 maintaining generally the maximum long speculative position 

of two million bushels, and purchased large amounts of cash rye, so that its 

operations caused a tight situation in December 1943 rye with a resultant 

inflated and manipulated price for both rye futures and actual rye in Chicago; 

(2) that the Business Conduct Committee of the Chicago Board of Trade in 

December 1943 and in January 1944 prohibited General Foods and its Executive 

Vice President Metcalf from further purchases of rye and rye futures without 

approval of the committee; (3) that respondent Rice on his own account and 

through customers of Rice and Company listed in Schedule A of the complaint 

whose trading he controlled or influenced, respondent Ryan, and respondent 

O'Brien engaged in a heavy concerted purchasing program of May rye futures with 

the arrangement and understanding that none of the General Foods' stock of 

delivered rye in Chicago would be delivered on May 1944 futures contracts; (4) 

that respondents endeavored to prevent increases in the deliverable supply of 

rye in Chicago and purchased May 1944 Winnipeg rye futures for the purpose and 
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with the effect of preventing rye from moving to Chicago from Canada for 

delivery on the May 1944 Chicago futures and that the Rice respondents 

 

 

for themselves and for Schedule A customers, Ryan, and O'Brien took delivery in 

Chicago on May 1944 futures contracts and withheld from the market 3,750,000 

bushels of rye or 91.5 percent of the rye involved in May 1944 deliveries; and 

(5) that General Foods continuing its position of maintaining the actual rye 

part of the market operation acquired 2,000,000 bushels of deliverable rye in 

Chicago in May 1944 from Rice, Ryan and O'Brien and Schedule A customers of Rice 

and Company for the purpose of relieving these respondents from the burden of 

carrying the rye and at the same time maintaining the inflated price by insuring 

the withholding of this rye from the Chicago market. 

The complaint was issued on May 26, 1945, by Ashley Sellers, Assistant War 

Food Administrator, and on June 15, 1945, he designated Jack W. Bain, Office of 

the Secretary, as referee. On July 31 and August 1, 1945, respondents Rice, 

Rice and Company, General Foods, and Metcalf filed motions questioning the 

authority of an Assistant War Food Administrator to issue the complaint. The 

powers exercised by the War Food Administrator were transferred back to the 

Secretary of Agriculture, effective June 30, 1945 (E. O. 9577, 3 CFR, 1945 

Supp., Page 84), and on August 8, 1945, the Secretary ratified and adopted the 

complaint and designation of referee issued by the War Food Administration. 

All the respondents filed answers admitting some of the facts alleged but 

denying any manipulation or corner, but General Foods and Metcalf did not deny 

that the trading limits were exceeded in one instance. After some 

postponements, a prehearing conference was held in Washington on November 26, 

1945, and the hearing was set for December 11, 1945, in Washington. It was set 

for Washington instead of Chicago, the place of the alleged manipulation and 

corner, at the request of respondent O'Brien, which request was concurred in by 

the other parties. 

At the appointed time and place the hearing began before Referee Bain. 

Charles W. Bucy, John S. Griffin, and Ben Ivan Melnicoff of the Washington 

office, Office of the Solicitor, appeared for the Government. Edward R. Adams 

and William Simon of Miller, Gorham, Wescott & Adams of Chicago appeared for 

General Foods; James A. Sprowl and Albert E. Jenner of Poppenhusen, Johnston, 

Thompson & Raymond of Chicago appeared for Metcalf; Lee A. Freeman of Rooks and 

Freeman of Chicago appeared for Rice and Rice and Company; Joseph B. Crowley of 

Bowden, Taylor and Norville of Chicago appeared for Ryan; and Howard W. Vesey 

and William A. Clineburg of Vesey, Wheeler & Prince of Washington appeared for 

O'Brien. Sessions of the hearing were held on 14 different days, 

 

 

ending on May 21, 1946, there having been various periods of adjournment between 

sessions. 

Before and at the opening of the hearing, the referee denied motions by one 

or more respondents to dismiss on various grounds, including alleged 

unconstitutionality of the statute and of particular parts of it, and claims 

that the complaint was vague and not in proper form, that cornering and past 

attempts to manipulate were not covered by section 6 (b) of the act, and that 

the Secretary did not have reason to believe that the act had been violated when 

he issued the complaint. None of the alleged grounds for dismissal were well 

taken, and the referee's denial of the motions was correct. Motions for 

severance were properly denied by the referee because the respondents were 

charged with acting together and it would have been an unnecessary waste of time 

and expense to have a number of separate hearings to go over the same set of 

facts. 

During the presentation of evidence by the Government, respondents were 

allowed, for the convenience of all concerned, to present some direct testimony 

and to introduce exhibits, without prejudice to their moving for dismissal when 
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the Government completed its case. On April 16, 1946, when the Government 

rested, the Rice respondents were allowed to recall three witnesses for further 

cross-examination. The respondents then filed motions to dismiss, and the 

hearing was recessed. Briefs were filed on these motions, and oral argument was 

held on them on May 14, 1946, in Washington, at the close of which the referee 

denied the motions, and the hearing was again recessed. 

At the next session of the hearing, on May 21, respondents rested. The 

Government then requested that official notice be taken of a number of matters, 

to which respondents objected. Within the period of time allowed by the referee 

at their request, respondents filed objections and briefs against the taking of 

official notice, and on June 19, 1946, the referee denied the request on the 

ground that a clearer record would be made if so many figures were presented 

through witnesses or tabulated and offered in evidence as exhibits. Respondent 

General Foods then requested that official notice be taken of a number of 

matters. The referee refused to take notice for General Foods for the same 

reason that he denied the Government's request, and detached "exhibits" which 

General Foods had attached to its request on the ground that it would be unfair 

to admit into the record in this manner documents which were numbered as, and 

appeared to be, exhibits duly admitted in evidence. General Foods objected, 

claiming that due process requires that the record contain these "exhibits" as 

presented. It is the referee's duty to obtain a fair and orderly record, and to 

do this he must exclude matters which would make the record 

 

 

unfair or disorderly. We do not think the filing of the written request to take 

official notice gave General Foods a constitutional right to place in the record 

the documents in question as if they were exhibits admitted in evidence nor does 

it appear that the referee abused his discretion in excluding them from the 

record. And in view of the conclusions reached herein, no harm was done to the 

General Foods' case. 

The parties were allowed until July 12, 1946, to file suggested findings and 

briefs, and all did so, respondents recommending dismissal and the Government 

recommending an order against all respondents. 

The referee issued his report proposing findings of fact and conclusions 

substantially similar to those suggested by the Government and proposing that 

respondents be found to have violated the act as alleged in the complaint and 

that sanctions be imposed. All respondents filed exceptions to the report 

supported by briefs. Thereafter, on December 17, 1946, extensive oral argument 

was held upon the exceptions before me in Washington, D. C. 

At this stage, a general description of the nature of the evidence and the 

principal issues might clarify what is set out later. Much of the evidence at 

the hearing was introduced in the form of exhibits. There is little or no 

dispute about the accuracy of the data contained in such exhibits. These deal 

with the rye market operations of respondents during the period covered by the 

complaint, rye futures prices on the Chicago Board of Trade and stocks of rye in 

Chicago during this period, shipments of rye to Chicago, etc. From these data 

it is plain (1) that General Foods by the operations alleged in the complaint 

had built up a stock of over 7,000,000 bushels of deliverable rye in Chicago by 

the end of December 1943, (2) that in December 1943 and January 1944 General 

Foods and respondent Metcalf, General Foods' Executive Vice President, were 

prohibited from acquiring any more rye futures or rye on the Chicago Board of 

Trade without the consent of the Business Conduct Committee, (3) that respondent 

Daniel F. Rice was retained about this time as agent to merchandise the General 

Foods' rye, (4) that respondent Rice and the Schedule A customers of respondent 

Rice and Company, whose trading is alleged to have been under the control or 

direction of respondent Rice, respondent O'Brien and respondent Ryan followed 

the trading pattern of holding large long lines in May 1944 futures, standing 

for and taking delivery of large amounts of May 1944 rye, (5) that respondent 

Rice on behalf of himself and Schedule A customers and respondent Ryan were long 
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May 1944 futures on the Winnipeg Board of Trade and took delivery and kept in 

Canada about 2,000,000 bushels, (6) that none or practically 

 

 

none of the large stock of General Foods' rye in Chicago was disposed of between 

December 31, 1943, and June 1, 1944, (7) that when the long May 1944 futures 

positions and deliverable cash rye holdings of all respondents are combined, the 

total for several months preceding May 1944 and into May 1944 was greater than 

the deliverable supply of rye in Chicago, and (8) that about 2,000,000 bushels 

of rye of respondents Rice for himself and Schedule A customers, Ryan and 

O'Brien were sold to General Foods about May 13, 1944. The data also shows that 

rye futures prices climbed steadily during 1943 to a price of about $ 1.27 on 

December 31, 1943, and remained about on this level during January, February, 

March, and April, 1944, that the opening price for May 1944 futures on May 1, 

1944, was $ 1.30, that the price reached $ 1.32 5/8 on May 5, that it started to 

decline on May 6 and, except for two or three days of minor recoveries, the 

price steadily declined to reach a low of $ 1.11 on May 22. 

Most of the exhibit evidence was introduced through Mr. William T. Buster of 

the Commodity Exchange Division, Compliance and Investigation Branch of the 

Production and Marketing Administration, United States Department of 

Agriculture, now the Commodity Exchange Authority, who made the investigation. 

Mr . Buster also testified concerning conversations had with Messrs. Rice, 

O'Brien, and Metcalf in June 1944 during the course of his investigation. These 

conversations are of considerable significance since they throw some light on 

the circumstances surrounding the trading activities of respondents. For the 

benefit of those who may read or review this decision and order, a summary of 

the important aspects of the conversations is given. 

In relating the conversation with Mr. Rice, Mr. Buster testified that Mr. 

Rice said that it was sometime in the winter of 1943-1944 that the Rice firm was 

retained as sellng agent for General Foods cash rye, that the sale of 

approximately 2,000,000 bushels of rye to General Foods in May 1944 followed 

pursuant to Mr. Rice calling upon Mr. Metcalf for help in carrying the rye and 

telling Mr. Metcalf if some help was not given that some of the rye was going to 

be sold on the open market and would undoubtedly result in the breaking of 

prices. According to Mr. Buster, Mr. Rice said that he made the proposition to 

Mr. Metcalf on behalf of himself, O'Brien and Ryan, that on May 13, 1944, Mr. 

Rice did not have on hand enough rye to fill his share of the sale and asked his 

customers for orders sufficient to do this. Mr. Buster also testified (1) that 

Mr. Rice expressed resentment at the Board of Directors of the Chicago Board of 

Trade for failing or refusing to adopt some measures that would prevent the 

delivery of some rye imported from Canada on which the duty was 

 

 

not supposed to have been paid and (2) that Mr. Rice said that in order to 

protect the Chicago market from Canadian rye being brought there, he was 

carrying 2,000,000 bushels of rye Winnipeg which he had bought for the account 

of himself and his customers in order to keep that rye from Chicago. Mr. Buster 

testified that Mr. Rice was discussing May 1944 futures in connection with the 

2,000,000 bushels of rye Winnipeg and that Mr. Rice said that he kept this 

amount in Canada to keep it from being delivered on Chicago futures. Later, on 

cross-examination, Mr. Buster said Mr. Rice did not make the statement with the 

meaning that his Canadian holdings were being withheld from shorts who would 

want the rye for delivery on Chicago May futures. 

With respect to his conversation with Mr. Metcalf, Mr. Buster testified that 

Mr. Metcalf explained that General Foods entered the rye market because they had 

lost the benefit of the domestic wheat and corn markets due to Government 

restrictions and other conditions which tended to make it impossible to trade in 

those markets, that consideration was given to the fact that rye was relatively 

cheap and unrestricted as to trading, that it seemed a good opportunity to do 

some buying to offset possible losses in the obtaining of materials used by 
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General Foods, that as General Foods took deliveries of rye they knew they were 

not going to be able to use it, that it was going to be necessary to dispose of 

the rye after it had served the company's purpose and that because General Foods 

and he were not experienced in the merchandising of rye they sought the services 

of one of the leading grain merchandising firms of the United States, Daniel F. 

Rice and Company. Mr. Metcalf told Mr. Buster that he had nothing in the files 

of the company to show the date when the services of the Rice firm were employed 

but he thought it was about sometime in January or February 1944 and he said 

that he notified the Rice firm that they might offer the rye for sale to 

Government agencies or other processors who might have use for it but not to 

offer it to speculators or elevator operators. He admitted to Mr. Buster that 

". . . by taking delivery of this rye and holding it, that the company had 

caused the prices of the nearest maturing future to be at a premium from the 

deferred futures and he said that this was unwittingly done but he recognized 

that it was done." Later, on cross-examination, Mr. Buster admitted that Mr. 

Metcalf did not tell him that Mr. Rice was "advised" to refrain from offering 

the rye to speculators or elevator operators but Mr. Buster said that Mr. 

Metcalf told him that "many offers of the rye had been made to the Government 

and other users of rye, but no sales were made, but no offers had been made to 

speculators" (Tr. pp. 911, 912). 

Mr. Buster testified that Mr. O'Brien told him that the break in prices in 

May rye was due to quite a bit of short selling and liquidation, 

 

 

particularly as to deliveries, that he could not take on any more rye when the 

weight of the selling hit the market and that Dan Rice Larry Ryan and he were 

about the only bulls left operating in the market when the selling and break 

came along. He told Mr. Buster that in connection with the sale of rye to 

General Foods in May 1944 the Stratton Grain Company had called him for margin, 

that he was unable to respond and needed help, that he knew General Foods was 

carrying a large line of rye and would be interested in supporting the price, 

that he told Dan Rice that he was unable to respond to his margin call, and Dan 

Rice put the proposition up to General Foods. He stated to Mr. Buster that ". . 

. he had been bearish in the market until about the first of the year, but after 

taking a couple of healthy wallops on the short side, and after being convinced 

by talking with Dan and giving thought to the economic situation in rye, that he 

was on the wrong side of the market, and at that time he thought rye was a 

relatively strong position, and that the long side of rye was the correct side 

to be on." 

Other witnesses were Mr. Douglas B. Bagnell and Mr. Fred Chauvin also of the 

Department's administrative organization for the administration of the act, who, 

for the most part, introduced exhibit evidence, Mr. Fred H. Clutton, secretary 

of the Chicago Board of Trade, Mr. Roland McHenry, chairman of the Business 

Conduct Committee of the Chicago Board of Trade in 1941, 1942, and 1943, Mr. 

Erling Mostue, assistant comptroller of Cargill, Inc., and Mr. Clarence Francis, 

Chairman of the Board of General Foods. 

Mr. Clutton introduced excerpts from minutes of meetings of the Board of 

Directors of the Chicago Board of Trade and of the Business Conduct Committee. 

His testimony also covered a move on April 28, 1944, initiated by respondent 

Rice, which would make un-deliverable on Chicago futures contracts grain 

imported from Canada unless duty had been paid on the grain. According to Mr. 

Clutton, Mr. O'Brien also favored this move as well as other persons including 

the local office of the Commodity Exchange Division, Compliance and 

Investigation Branch, Production and Marketing Administration. United States 

Department of Agriculture. 

Mr. McHenry testified generally as to the action taken by the Business 

Conduct Committee in restricting General Foods and Metcalf from further 

purchases of Chicago rye and rye futures. 

Mr. Francis testified that he met respondent Rice once at a meeting in Mr. 

Metcalf's office in New York, that respondent O'Brien was present, that Mr. Rice 
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"definitely carried the ball", that Mr. Francis was advised that there were 

2,000,000 bushels of distress rye about to be dumped on the market which would 

have the very definite effect of 

 

 

depreciating the value of General Foods' rye holdings, that the recommendation 

was made that General Foods acquire the 2,000,000 bushels of cash rye, that Mr. 

Francis insisted that General Foods should not increase its net position, and 

that the decision was arrived at to acquire the 2,000,000 bushels and to sell an 

equivalent amount of futures. Mr. Francis said that Mr. Rice recommended the 

purchase but that he did not tell Mr. Francis who held the 2,000,000 bushels. 

Following Mr. Francis' initial testimony, Mr. Bagnell testified as to a 

conversation which he had with Mr. Francis in the latter part of October or the 

first of November, 1945. Mr. Bagnell said that he gathered from Mr. Francis' 

discussion during this conversation that the meeting with Mr. Rice and Mr. 

O'Brien took place in the latter part of April 1944. He testified that Mr. 

Francis told him that at this meeting Mr. Rice was asked if he had a position in 

rye and he replied, "Yes, about a million bushels", and that the other gentleman 

whose name Mr. Francis did not recall was asked if he had a position and he 

replied "About half as much as Mr. Rice." 

There was no testimony from an expert witness or any witness as to whether 

rye futures prices or actual rye prices on the Chicago Board of Trade were 

manipulated prices, and no witness testified as to whether there was a corner or 

"squeeze" in May 1944 rye on the Chicago Board of Trade. 

The main charge of the Government is that respondents acted together to bring 

about a corner in May rye with General Foods handling the actual rye part of the 

program and the remaining respondents operating the futures part. The 

Government also charges that respondents individually and collectively 

manipulated the price of rye futures and actual rye on the Chicago Board of 

Trade. In essence, the principal Government contention is that the rye prices 

which broke in May 1944 was a manipulated price established by the operations of 

General Foods and Metcalf during 1943 and sustained by collective operations of 

all respondents during the months of 1944 preceding the market decline in May 

1944. Some hints are also made that Rice and Ryan may have contributed to the 

manipulated price level reached by December 31, 1943. In addition to the main 

charges of corner and manipulation of price, the Government charges respondents 

individually and collectively with attempting to corner rye futures and rye and 

attempting to manipulate actual rye and rye futures prices on the Chicago Board 

of Trade. 

Respondents generally insist that there is no showing of any collusion, 

combination or plan among them, that there was no corner in May rye, that their 

activities are not shown to be in violation of the act, etc. Respondents raised 

so many objections that it is impracticable 

 

 

 

to relate them all especially since many are essentially upheld by the 

conclusions reached herein. The more important of respondents' objections 

bearing on the violations found are discussed under the heading "Conclusions." 

Findings of Fact

1. Respondent General Foods Corporation, herein called General Foods, is a 

Delaware corporation having its principal place of business and office in New 

York, New York. At all times material herein it had membership trading 

privileges on the Board of Trade of the City of Chicago, herein called the 

Chicago Board of Trade, a contract market. 

2. Respondent Charles W. Metcalf, New York, New York, was Executive Vice 

President of General Foods and a member of the Chicago Board of Trade at the 

time of the transactions involved herein, but he is not now an officer of 

General Foods. He had charge of and handled the rye and rye futures trading of 
Page 9 

General Foods involved herein. He resigned from General Foods because there 

were objections within the corporation to his having traded in rye for himself 

while directing the corporation's rye trading. 

3. During the period December 1942 through May 1944 respondent Daniel F. Rice 

and Company, herein called Rice and Company, was a partnership composed of 

respondent Daniel F. Rice, of Chicago, Illinois, Joseph J. Rice, Walter T. Rice, 

and William F. Rowley, having its principal place of business in Chicago, 

Illinois. In January 1945 Joseph A. Fagan became a partner. At all times 

material herein the partnership was registered under the Commodity Exchange Act 

as a futures commission merchant, and all partners except Fagan and Walter T. 

Rice were members of the Chicago Board of Trade. 

4. Respondent Lawrence J. Ryan, Chicago, Illinois, was at all times material 

herein a member of the Chicago Board of Trade and was registered under the act 

as a futures commission merchant. 

5. Respondent Philip R. O'Brien, Chicago, Illinois, was at all times material 

herein a member of the Chicago Board of Trade and was registered under the act 

as a floor broker. During 1944 he was President of the Chicago Board of Trade. 

6. During the period here involved, General Foods was not a user of rye and 

had no need for it. Its holdings of rye and rye futures were speculative, not 

being offset by sales of or needs for rye. The same is true for the rye and rye 

futures held and controlled by each of the other respondents. 

7. In December 1942 and January 1943 General Foods bought 1,055,000 bushels 

of May 1943 rye futures and 945,000 bushels of July 1943 rye futures on the 

Chicago Board of Trade, getting a net long 

 

 

 

position of 2,000,000 bushels, the maximum speculative position which it could 

legally attain (17 CFR, 1938 Supp., 150.1). It held this position until May 

1943, when it began taking delivery on its May futures. As it received 

delivery, it purchased more futures, generally maintaining its 2,000,000 long 

futures position, except that on May 8, 1943, it held 20,000 bushels of 

speculative rye futures in excess of the limit. During May 1943 General Foods 

took delivery of 2,420,000 bushels of rye on its futures contracts, and in 

addition purchased from Rice and Company 540,000 bushels of deliverable rye, 

deliverable rye meaning rye of such grade and in such position as to be 

deliverable in satisfaction of rye futures contracts under the rules of the 

Chicago Board of Trade. On May 29, 1943, it held 2,960,000 bushels of 

deliverable rye in Chicago. 

8. When the May 1943 rye future expired, General Foods bought enough of the 

July and September 1943 rye futures to continue its 2,000,000 bushels long 

futures position. It held the rye acquired in May and it took delivery on 

2,040,000 bushels of July futures, so that at the end of July 1943 it held 

5,000,000 bushels of deliverable rye in Chicago. On September 4,1943, General 

Foods had received delivery of its 350,000 bushels of September rye futures, 

giving it 5,350,000 bushels, or 66 percent of the 8,095,464 bushels of 

deliverable rye in Chicago. In October and November, it bought 1,880,000 

bushels of December 1943 rye futures, and in December took delivery, giving it 

7,230,000 bushels on December 31, 1943, or 76 percent of the 9,487,525 bushels 

of deliverable rye in Chicago. The majority of General Foods' transactions were 

handled through brokers other than Daniel F. Rice or Rice and Company. 

9. General Foods' stock of cash rye in Chicago on December 31, 1943, was an 

extraordinarily large supply of rye in Chicago. On very few occasions in past 

years did the total supply in Chicago reach or exceed this figure. 

10. In November 1943 the Business Conduct Committee of the Chicago Board of 

Trade considered the "commanding position" of General Foods in rye and called 

respondent Metcalf before the committee, as it was Metcalf's membership on the 

Board of Trade which was so registered as to give General Foods its membership 

trading privileges. At a meeting of the committee on November 29, 1943, the 
Page 10 

committee told Metcalf that the "combined position" of General Foods and himself 

in rye and December rye futures "might tend to create a corner and be in a 

position to dominate price movements." Metcalf then agreed with the committee; 

(1) that neither he nor General Foods would purchase any more December 1943 rye 

futures without prior consent of the committee; (2) "That neither he nor the 

corporation would purchase warehouse 

 

 

 

receipts for Chicago Rye without prior consultation with and consent of the 

Committee"; and (3) that he would be available for further consultation. The 

quotations in this paragraph are from the minutes of the Business Conduct 

Committee. 

11. On December 6, 1943, the Business Conduct Committee wrote Metcalf denying 

his request that he and General Foods be released from the agreement not to 

purchase rye and rye futures. On January 4, 1944, Metcalf wrote the committee 

that the agreement not to purchase rye futures and rye had been fulfilled and 

that he felt free to buy and sell rye futures, but the committee answered on 

January 6 that "this Committee is of the opinion that any further purchases of 

Rye in cash or futures would constitute an attempt to corner Rye stocks in 

Chicago for the purpose of manipulating or controlling the price of that 

commodity." 

12. On June 23, 1944, Charles W. Metcalf told an investigator for the 

Government that the taking delivery of rye and holding it by General Foods had 

caused the nearest maturing future to be higher than the deferred future. He 

promised that there would be no corner in the July 1944 future, stating that he 

would see to it that General Foods offered enough rye in the market to keep it 

liquid, and that the price would not go higher in July than the price that 

prevailed in May. 

13. In December 1943 or in January or February, 1944, General Foods employed 

Rice and Company to merchandise its rye, but neither party to the contract of 

employment kept any record of it. By May 27, 1944, Rice and Company had not 

merchandised or delivered any of the rye held by General Foods in Chicago. 

14. On March 21, 1944, Rice and Company wrote to the War Food Administration 

that it was authorized to offer the rye of General Foods "to any processors who 

had use for it or to agencies of the Government who had the authority to make 

such purchases." Enclosed in the letter was an article from a newspaper, dated 

New York, March 19, stating that a spokesman for General Foods said that it was 

not a user of rye and would sell its rye "to the government or any other user 

who has need for it" and that the rye was "available to any user in need of it." 

15. On June 23, 1944, Charles W. Metcalf told an investigator for the 

Government that many offers had been made to sell the rye of General Foods to 

the Government and other users of rye, but that no offers had been made to 

speculators. By restricting offers to the Government and to "users" of rye, the 

General Foods' rye was not made available to others who could use it for 

delivery on Chicago rye futures. 

16. On November 27, 1943, Daniel F. Rice was short 170,000 bushels of Chicago 

May 1944 rye futures. On November 29 he changed to a long position of 180,000 

bushels, which he increased to 1,200,000 

 

 

 

bushels on December 21. He remained long on through the first four months of 

1944, being long 590,000 bushels on April 29, 1944. In December 1943 he 

accumulated 305,000 bushels of cash rye, by taking delivery on futures and by 

purchase. This was increased to 358,400 bushels of deliverable rye in Chicago 

on April 29, 1944. 

17. On September 30, 1943, Daniel F. Rice held a long position of 560,000 

bushels of May 1944 rye futures on the Winnipeg Grain Exchange,Winnipeg, Canada. 
Page 11 

He increased this position until he held 1,010,000 bushels on April 29, 1944, 

and took delivery of and held all of it in Winnipeg in May 1944. 

18. During the period October 1943 through May 1944 Daniel F. Rice controlled 

or directly influenced the trading of 23 customers of Rice and Company in rye on 

the Chicago and Winnipeg markets. These are called Schedule A customers, as 

they were listed in Schedule A attached to the complaint. 

19. During late 1943 and early 1944 Schedule A customers bought May 1944 rye 

futures on the Chicago Board of Trade and Winnipeg Grain Exchange, through Rice 

and Company, and took delivery in May 1944. On May 27 they held 2,305,000 

bushels in Chicago out of 2,705,000 bushels they received on delivery there, and 

at Winnipeg they held 700,000 out of 805,000 bushels received on delivery. 

20. On December 15, 1943, the Rice and Ryan account, owned equally by Daniel 

F. Rice and Lawrence J. Ryan, changed from a short position in the Chicago May 

1944 rye future to a long position, and maintained the long position into May 

1944. On April 29 it was 165,000 bushels long. It increased its holdings of 

deliverable rye in Chicago, by receiving delivery on futures contracts, from 

44,984 bushels on September 30, 1943, to 289,336 bushels on April 29 and 342,282 

bushels on May 11, 1944. 

21. On April 12, 1944, the Rice and Ryan account bought 200,000 bushels of 

Winnipeg May 1944 rye futures, took delivery in May 1944, and was holding the 

200,000 bushels of rye in Winnipeg on May 27. 

22. Lawrence J. Ryan had been long Chicago May 1944 futures from October 1, 

1943, but on November 29 he increased this long position from 260,000 to 575,000 

bushels, and continued to increase it until he was long 1,215,000 bushels on 

January 4, 1944. He remained long through the first four months of 1944, being 

long 945,000 bushels on April 29. In December 1943 he took delivery of 140,000 

bushels of rye, and on April 29, 1944, he held 105,000 bushels of this 

deliverable rye in Chicago. 

23. In May 1944 Lawrence J. Ryan took delivery of 120,000 of rye on Winnipeg 

Grain Exchange May 1944 rye futures contracts, and on May 27 was holding 100,000 

bushels of this rye in Winnipeg. 

 

24. On December 31, 1943, Philip R. O'Brien was long 120,000 bushels in the 

Chicago May 1944 rye future. After talking to Daniel F. Rice and after giving 

consideration to the economic position of rye, O'Brien, on January 4, 1944, 

purchased 405,000 bushels more, and continued to purchase such future until on 

February 14, 1944, he held 2,025,000 bushels, being 25,000 bushels in excess of 

the limit for speculative holdings in any one future (17 'CFR, 1938 Supp., 

150.1). He maintained a large long position in that future for the first four 

months of 1944, and on April 29, 1944, was long 1,480,000 bushels in it. During 

May 1944 he took delivery of 735,000 bushels of rye on his Chicago May 1944 rye 

futures contracts. 

25. On December 24, 1943, Rice, Schedule A customers, Ryan, and O'Brien were 

long 5,645,000 bushels in the Chicago May 1944 rye future, their holdings 

constituting about 26 percent of the 21,715,000 bushel open interest in that 

future. On February 11, 1944, they were long 7,950,000 bushels, or about 38 

percent of the 21,077,000 bushel open interest. On April 29, 1944, the first 

day on which notice could be issued to deliver rye in satisfaction of Chicago 

May 1944 rye futures contracts, they were long 5,695,000 bushels, about 46 

percent of the 12,404,000 bushel open interest. General Foods had no long 

position in May 1944 futures but took a comparatively modest short position 

toward the end of April 1944. 

26. During the first five months of 1944 Charles W. Metcalf traded in rye and 

rye futures for himself, Mrs. Metcalf, Barbara Metcalf, and G. E. Platt. The 

positions of these accounts differed and the combined position in the Chicago 

May 1944 rye future was short and long at various times during this period until 

April 19, when it went from 175,000 bushels net short to 5,000 bushels net long. 
Page 12 

On April 26 this net long position was increased to 125,000 bushels. One of 

these accounts held 50,000 bushels of deliverable rye in Chicago from December 

29 to May 13, 1944. Metcalf failed to file some of the reports required under 

the Commodity Exchange Act in connection with these holdings. 

27. On April 28, 1944, Daniel F. Rice initiated a proposal that the Chicago 

Board of Trade pass a regulation which would thereafter prevent delivery on 

Chicago futures contracts of grain, including rye, imported into the United 

States unless the import duty for grain to be used as food had been paid, there 

being an act of Congress then in effect exempting from the import duty grain to 

be used for livestock feed. Philip R. O'Brien favored the proposal. When 

counsel for the Board of Trade advised that adoption of the proposed regulation 

would not be proper, no action was taken to adopt it. The proposal was an 

attempt to reduce the amount of deliverable rye in Chicago. 

 

28. Through the month of May 1944 Daniel F. Rice, Schedule A customers, and 

Lawrence J. Ryan held 2,010,000 bushels of rye in Winnipeg. This is the rye 

Rice referred to when he told an investigator for the Government that he was 

holding 2,000,000 bushels of rye in Winnipeg to keep it from coming to Chicago. 

This rye was withheld to prevent its being used for delivery on Chicago May 1944 

rye futures contracts. 

29. In May 1944 Rice and Company, Rice (for himself and Schedule A 

customers), Ryan, and O'Brien received 3,980,000 bushels of rye in satisfaction 

of Chicago May 1944 rye futures contracts, redelivered 230,000 bushels, and held 

in Chicago 3,750,000 bushels, or over 91 percent of the 4,100,000 bushels of rye 

delivered on Chicago May 1944 rye futures contracts. 

30. About May 5 and 6, 1944, there were rumors around the Chicago Board of 

Trade that General Foods had "sold out to Cargill" or was disposing of large 

quantities of its rye. On May 8 Charles W. Metcalf telephoned Philip R. 

O'Brien, wanting to know if something could be done to stop the rumors. The 

conversation was followed by a telegram from Metcalf to O'Brien denying that 

General Foods was disposing of its rye. At Metcalf's request O'Brien showed the 

telegram to some of the men on the trading floor and the news quickly got around 

that the telegram had been received. 

31. During April 1944 and on until trading closed in the Chicago May 1944 rye 

future on May 22, 1944, the price of such May future was more than that of the 

Chicago July and September 1944 rye futures. On April 29, 1944, such May future 

was 2 cents per bushel more than the July and 5 3/4 cents more than the 

September future. A premium relationship for May futures over the deferred 

futures also existed on the Winnipeg Grain Exchange. 

32. Some time before May 13, 1944, Philip R. O'Brien received a call for 

margin in connection with his rye transactions, but he could not respond to the 

call. He told Daniel F. Rice of the situation and Rice put the proposition up 

to General Foods. As a result, O'Brien sold General Foods, through Rice, 

665,000 bushels of rye on May 13 and 15, 1944. On May 13 he owned only 530,000 

bushels of rye, but he bought 60,000 bushels on May 15 and took delivery on 

Chicago futures contracts of 25,000 bushels on May 16, 10,000 bushels on May 17, 

and 75,000 bushels on May 18. 

33. Shortly before May 13, 1944, there was a meeting in Charles W. Metcalf's 

office in the office of General Foods in New York, of which meeting General 

Foods kept no written record. It was attended by Chairman of the Board Clarence 

Francis, President Austin S. Igleheart, and Executive Vice President Metcalf, 

all of General Foods, and 

 

 

 

Daniel F. Rice and Philip R. O'Brien. At the meeting General Foods ascertained 

the positions of Rice and O'Brien in the Chicago rye market and authorized the 

purchase of 2,000,000 bushels of "distress rye" about to be dumped on the 
Page 13 

market, which, in the words of the Chairman of the Board of General Foods, would 

"have the very definite effect of depreciating the value of our holdings . . . 

." Rice recommended that General Foods acquire such rye. General Foods 

authorized the purchase of the rye, and the taking of a short position of an 

equal quantity in the Chicago July rye future. 

34. As a result of the authorization mentioned in Finding of Fact 33, on May 

13, 15, 16, 17, 18, and 23, 1944, General Foods purchased, through Daniel F. 

Rice, 1,999,466.14 bushels of deliverable rye in Chicago. This consisted of 

140,000 bushels from Schedule A customers, 355,000 bushels from Rice, 495,000 

bushels from Ryan, 344,466.14 bushels from the Rice and Ryan account, and 

665,000 bushels from O'Brien. When the Rice and Ryan account rye is divided 

between its two owners, the amount of Ryan's rye involved is 667,233.07 bushels, 

the exact amount of Rice's when the Schedule A customers are included. 

35. The purpose of the transactions mentioned in Finding 34 was to support 

the price of rye by preventing a drop in price that would have been caused if 

the rye purchased and held by General Foods had got into the open market. 

36. Commencing at some time around the beginning of 1944 and continuing into 

May 1944, Daniel F. Rice, Rice and Company, O'Brien and Ryan collaborated to 

manipulate the price of rye futures and actual rye on the Chicago Board of Trade 

and to corner the rye market on the Chicago Board of Trade. 

37. General Foods Corporation, its Executive Vice President Metcalf, Daniel 

F. Rice, Rice and Company, O'Brien, and Ryan, by virtue of the 2,000,000-bushel 

transaction mentioned in Findings of Fact 34 and 35, collaborated to manipulate 

and did manipulate the price of rye futures and actual rye upon the Chicago 

Board of Trade. 

CONCLUSIONS

This proceeding is not one of investigation with a view to the formulation 

and promulgation of legislation or rules of a legislative nature designed to 

restrict or suppress undesirable speculative excesses in futures markets. This 

is an adjudicative proceeding of a type some people call "accusatory" and it 

culminates in the imposition of administrative sanctions for violations of the 

act. Section 6 (b) of the act provides that the findings of fact in proceedings 

of this kind shall be final on appeal to the appropriate United States circuit 

court of appeals ". . . if supported by the weight of the evidence . . . ." 

Whether 

 

 

 

a reviewing circuit court of appeals will determine for itself the weight of the 

evidence, or will not upset our appraisal of the weight of the evidence unless 

clearly wrong, we nevertheless must decide the problems presented on the basis 

of what we consider the weight of the evidence. 

I

With these preliminary but imperative considerations in mind, the first 

general question to be examined is whether the evidence establishes that 

respondents individually and collectively manipulated prices of rye futures 

contracts and actual rye on the Chicago Board of Trade. To manipulate prices 

means, giving the term its broadest scope, to cause prices to go up or down by 

means directed to either such end or to prevent prices from going up or down by 

means directed to either such end. Leaving for subsequent consideration the 

2,000,000-bushel transaction in May 1944, the Government charges respondents 

mainly with artificially enhancing prices of rye and rye futures. I take it 

that such a charge cannot be considered as established unless the evidence shows 

that rye and rye futures prices on the Chicago Board of Trade were artificially 

enhanced by manipulative means. 

The Government and the referee base their conclusions of a manipulated price, 

that is a price artificially enhanced by manipulative means, largely on (1) the 

rise in the price of rye futures on the Chicago Board of Trade from $ 0.64 1/4 
Page 14 

on December 1, 1942, to $ 1.32 5/8 per bushel on May 5, 1944; (2) the fact that 

May rye futures, starting in August 1943, were at a premium over July 1944 rye 

futures, and (3) the fact that the price of May rye futures declined during May 

1944 from $ 1.32 5/8 on May 5 to a low of $ 1.11 for the month on May 22, the 

last day of trading in the future. 

We do not have the benefit of the testimony of an expert price analyst or 

economist as to whether the facts relied upon by the Government are proof of, or 

evidence of, a manipulated price. And there is not in the evidence any data as 

to rye futures prices at markets other than Chicago or cash rye prices with 

which to compare Chicago rye futures prices. Of course it is possible, although 

it does not appear from the record, that the Chicago market is the pricedetermining rye market, both cash and futures, for the United States and Canada, 

and that such data would not indicate much by comparison with Chicago prices. 

But, at any rate, I am afraid that there is something missing in the process by 

which the Government gets over from the existence of these facts to the 

conclusion of a manipulated price, at least as far as the evidential 

requirements of this proceeding are concerned. 

 

Taking up first the price rise from $ 0.64 1/4 on December 1, 1942, for the 

December 1942 future to the price of $ 1.32 5/8 for the May 1944 future on May 

5, 1944, it is apparent that there was a trend upward in rye futures prices 

before General Foods had done anything that would indicate any significant 

effect upon price. The December 1942 future closed on December 23 at $ 0.72-$ 

0.72 3/4. On December 1, 1942, the opening price of the May 1943 future was $ 

0.70 5/8 - 3/4, and the opening price of the July 1943 future was $ 0.73. By 

the end of April 1943, before General Foods had acquired any cash rye by 

delivery or otherwise, the May 1943 future was at $ 0.85-$ 0.85 1/8 and the July 

1943 future $ 0.87 7/8-$ 0.88. The September 1943 future went as high as $ 0.94 

1/8 in March 1943. The record itself, then, indicates an upward movement in rye 

prices and I cannot help but know that during the period covered by the 

complaint there was an upward trend in grain prices and prices generally. The 

data in the record as to increases in the visible supply of rye and increases in 

the deliverable supply of rye in Chicago are indications that, in the light of 

objective supply and demand conditions, rye prices should not have risen so 

much. But another thing that I cannot help but know is that factors less 

fundamental than objective supply and demand conditions enter into trading 

opinion in a speculative market and the record shows a volume of trading in rye 

futures far above normal during the period covered by the complaint. Another 

difficulty with the invocation of the price rise as proof of manipulation is 

that the price level reached at the end of December 1943 and the first few days 

of January 1944 did not go up during the months of 1944 preceding the price 

decline during May 1944. The decline was from approximately $ 1.30 to $ 1.11 

which the Government charges was the natural level dictated by supply and demand 

conditions. So that if the price was a manipulated price, the manipulation 

would seem to represent only about 19 cents of the sharp price rise during 1943. 

General Foods' large purchases and taking of delivery may very likely have 

accelerated an already existing upward movement. This might be a safe 

assumption in some other kind of a proceeding. Here we are faced with the 

necessity of finding facts and not probabilities. n1 

n1 In 1934, Dr. J. W. T. Duvel, Chief, Grain Futures Administration, 

testified in connection with H. R. 8829, 73d Congress, 2d session, one of 

the bills from which later emerged the Commodity Exchange Act. In support 

of the provisions of the bill for establishing trading limits, Dr. Duvel 

said that Grain Futures Administration studies had disclosed that 

concentrated large-scale operations, that is transactions of 2,000,000 

bushels or more, result in abnormal price-movements in more than 80 percent 

of instances. Hearings before House Committee on Agriculture, pp. 13-17. 

So that even the studies referred to show lack of abnormal price movements 

in some concentrated large-scale operations. 
Page 15 

The same general conclusions are applicable to the deductions desired by the 

Government from the existence of a premium for the May 

 

 

 

1944 future over the July and September futures. Analysis of the relationships 

between futures is undoubtedly one of the standard tests for the detection of 

artificiality or manipulation. Government counsel say that the premium 

relationship between the May 1944 and the deferred futures was abnormal. 

Respondents' counsel say that the relationship was normal. The only way to find 

out is to conduct a close study of data not introduced in evidence covering a 

period of years to ascertain the reasons for the existence of the premium 

relationship for rye futures in other years when it occurred. If such a study 

revealed the relationship to be unusual, the problem would still remain as to 

whether manipulation or some other ingredient in the 1943-May 1944 rye market 

situation was the cause. I do not believe that because Mr. Metcalf admitted to 

a Government investigator that General Foods had unwittingly caused the 

relationship to come about and promised to cooperate by making the July market 

liquid is powerful evidence that General Foods manipulated the price. 

Potentially the premium relationship is perhaps a more reliable test for 

artificiality or manipulation, or a stronger indication of such a condition, 

than the rise in price during 1943, but its potentialities are not realized in 

this record. 

Then we come to the decline in price in May 1944. It may be that the price 

was at an unrealistically high level on May 1, 1944, when the price of May rye 

futures opened at $ 1.30. Again, it may be, although not established here by 

the proof requirements applicable to this proceeding, that respondents' 

operations contributed to the building up and maintenance of this price level. 

But because the price came down is not to prove that the only answer is a 

manipulated price in violation of the act. There is no testimony that this is 

the answer. Support of the Government contention is sought in the fact that 

heavy deliveries by shorts in the first few days of May 1943 did not cause the 

price to go down during the delivery month of May 1943. Similar heavy 

deliveries in December 1943, although not so much in amount as in May 1943 or 

May 1944, did not bring about any price decline during December 1943 in December 

1943 futures prices. In fact the prices went up at the time when the alleged 

manipulated price level was reaching its peak. Seizing upon the May 1943 

situation of heavy deliveries by the shorts having no depressing effect upon the 

May 1943 futures prices during May 1943 as proof that the May 1944 heavy 

deliveries by shorts broke a manipulated price naturally causes one to wonder 

why heavy deliveries in December 1943, although admittedly not quite as large as 

in May 1943 or May 1944, did not break the allegedly artificial and manipulated 

price level for rye futures in December 1943. Some logical explanation may 

exist but it does not emerge clearly from the record. 

 

The price rise during 1943, the premium relationship for the May 1944 future 

over the deferred futures, and the price decline in May 1944 are matters which 

might be strong indications of an artificial or a manipulated price. An expert 

analyst might start with these facts and by appraising and isolating the various 

influences upon prices during this period come out with a reasoned conclusion 

that the price level for rye and rye futures was artificially enhanced to some 

extent during 1943 by the weight of General Foods' operations and maintained 

with the help of the other respondents to sometime in May 1944 when it declined 

due to the apparent ability of the shorts to meet their commitments. Yet, I do 

not see how I can do this in this kind of a proceeding. 

The Government sought to have official notice taken of a great many data in 

support of its arguments that these facts establish a manipulated price. 

General Foods likewise tried to get in a great deal of data and information by 

official notice to disprove a manipulated price. The referee ruled that such 

data should be put in evidence in the usual way but neither party saw fit to do 

this. The comprehensive economic study sought to be made on this subject by the 
Page 16 

requests of the Government and General Foods for official notice is something 

that should not have to be made by a referee or deciding officer without the 

benefit of explanation by witnesses and without an adequate opportunity for each 

party to dispute the inferences sought from the data by the other party. The 

data sought to be officially noticed do not consist of general background 

material. They go to the heart of perhaps the main issue in the entire 

proceeding. I do not believe that advertence to the expertise of the referee or 

the deciding officer is an adequate substitute in this kind of proceeding for 

evidence introduced in the usual way. 

Before leaving the discussion of the charges that respondents collectively 

and individually manipulated prices of rye futures and actual rye, attention 

should be paid to the charge of collective manipulation. There is no evidence, 

or at least practically no evidence, that the Rice respondents, Ryan, or O'Brien 

had any connection or association with General Foods' operations during 1943 

which ended with the May 1944 futures price at $ 1.27. During the first few 

days of January 1944, the price got as high as $ 1.34. It was about this time 

that respondent Rice and Company was retained as selling agent for the General 

Foods' rye and it was after this time that the heavy purchasing program of May 

rye futures by the respondents other than General Foods took place. But the 

price did not get any higher and on May 1, 1944, was $ 1.30. So that any 

responsibility for a manipulated price on the part of respondents, other than 

General Foods and perhaps Metcalf, can only 

 

be vicarious and on the tenuous theory of contrbution to maintenance of any 

existing manipulated price level. While this might possibly be a supportable 

theory if it had been established by the evidence that the price level was a 

manipulated one and that the activities of respondents held this price level up, 

it is difficult to believe that the respondents who bought heavily in May rye 

futures at an alleged artificially enhanced price did so with knowledge that the 

price level was a manipulated one and for the purpose of maintaining a 

manipulated price. The main charge in the Government case is that respondents 

ran a collective corner in May rye. Rice, Ryan and O'Brien, to be candid, were 

looking for profits and if everything the Government charges would be conceded, 

these respondents were trying to enhance the prices existing when they 

purchased. Another weakness in the joining of all respondents on a charge of 

collectively manipulating the price is that according to the Government evidence 

it was not until shortly before May 13, 1944, that General Foods and Metcalf 

knew the positions in May rye of the other respondents. Mr. Bagnell testified 

that Mr. Francis told him that General Foods ascertained the positions of Rice 

and O'Brien in May rye at the meeting in New York some short time before May 13, 

1944, which culminated in the purchase of 2,000,000 bushels of rye which came 

from Rice, Schedule A customers, O'Brien, and Ryan. The Government even 

suggested this in a finding of fact. I do not see then how General Foods and 

Metcalf can be joined collectively with the others as manipulators who together

sustained during 1944 a manipulated price otherwise achieved prior to that time 

by General Foods, even if such was proved, when there is no link shown between 

General Foods or Metcalf and the remaining respondents during the months of 1944 

preceding May. 

We finally come at this stage of our decision to the sale of the 2,000,000 

bushels of rye to General Foods from Rice, Ryan, and O'Brien on May 13, 1944, 

and subsequent dates. There is no doubt that the purchase by General Foods and 

the sale by Rice, Ryan, and O'Brien were transacted for the purpose, at least, 

of supporting or pegging the market price by taking off the market rye which 

otherwise would have been sold on the market with consequent adverse effects 

upon price. The sale came during a delivery period when this record shows that 

prices were acutely sensitive. It is a proper inference from the record 

evidence that the 2,000,000-bushel deal kept the price from declining to some 

extent which would have happened if the rye had been dumped on the market at the 

time. General Foods and Metcalf as its officer in charge of its rye purchasing 

program, O'Brien and Rice without question 

 

 
Page 17 

 

participated in the transaction. Some of the rye sold was Ryan's individually 

and some from the Rice-Ryan joint account. While Ryan is less directly involved 

than the others, the evidence is sufficient to justify the conclusion that Ryan 

also participated in the sale for the purpose of maintaining rye prices. 

II

Concerning the charges in the complaint and the referee's proposed findings 

and conclusions that the respondents collectively cornered the May market in 

rye, the same problem raises its head as was discussed above in connection with 

collective manipulation. This problem must be faced. As was pointed out, there 

is no link shown between General Foods and Metcalf on the one hand, and the 

remaining respondents on the other during the months of 1944 preceding May 1944. 

The Government even suggested a finding of fact that it was at the meeting 

shortly before May 13, 1944, which led to the 2,000,000-bushel transaction that 

General Foods ascertained the positions of Rice and O'Brien in the rye market. 

On what basis, then, can General Foods and Metcalf be found collectively with 

the others to have cornered the market? Even in an administrative proceeding, 

such as this, for violations of an act, I suppose that to hold a person 

responsible for a violation some intent must be shown either by the mere doing 

of a prohibited act or by the more exacting standard of a specific intent 

equivalent to the mens rea of criminal law. However questionable or 

undesirable, the holding of a large supply of rye by General Foods was not in 

itself prohibited, nor was its failure to liquidate the stock or part of it in 

such a way as to make rye available to elevators or other speculative interests. 

Omitting General Foods and Metcalf from the picture for a moment, it might 

still be possible for the remaining respondents to have violated the act by 

cornering the market because they took advantage of the technical situation of 

General Foods' apparent policy of not making their rye available to speculators 

or elevator interests. I am afraid, however, that other applicable 

considerations do not make it possible to find that the respondents other than 

General Foods did corner the market in May rye as distinguished from an attempt 

to corner.

Respondents claim in general that a corner in violation of the act cannot 

exist unless the shorts are actually cornered during the delivery month, that is 

that the shorts are unable to make delivery of the commodity due to the efforts 

of the cornering interest in cornering the 

 

 

 

available supplies and standing for delivery on its long contracts. n2 The 

position of the Government does not seem precise. While there is no doubt that 

the Government holds out as a corner in violation of the act control or 

possession of deliverable supplies on one market the Chicago Board of Trade, it 

sometimes appears that the Government claims that such a situation constitutes a 

corner in violation of the act regardless of whether the attempts to corner the 

market succeed or any resulting enhancement or fluctuation of price results. At 

other times, the Government seems to concede that an essential element of the 

violation "corner" is an artificial stimulation of price. 

n2 This is the classical corner on a grain futures market. Numerous 

authorities were cited by respondents in support of their position. They 

might also have referred to "A Primer of Trading in Commodity Futures," 

July 1937, United States Department of Agriculture, Commodity Exchange 

Administration, which has the following definition : Corner. A condition in 

which one operator or pool controls so much of a commodity, usually both 

with respect to the physical commodity deliverable upon contracts and with 

respect to contracts to buy, that contracts to sell can be fulfilled or 

offset only upon the terms of such operator or pool." 

Section 6 (b) of the act does not mention corner but does impose 

administrative sanctions for manipulating the price or attempting to manipulate 
Page 18 

price. Section 9 of the act authorizes criminal penalties for persons "who 

shall corner or attempt to corner" any commodity in interstate commerce or for 

future delivery on or subject to the rules of any board of trade. Assuming that 

the first part of the first sentence in section 6 (b), "If the Secretary of 

Agriculture has reason to believe that any person (other than a contract market) 

is violating, or has violated any of the provisions of this act * * *" 

incorporates by reference the prohibition in section 9 against corners and 

attempts to corner, I have been unable to find any satisfactory authority that a 

corner in violation of the act exists, as distinguished from an attempt to 

corner, unless a manipulated or artificial price of some sort or degree is 

caused by the cornering efforts. Careful examination of the several 

authoritative treatises referred to in the proceeding, n3 the legislative 

history of the act, and the leading cases reveal that a corner is the most 

spectacular illustration of manipulating prices upward. Manipulative practices 

such as cornering efforts that fail to enhance the price or to cause price 

fluctuations may still come under the general heading of "manipulation" but it 

seems to me that these are covered by the act as attempts to manipulate or 

attempts to corner. 

n3 Technical Bulletin No. 747, Grain Prices and Futures Market, G. 

Wright Hoffman, United States Department of Agriculture, 1941; Future 

Trading Upon Organized Commodity Markets, G. Wright Hoffman, University of 

Pennsylvania Press, 1932; Report of the Federal Trade Commission on the 

Grain Trade, Vols. V, VI, and VII, 1920-1926. 

We have already come to the conclusion that the evidence in the record does 

not warrant a conclusion in this type of proceeding that rye futures or rye 

prices were manipulated prices at the end of 1943 or in 

 

 

 

the first few days of January 1944. No enhancement of the price level occurred 

during 1944 and we cannot find that respondents maintained a manipulated price 

level during 1944 up to the market decline in May. So even if it be conceded 

that the respondents or some of them were attempting to run a corner on May rye, 

no price effects are disclosed and we are consequently unable to find or 

conclude that a corner in violation of the act was achieved. 

III

The part of the Government case dealing with attempts to manipulate and 

attempts to corner is on more solid ground. It is common knowledge and it is 

apparent throughout this record that the adequacy of deliverable supplies on a 

futures market to meet maturing futures contracts is a potent price-influencing 

factor. The inadequacy or threat of inadequacy is disturbing to stability and 

has a tendency to enhance prices. On the other hand, excessively large or 

surplus supplies on any market, particularly a large or terminal market results 

in, or has a tendency to result in, lowered prices. 

Rice, O'Brien and Ryan were experienced traders. They were speculators with 

no use for actual rye. The "tight" situation in December 1943 rye due largely 

to General Foods' operations was not a secret. O'Brien was the President of the 

Board of Trade and Rice as General Foods' agent for the merchandising of its rye 

must have known of the action of the Business Conduct Committee in prohibiting 

further purchases of rye or rye futures by General Foods or Met-calf. Ryan had 

a joint account with Rice. Yet in the face of a practically unprecedented 

supply of rye in Chicago, with over 7,000,000 bushels in the hands of General 

Foods alone, Rice, the Schedule A customers, O'Brien, and Ryan embarked on large 

long lines in May 1944 futures. This in itself does not seem logical for an 

experienced trader unless he has some reason to believe that the large supplies 

would not be available to shorts or at least would not be liquidated in such a 

way as to depress prices on the Board of Trade. n4 The source for such a reason 

to believe on the part of O'Brien and Ryan immediately suggests itself as Mr. 

Rice. This is supported by later developments in May 1944 when Mr. O'Brien 

found himself unable to carry 
Page 19 

 

 

 

the rye delivered on his contracts and Rice, Schedule A customers, Ryan, and 

O'Brien took their trouble to General Foods through Mr. Rice. 

n4 The possible impact upon the market of the liquidation upon the Board 

of Trade of General Foods' long supply is seen from Finding of Fact 30. In 

defending O'Brien's participation because of his position as President of 

the Board of Trade, O'Brien's counsel argues, "If 7,000,000 bushels of rye 

should suddenly be dumped on the Chicago market, the impact upon the rye 

market would obviously be terrific" (p. 16, O'Brien's Exceptions to the 

Referee's Report). This bears out our conclusion that an experienced 

trader would be wary about going on a large long line with 7,000,000 

bushels of cash rye in the market. How would such traders know when they 

went long whether or not the rye would be dumped or sold to the shorts? 

Although these respondents made heavy purchases of May futures in January and 

February, 1944, prices did not go up, and after some liquidation on their part, 

Rice, Schedule A customers, Ryan, and O'Brien, as shown by Finding of Fact 25, 

were long 5,695,000 bushels May on April 29, 1944, and took delivery of large 

amounts of rye in May. For some time previously a profit could have been made 

by selling May and buying July or September 1944 futures. When to the purchase 

and maintenance of large long lines in May futures, the taking of delivery and 

the holding of very large amounts are added the taking of delivery and the 

holding of rye in Winnipeg mentioned in Finding of Fact 28, the last-minute 

attempt on April 28, 1944, to make Canadian rye undeliverable unless the duty 

was paid, the failure of these speculators to take a profit by selling May and 

buying later futures, and the sale of the 2,000,000 bushels to General Foods in 

May 1944 by Rice, Schedule A customers, O'Brien, and Ryan, it is a reasonable 

inference that Rice personally and through Schedule A customers, O'Brien, and 

Ryan, were individually and together using the weight of their trading in an 

attempt to influence the price, in other words, to manipulate the price. The 

attempts even reach the ambitious level of attempts to corner the market in May 

rye, a more newsworthy description of the kind of manipulation attempted. 

I am unable to conclude from the record evidence that General Foods or 

Metcalf participated in these efforts by Rice, O'Brien, and Ryan. As has been 

previously observed, the evidence indicates that General Foods and Metcalf did 

not know of the positions of Rice and O'Brien in May rye until the meeting 

shortly before May 13, 1944 (Complainant's Suggested Findings of Fact, 

Conclusions and Order, Suggested Finding of Fact 18). The evidence reveals also 

that General Foods did not know whose rye they were buying, and I am not asked 

to disbelieve the witness who gave the testimony. The mere fact that the 

meeting had to be held and the fact that, according to the Government evidence 

and argument, Mr. Rice had to exercise his persuasive powers to talk General 

Foods into the 2,000,000-bushel purchase are inconsistent with the notion that 

General Foods and Metcalf were parties to a full-fledged plot to corner the rye 

market that had been hatched with the assent and cooperation of all sometime in 

1943. General Foods was not long May 1944 but short to some extent. As far as 

Metcalf personally is concerned, his trading in May rye on his individual 

account and for the accounts he controlled 

 

 

 

does not reveal trading consonant with any knowledge, participation or 

understanding of a plan to run a corner. 

Naturally, counsel for the respondents dispute vigorously the drawing of any 

inferences of illegitimacy from any of the facts. The inferences drawn are 

certainly reasonable in the light of the evidence and in the absence of any 

explanation in evidence by the respondents. A few words might be said, however, 

about Finding of Fact 18 to the effect that Rice controlled or directly 

influenced the Schedule A customers. Counsel for the Rice respondents dispute 
Page 20 

any finding that Rice controlled or directly influenced the Schedule A customers 

although they do admit that "These customers, in the same manner as customers of 

any brokerage house, very probably were influenced in their trading by Rice" 

(Suggested Findings of Fact and Conclusions of Law Submitted by Rice 

Respondents). Buster testified that Rice told him that he was in touch with the 

Schedule A customers almost daily and that he often had discretionary authority 

for a day. There is evidence also of numerous block executions of orders both 

on the Chicago Board of Trade and on the Winnipeg Grain Exchange with 

distribution of the orders among Rice customers, most of whom are listed in 

Schedule A, without any indication that individual orders had been received. 

There is the further strong circumstantial evidence in the pattern of trading, 

that is practically all Schedule A customers being long May 1944 Chicago, 19 of 

the 23 customers being long May 1944 on the Winnipeg Grain Exchange, with 14 of 

the customers taking delivery in Chicago and 18 of the 19 in Winnipeg taking 

delivery. These deliveries were taken when it would have been profitable both 

in Chicago and Winnipeg to sell May and buy July or later futures. Further, the 

rye delivered to Schedule A customers in Winnipeg was part of the 2,000,000 

bushels which Rice held in Winnipeg according to his statement to Buster. 

As to the move on April 28, 1944, initiated by Rice and proposed by O'Brien, 

to have the Board of Trade declare ineligible for delivery Canadian grain unless 

the duty was paid, the Rice counsel defend by saying that officials of the Board 

of Trade and the Commodity Exchange Division officer in Chicago favored the 

move. Mr. O'Brien had a large long line in May rye, he had attended a meeting 

on the night of April 27, 1944, at Rice's apartment and must have known of 

Rice's position. The record shows that most of the rye in Chicago outside of 

that held by General Foods and some of the respondents was rye imported from 

Canada by Cargill, Inc., in November and December, 1943. Yet on the morning of 

April 28, 1944, after the meeting in Rice's apartment on the night of April 27, 

and on the last day before the first notice day for delivery on May rye 

contracts, Mr. O'Brien took action to have a resolution prepared for the Board 

of Directors 

 

 

 

which would make undeliverable at least some if not a large part of the 

deliverable rye in Chicago. The circumstances justify an inference of less than 

an altruistic desire on the part of Mr. O'Brien to protect the market. As far 

as Mr. Rice is concerned, his conversation with Mr. Buster in which he 

complained of the "raw deal" he and the other May rye longs got from the Board 

of Trade on this matter, pretty well indicates the motivation for his action in 

initiating the proposal. 

The activity of O'Brien in making known to the traders Metcalf's telegram on 

May 8, 1944, denying the rumors that General Foods had sold out to Cargill, 

Inc., the principal short, may be explainable on the ground that Mr. O'Brien was 

President of the Board of Trade. Perhaps this activity does not mean very much 

in itself in this case. It did happen, however, that O'Brien was long May and 

that, consequently, his personal interests were also served. The incident does 

fill in another detail of the general picture. 

In addition to what are considered the collective attempts of Rice, O'Brien, 

and Ryan during 1944 to manipulate the price, each one individually made his 

contribution and, therefore, individually attempted to manipulate the price. 

There is the further question of the 2,000,000-bushel transaction with General 

Foods in May 1944 which has been held to be a manipulation of the price and, of 

course, this also constituted an attempt to manipulate the price. Here also the 

attempt was participated in by General Foods, Metcalf, Rice, O'Brien, and Ryan 

and consituted a collective attempt and an individual attempt on the part of 

each participant. Rice, Metcalf, Francis, and O'Brien admitted that the purpose 

of the deal was to maintain the market price or to prevent any break in the 

price. 

IV
Page 21 

Respondents voiced many grievances throughout the proceedings. Out of a 

sense of fairness but at the expense of having a long, drawn-out decision, we 

have attempted to answer those of significance, but there are so many that we 

have been unable to discuss them all. Of course then, this decision shall be 

considered as overruling all objections and exceptions inconsistent with it. A 

few procedural matters raised by respondents are left for consideration. 

Respondents attack the complaint. They urge its invalidity because the document 

reads "There is reason to believe" instead of "I have reason to believe" and 

because the caption reads "In re General Foods . . ." instead of "Secretary of 

Agriculture v. General Foods . . . ." These protestations have no substance and 

relate to mere matters of form. 

Respondents were particularly upset because the complaint does not charge a 

conspiracy or agreement. They say that the word "collectively" 

 

 

 

has no legal meaning. The complaint is clear that respondents are accused of 

acting together, in concert, as a group. Respondents' protestations that the 

complaint leaves them in the dark as to whether collusive action is alleged 

because of the omission of specific charges of conspiracy or agreement are farfetched. Conspiracy to violate is a separate crime in the field of criminal law 

and this is not a criminal proceeding. Because complaints in former proceedings 

under the act may have alleged an agreement is not to strike down as fatal any 

changes in the form or style of subsequent complaints. Absence of either the 

pleading or proof of an express agreement entered into at a particular time and 

particular place is not fatal in a conspiracy case in criminal law and certainly 

is not an administrative proceeding involving substantive charges of violations 

of an act by a group working together. 

Respondents also attack the constitutionality of the act. They find it an 

improper delegation of legislative power and a violation of the due process 

clause of the Fifth Amendment. Even if we had the power to decide these 

questions, they are well-settled by now in favor of the constitutionality of the 

act. 

Another contention pressed vigorously by respondents is that there is no 

jurisdiction in this proceeding to consider or impose administrative sanctions 

for past attempts to manipulate or to corner. This contention is based on the 

wording of section 6 (b) with respect to attempts. Section 6 (b) says: 

"If the Secretary of Agriculture has reason to believe that any person (other 

than a contract market) 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 future delivery on or subject to the 

rules of any board of trade . . . ." [Italics supplied] 

Respondents rely upon the decision in Wallace v. Cutten, 298 U. S. 229 

(1936), upholding a Circuit Court of Appeals decision that the former section 6 

(b), phrased in the present tense, precluded the Secretary from proceeding 

against Cutten after the violation was completed. After a reading of the 

legislative history of the section, particularly the committee hearings 

(Hearings Before House Committee on Agriculture on H. R. 8829, 73rd Congress, 

2nd Session; Hearing Before the Senate Committee on Agriculture and Forestry on 

H. R. 6772, 74th Congress, 2nd Session), one finds it hard to believe that 

Congress in legislating to remedy the defect in the statute revealed by the 

Cutten decision did not intend to cover attempts as well as established 

manipulation of price. Any doubts are resolved by the language in the first 

part of the sentence incorporating in section 6 (b) any existing or 

 

 

 

past violations of other provisions of the act. Section 9 of the act provides 

in part as follows: 
Page 22 

"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 . . . shall be deemed guilty of a misdemeanor, and upon 

conviction thereof be fined not more than $ 10,000 or imprisoned for not more 

than one year; or both, together with the costs of prosecution." 

Section 6 (b) authorizes jurisdiction where any person has violated any of 

the provisions of the act, one of which is the prohibition and the penalty for 

any person who shall ". . . attempt to manipulate . . . or who shall . . . 

attempt to corner . . . ." 

One more comment is in order. Respondents continually argued about the 

malefactions of Cargill, Inc., in the carrying on of its business. As long as 

the Government charged the market decline in May 1944 to be due to the 

"breaking" of a corner, there was relevancy to respondents' answering 

contentions that the decline was due to a "bear raid" by Cargill. But 

respondents or some of them did not stop there and went on to delineate all the 

historical tactics of the short or elevator interests that they consider unfair 

or irregular. Those matters were not in issue here. 

V

In recapitulation, it is concluded that respondents Daniel F. Rice, Daniel F. 

Rice and Company, Philip R. O'Brien, and Lawrence J. Ryan in violation of the 

act collectively and individually attempted to manipulate the price of rye 

futures on the Chicago Board of Trade and actual rye on and subject to the rules 

of the Chicago Board of Trade and to corner such futures and actual rye. It is 

concluded further that respondents General Foods Corporation, Charles W. 

Metcalf, in charge of General Foods' rye operations, Daniel F. Rice, Daniel F. 

Rice and Company, Philip R. O'Brien, and Lawrence J. Ryan in violation of the 

act collectively and individually attempted to and did manipulate the price of 

rye futures on the Chicago Board of Trade and actual rye on and subject to the 

rules of the Chicago Board of Trade by virtue of the 2,000,000-bushel 

transaction in May 1944. General Foods as alleged in the complaint also 

exceeded the trading limits in one instance. 

There remains, finally, the soul-searching task of imposing sanctions. Some 

of the charges in the complaint have not been established and the sanctions 

accordingly should not be as heavy as those requested by the Government and 

proposed by the referee. The violations found are nevertheless serious and 

warrant remedial measures. However, 

 

 

 

no sanction is invoked because of O'Brien's trading in excess of the limits nor 

for Metcalf's failure to file some reports since these matters were not 

mentioned in the complaint. The protagonist in the drama is Daniel F. Rice, and 

this should be considered in the evaluation of the sanctions invoked. General 

Foods, through Metcalf, provided the setting for the attempt to corner but we 

are unable to find that it was done with manipulative intent or that General 

Foods and Metcalf were parties in the attempt to corner. However, General Foods 

through arrangements made by Metcalf did purchase the 2,000,000 bushels in May 

1944 to keep it from being dumped upon the market, in itself a manipulation, and 

the trading limits were exceeded on one occasion in 1943. O'Brien played a 

minor role compared to Rice and Ryan's participation is considerably less than 

that of Rice and O'Brien. Weighing all the pertinent factors as best we can, 

the conclusion is that the trading privileges of Daniel F. Rice and Daniel F. 

Rice and Company and the registration of Daniel F. Rice and Company be suspended 

for six months, that the trading privileges of General Foods Corporation and 

Metcalf should be suspended for 30 days, that the trading privileges and the 

registration of Philip R. O'Brien should be suspended for 30 days, and that the 

trading privileges and the registration of Lawrence J. Ryan should be suspended 

for 10 days. 

ORDER
Page 23 

1. All contract markets shall refuse respondents Daniel F. Rice and Daniel F. 

Rice and Company all trading privileges thereon for a period of six months and 

shall refuse respondents General Foods Corporation, Charles W. Metcalf and 

Philip R. O'Brien all trading privileges thereon for a period of 30 days and 

shall refuse respondent Lawrence J. Ryan all trading privileges thereon for a 

period of 10 days. 

2. The registration of Daniel F. Rice and Company as a futures commission 

merchant is suspended for a period of six months, the registration of Philip R. 

O'Brien as a floor broker is suspended for 30 days, and the registration of 

Lawrence J. Ryan as a futures commission merchant is suspended for 10 days. 

3. The refusals of trading privileges and the suspensions provided shall 

begin on the 40th day after this date. 

4. All charges contained in the complaint not found to be established are 

dismissed as far as this proceeding is concerned. 

5. Copies hereof shall be served on the parties or their counsel of record 

and on each contract market. 

 

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