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Commodity Futures Trading Commission 

CEA CASES 

NAME: SECRETARY OF AGRICULTURE V. CLARENCE J. BURNS COMPANY, INC., CLARENCE J. 

BURNS PHILLIP T. BURNS, DOROTHEA BURNS, AND ROY L. MORGAN 

DOCKET NUMBER: 27 

DATE: SEPTEMBER 30, 1941 

DOCUMENT TYPE: DECISION AND ORDER 

(COPY) 

DEPARTMENT OF AGRICULTURE 

WASHINGTON 

UNITED STATES OF AMERICA 

BEFORE THE SECRETARY OF AGRICULTURE 

CE-A Docket No. 27 

Secretary of Agriculture, Complainant v. Clarence J. Burns Company, Inc., 

Clarence J. Burns Phillip T. Burns, Dorothea Burns, and Roy L. Morgan, 

Respondents 

Proceedings, Findings of Fact, Conclusions, and Order 

PROCEEDINGS 

On June 5, 1941, complaint was issued by the Assistant Secretary of 

Agriculture, pursuant to the Commodity Exchange Act (7 U.S.C. and Supp. V, §§ 1-

17a), against Clarence J. Burns Company, Inc., and its officers, Clarence J. 

burns, Phillip T. Burns, Dorothea Burns, and Roy L. Morgan, of Aberdeen, South 

Dakota, the respondents. It was alleged that the corporate respondent, a 

registered futures commission merchant, and the individual respondents, as 

agents and controlling managers of the corporation, had made false reports to 

customers in connection with commodity futures trades, had cheated, defrauded, 

and deceived customers, had kept false records of commodity futures trades, had 

bucketed futures orders, had failed to keep records 

of the amounts required to be segregated for customers, and had failed to keep 

records showing the positions of customers on the last day of the month, in 

violation of the act and the rules and regulations thereunder. A hearing before 

a referee was set for June 24, in Washington, D. C. 

On June 12, a copy of the complaint was served by registered mail on each 

respondent, with a letter from the referee stating that the hearing was 

postponed, and that respondents might request that it be held at some place more 

convenient to them than Washington. 

In a letter, dated June 17, 1941, to the Chief of the Commodity Exchange 

Administration, respondents stated that the acts alleged were done through 

ignorance of the mechanics of handling futures, and not to cheat customers; that 

respondents had conducted an insurance, real estate, and stock and bond business 

for some years; that Harris, Upham & Company furnished them quotations, and, 

when their stock and bond business declined, they had to enter the grain futures 

business, against their desires, to help reduce Harris, Upham's service costs; 

that immediately after the mistakes were disclosed by the audit made by the 

Commodity Exchange Administration, the customers had been notified and paid the 

proper amounts; that they had obtained correct executions of orders since the 

audit; and that they could now do without the grain business, as their stock 
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business would support their quotation service. They asked that the charges 

against them be dismissed. 

On June 21, the referee wrote respondents that the complaint would not be 

dismissed at that time, but that their letter of June 17 could be considered as 

an answer if they wished, and that they might answer further and request a 

hearing at a convenient place. They filed a reply, on June 26, waiving a 

hearing, in accordance with a provision of the complaint authorizing them to 

admit the facts alleged and contest the proceeding on the ground that those 

facts are not violations of the act and do not warrant disciplinary action by 

the Secretary, in which case a tentative order would be served upon them, after 

which they might file exceptions and briefs and request oral argument. They 

stated that they had retired from the futures business and liquidated customers' 

accounts, and rested their answer upon their letter of June 17. 

This order, based upon the record, as outlined above, will be served upon the 

respondents as the tentative order mentioned in the complaint. If exceptions to 

it are duly filed, it will be resubmitted, with the entire record, for further 

consideration, but if no exceptions are filed, it will be served as the final 

order in this proceeding. 

FINDINGS OF FACT 

1. The respondent Clarence J. Burns Company, Inc., of Aberdeen, South Dakota, 

a South Dakota corporation, registered with the Secretary 

of Agriculture as a futures commission merchant for the years 1939, 1940, and 

1941, and its registration has not heretofore been suspended or revoked. 

2. From December 1939 through September 1940, the respondents Clarence J. 

Burns, Phillip T. Burns, Dorothea Burns, and Roy L. Morgan were, respectively, 

president, vice-president, secretary and treasurer, and assistant secretary and 

treasurer of Clarence J. Burns Company, Inc., and acted as agents of and 

exercised management and control of that corporation as to all matters set forth 

in these findings. 

3. From December 1939 through September 1940, the corporate respondent and, 

by and through it, the individual respondents were correspondents of members of 

a contract market. 

4. About August 27, 1940, the corporation reported to R. A. Nichols, 

Aberdeen, South Dakota, its customer, that it had sold for him 2,000 bushels of 

wheat for future delivery in December, on the Chicago Board of Trade, a contract 

market, at 73 1/2 cents per bushel, to close out a purchase of 1,000 bushels it 

had made for him at 70 cents, and 1,000 bushels at 71 5/8 cents, showing a net 

gain to him, after deducting $ 8 commission charges, of $ 45.75, which was 

credited to his account. The sale was not made as reported, but was taken over 

by the corporation and allocated to a house account, designated Doro Burns, on 

August 26, 1940. The long position was closed 

out by a sale on August 28, 1940, at 74 1/8 cents per bushel, and on that day 

the Doro Burns account was credited with a gain of $ 12.50 on the transaction. 

5. The corporation, in some instances crediting the difference between the 

reported and the actual gain or loss to the Doro Burns account, as in Finding 4, 

made false reports to the customers, and false entries on the corporation's 

records, of executions of Chicago wheat futures trades, for George Guhin, 

Aberdeen, South Dakota, on July 15 and August 26, 1940; for L. B. Cronholm, 

Ipswich, South Dakota, on July 20 and 30, 1940; for Dr. J. D. Alway, Aberdeen, 

South Dakota, on April 25, 1940; for W. C. Smith, Sisseton, South Dakota, on 

December 13, 1939, April 16, 1940, and May 15, 1940; for Joe E. Marx, Bristol, 

South Dakota, on April 25 and May 1, 1940; for Dr. Peter Steiner, Hosmer, South 
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Dakota, on May 15, 1940; for Ed. Grupe, Aberdeen, South Dakota, on April 22 and 

May 15, 1940; and for Dr. Hugo Neukamp, Hosmer, South Dakota, on April 22, 1940. 

6. The futures trades mentioned in Findings 4 and 5 could be used for hedging 

transactions in grain in interstate commerce. 

7. The false records and false reports mentioned in Findings 4 and 5 were 

willfully made, and the corporation thereby willfully deceived, cheated, and 

defrauded the customers concerned. 

8. The corporation, from December 1939 to September 1940, failed to make and 

keep a daily computation of the money and property of customers required by 

section 4d(2) of the act to be kept in segregation. 

9. The corporation, from December 1939 to September 1940, failed to prepare 

and keep a record showing each customer's position in commodity futures on 

contract markets as of the close of the last business day of each calendar 

month. 

10. The individual respondents, and each of them, acting individually and by 

and through the corporation, did each of the acts mentioned in Findings 4, 5, 7, 

8, and 9. 

CONCLUSIONS 

The record and the foregoing findings show that respondents repeatedly 

bucketed their customers' commodity futures orders, falsely reported to, 

deceived, cheated, and defrauded the customers, and entered false records of 

customers' trades, in violation of the act, and failed to keep records required 

by the act. Respondents' claim that they paid the customers the full amounts 

due them, after the Government audit disclosed the situation, does not excuse 

their numerous violations. Their trading privileges on contract markets should 

be denied for five years, and the registration of the corporation should be 

revoked. 

ORDER 

IT IS ORDERED that the registration of the respondent Clarence J. Burns 

Company, Inc., Aberdeen, South Dakota, as a futures commission merchant for the 

year 1941 be, and it is hereby, revoked. 

IT IS FURTHER ORDERED that all contract markets refuse the respondents 

Clarence J. Burns Company, Inc., Clarence J. Burns, Phillip T. Burns, Dorothea 

Burns, and Roy L. Morgan, all trading privileges thereon for a period of five 

years, beginning on the effective date of this order. 

IT IS FURTHER ORDERED that a copy hereof be sent, by registered mail, to each 

of the respondents, at 209 1/2 South Main Street, Aberdeen, South Dakota. If 

any exceptions to this order are filed with the Hearing Clerk, Office of the 

Solicitor, Department of Agriculture, Washington, D. C., within 20 days from the 

earliest day on which a copy thereof is delivered to any respondent, as 

evidenced by the return receipt card, then the entire record, including this 

order and all exceptions thereto, is to be resubmitted for further 

consideration. If no exception is filed within that time, a copy of this order 

shall be served by registered mail upon each contract market. 

IT IS FURTHER ORDERED that, when a copy hereof is sent by registered mail 

from the Hearing Clerk to a contract market, this shall be effective as a final 

order 40 days after its date. 

Done at Washington, D. C., this 

30th day of September 1941. 

Witness may hand and the seal of 

the Department of Agriculture. 
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(SEAL) 

s/ Robert H. Shields 

Assistant to the Secretary of Agriculture 

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