Page 1 

Commodity Futures Trading Commission 

CEA CASES 

NAME: KHALIL HADDAD 

CITATION: 22 Agric. Dec. 137 

DOCKET NUMBER: 110 

DATE: FEBRUARY 20, 1963 

DOCUMENT TYPE: DECISION AND ORDER 

(No. 8185) 

In re KHALIL HADDAD. CEA Docket No. 110. Decided February 20, 1963. 

Suspension of Registration -- Denial of Trading Privileges -- Default Order

Respondent's failure to file an answer to the complaint constitutes an 

admission of the allegations of the complaint. Respondent's registration as a 

floor broker is suspended for six months and all contract markets are ordered to 

refuse all trading privileges to respondent for six months. 

Mr. Earl L. Saunders, for Commodity Exchange Authority. Mr. Jack W. Bain,

Hearing Examiner. 

Decision by Thomas J. Flavin, Judicial Officer

PRELIMINARY STATEMENT

This is a proceeding under the Commodity Exchange Act (7 U.S.C. Chapter I), 

instituted by a complaint filed November 23, 1962, by an Assistant Secretary of 

Agriculture. The respondent, a member of the Chicago Mercantile Exchange and a 

registered floor broker under the act, is charged with attempting to cheat and 

defraud and cheating and defrauding persons in or in connection with the making 

of contracts of sale of a commodity for future delivery in violation of section 

4b (A) of the act (7 U.S.C. 6b(A)). A copy of the complaint and a copy of the 

rules of practice were served upon respondent November 26, 1962. 

At the time of service of the complaint, respondent was notified in writing 

that an answer thereto should be filed within 20 

days after such service and that failure to file an answer would constitute an 

admission of the facts alleged in the complaint and a waiver of oral hearing. 

Notwithstanding such notice, respondent has not filed an answer. The matter was 

referred to Jack W. Bain, Hearing Examiner, Office of Hearing Examiners, United 

States Department of Agriculture, for the preparation of a report without 

further investigation or hearing pursuant to section 0.9(c) of the rules of 

practice (17 CFR 0.9(c)). On January 16, 1963, the hearing examiner or referee 

filed a report containing proposed findings of fact and conclusions and 

recommending that respondent's registration as a floor broker under the act be 

suspended for a period of six months and that all contract markets be ordered to 

deny all trading privileges to respondent for a period of six months. No 

exceptions to the hearing examiner's report were filed. 

FINDINGS OF FACT

1. Respondent, Khalil Haddad, an individual whose place of business is 228 

North La Salle Street, Chicago, Illinois, is now and was at all times material 

herein a floor broker registered under the act. The respondent was at all times 

material herein a member of the Chicago Merchantile Exchange, and an agent or 
Page 2 

employee of a firm which is now, and was at all times material herein, a futures 

commission merchant registered under the act and a clearing member of the 

Chicago Mercantile Exchange. 

2. The Chicago Mercantile Exchange is now and was at all times material 

herein a board of trade duly designated as a contract market under the act. 

3. At all times material herein, respondent was authorized to solicit or 

accept commodity futures orders for and in the name of his employer, and was 

engaged in executing orders on the Chicago Mercantile Exchange on behalf of such 

employer and its customers. Respondent also performed clerical duties in 

connection with the maintenance of records for his employer pertaining to 

commodity futures transactions on the Chicago Mercantile Exchange and on other 

contract markets. In addition to respondents duties for his employer, 

respondent traded in commodity futures in his personal account which was carried 

with the customers' accounts of his employer. 

4. The futures transactions referred to herein relate to the 

January 1962 frozen whole egg future and the September 1962 shell egg future on 

the Chicago Mercantile Exchange. Such future contracts could have been used for 

(a) hedging transactions in interstate commerce in eggs or the products or 

byproducts thereof, (b) determining the price basis of transactions in 

interstate commerce in eggs, and (c) delivering eggs sold, shipped, or received 

in interstate commerce for the fulfillment of such futures contracts. 

5. On December 4, 1961, respondent caused two contracts of January 1962 

frozen whole egg futures to be sold on the Chicago Mercantile Exchange and 

cleared by respondent's employer in its customers' account, but, in accordance 

with respondent's instructions to the bookkeeper of respondent's employer who 

recorded such transactions, the transactions were not allocated to any specific 

account. 

6. On December 20, 1961, respondent sold two contracts of January 1962 frozen 

whole egg futures and caused two additional contracts of January 1962 frozen 

whole egg futures and one contract of September 1962 shell egg futures to be 

sold on the Chicago Mercantile Exchange. Respondent caused all such contracts 

to be cleared by his employer in its customers' account, but, in accordance with 

respondent's instructions to the bookkeeper of respondent's employer who 

recorded such transactions, the transactions were not allocated to any specific 

account. 

7. On Thursday, January 11, 1962, an accountant from the Chicago office of 

the Commodity Exchange Authority visited the offices of respondent's employer to 

audit records of the firm. The bookkeeper referred to in Findings of Fact 5 and 

6 above there upon asked respondent to give him the names of the persons for 

whom the sales referred to in Findings of Fact 5 and 6 above were made. 

Respondent instructed the bookkeeper to allocate the transactions to the 

accounts of six persons whose accounts with respondent's employer were handled 

by respondent. Pursuant to these instructions, the bookkeeper recorded the 

transactions in such accounts. The persons in whose accounts the contracts were 

placed had not authorized such transactions and had no knowledge of such 

transactions or of the bookkeeping entries made with respect to such 

transactions. At the time respondent gave the bookkeeper the instructions to 

place the transactions in the specified accounts, substantial losses had accrued 

with respect to each of the transactions. 

8. The bookkeeper referred to in Findings of Fact 5 through 7 above insisted 

that the matters referred to in such findings be brought to the attention of the 

office manager of respondent's employer, and at a meeting held after the close 

of the market January 11, 1962, the office manager ordered that the transactions 

be liquidated an the following day. 
Page 3 

9. Pursuant to the instructions of the office manager of respondent's 

employer, the futures transactions referred to in Findings of Fact 5 through 7 

were liquidated January 12, 1962, at substantial losses. The liquidating 

transactions and losses were entered in the ledger accounts of the persons 

referred to in Finding of Fact 7 above in whose accounts the initial 

transactions had been placed. However, no statements were sent to such persons 

notifying them of such losses. 

10. On Sunday, January 14, 1962, all the facts relating to the foregoing 

matters were brought to the attention of the president of respondent's employer, 

and the president of the firm determined that the futures transactions should be 

removed from the customers' accounts and that the losses should be charged to 

respondent's personal account. Pursuant to such determination, bookkeeping 

entries were made removing the transactions and losses from the customers' 

accounts and placing the transactions and losses in respondent's account. 

CONCLUSIONS

Respondent has not answered the complaint. Under the rules of practice, his 

failure to do so constitutes an admission of all the material allegations 

therein and such allegations have been adopted as the Findings of Fact of this 

Decision and Order. By reason of the facts set forth therein, respondent 

willfully violated section 4b(A) of the act (7 U.S.C. 6b(A)). In view of the 

flagrant nature of the violation, it is concluded that respondent should be 

denied all trading privileges on contract markets for a period of six months and 

that the registration of respondent as a floor broker under the act should be 

suspended for the same period, as recommended by complainant. 

ORDER

Effective March 18, 1963, the registration of the respondent, Khalil Haddad, 

as a floor broker under the Commodity Exchange Act is suspended for a period of 

six months, and all contract 

markets shall refuse all trading privileges to the respondent for a period of 

six months, such refusal to apply to all trading done and positions held by the 

respondent, directly or indirectly. 

A copy hereof shall be served upon the respondent and upon each contract 

market. 

LOAD-DATE: June 8, 2008 
Page 4