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Commodity Futures Trading Commission 

CEA CASES 

NAME: FOX DELUXE FOODS, INC., ROLAND N. GERGEN, HAROLD W. FOX, AND BERT E. FOX 

DOCKET NUMBER: 74 

DATE: JULY 23, 1956 

DOCUMENT TYPE: COMPLAINT 

UNITED STATES DEPARTMENT OF AGRICULTURE 

BEFORE THE SECRETARY OF AGRICULTURE 

In re: Fox DeLuxe Foods, Inc., Roland N. Gergen, Harold W. Fox, and Bert E. Fox, 

Respondents 

CEA Docket No. 74 

Complaint and Notice of Hearing Under Section 6 (b) of the Commodity Exchange 

Act 

There is reason to believe that the respondents, Fox DeLuxe Foods, Inc., 

Roland N. Gergen, Harold W. Fox, and Bert E. Fox, attempted to manipulate and 

did manipulate the price of a commodity in interstate commerce and for future 

delivery on or subject to the rules of a board of trade, in violation of the 

Commodity Exchange Act (7 U.S.C. 1952 ed. §§ 9, 13), and in accordance with the 

provisions of section 6 (b) of the said act (7 U.S.C. 1952 ed. § 9) this 

complaint and notice of hearing is issued stating the charges in that respect as 

follows: 

I 

Respondent Fox DeLuxe Foods, Inc., an Illinois corporation with offices and a 

place of business at 1122 Fulton Street, Chicago 7, Illinois, hereinafter called 

Fox DeLuxe, is now and has been at all 

times material to this complaint a wholesale egg and poultry dealer, a clearing 

member of the Chicago Mercantile Exchange, and a registered futures commission 

merchant under the Commodity Exchange Act. At all such times the said 

corporation traded in egg futures on the said Exchange for the accounts of 

customers and also for its own or house account. 

II 

Respondent Roland N. Gergen, an individual whose, address is 1122 Fulton 

Street, Chicago 7, Illinois, was the secretary of the respondent corporation at 

all times during December 1953, and the executive vice president of the 

respondent corporation at all times during January 1956. 

III 

Respondent Harold W. Fox, an individual whose address is 7318 Ridge Avenue, 

Chicago, Illinois, was an agent and employee of the respondent corporation at 

all times during December 1953, and a vice president of the respondent 

corporation at all times during January 1955. The said Harold W. Fox is now and 

was at all times material herein a member of the Chicago Mercantile Exchange and 

a registered floor broker under the Commodity Exchange Act. 

IV 
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Respondent Bert E. Fox, an individual whose address is 1122 Fulton Street, 

Chicago 7, Illinois, was at all times material to this complaint a vice 

president of respondent Fox DeLuxe and a member of the Chicago Mercantile 

Exchange. The said Bert E. Fox was registered as a floor broker under the 

Commodity Exchange Act during January 1956 and is now so registered. 

V 

The transactions hereinafter described were carried out under the direction 

and supervision and by means of the acts of the said individual respondents in 

their capacities as officers, agents, or employees of the respondent 

corporation. 

VI 

The Chicago Mercantile Exchange is now and has been at all times material to 

this complaint a duly designated contract market for trading in eggs under the 

Commodity Exchange Act. 

December 1953 Transactions 

VII 

Between November 30, 1953, and December 23, 1953, respondent Fox DeLuxe, in 

its capacity as a registered futures commission merchant, carried commodity 

futures trading accounts for 32 customers 

who had open contract positions in the December 1953 egg future on the Chicago 

Mercantile Exchange. At the close of business November 30, 1953, the respondent 

corporation had 13 customers who held long open contract positions in such 

future in the aggregate amount of 77 contracts or carlots. During the next few 

trading days, the great majority of such customers sold December 1953 egg 

futures and liquidated or reduced their long positions, and by the close of 

business December 8, 1953, such long positions had declined to a total of 22 

carlots held by five customers. On the short side of the December 1953 egg 

future, the respondent corporation had, at the close of business November 30, 

1953, six customers who held a total of 63 carlots. During the next few trading 

days, this short position remained substantially unchanged, and at the close of 

business December 8, 1953, stood at 60 carlots held by five customers. During 

the said period, respondent Fox DeLuxe did not hold any position in such future 

for its house account. 

VIII 

Beginning on or about December 9 and continuing thereafter until shortly 

before December 23, 1953, a substantial majority of the customers of respondent 

Fox DeLuxe who had theretofore been selling 

December 1953 egg futures and liquidating or reducing their positions, as 

described in paragraph VII, reversed their operations and purchased substantial 

quantities of such future through the said firm, reestablishing and increasing 

their long positions. On December 9, 1953, all short positions of customers in 

the December 1953 egg future on the books of respondent Fox DeLuxe were closed 

out by purchases of futures, and purchases for such customers continued during 

that day and the next few trading days until long positions in the December 1953 

egg future had been established for the accounts of all such customers. After 

December 8, 1953, neither respondent Fox DeLuxe nor any of its customers held a 

short position in the December 1953 egg future. As the final day for trading in 

the December 1953 egg future approached, other traders who had not theretofore 

held any position in such future through respondent Fox DeLuxe during December 

1953 purchased substantial quantities of such future and established long 

positions through the said firm. 

IX 
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On December 10, 1953, respondent Fox DeLuxe entered the December 1953 egg 

futures market with a purchase of 25 carlots for its house account and made 

additional purchases thereafter, reaching a maximum long position of 46 carlots 

shortly prior to the termination of 

trading in such future. As a result of such purchases and of the purchases for 

customers' accounts described in paragraph VIII, the long open contract position 

of respondent Fox DeLuxe in the December 1953 egg future for itself and its 

customers increased from 22 carlots on December 8, 1953 to 225 carlots on 

December 21, 1953, or from 2.4 percent to 43.7 percent of the open interest in 

such future. At the close of business on December 22, 1953, the long open 

contract position of respondent Fox DeLuxe for itself and its customers was 198 

carlots or 53.7 percent of the open interest. At the close of business December 

23, 1953, the final day for trading in the December 1953 egg future, respondent 

Fox DeLuxe held a total of 96 long carlots of such future in its house account 

and three other accounts which were carried on its books in the names of Earl 

Barnes, Charles Burbulis, and J. A. Roeser, and such 96 long contracts 

constituted the entire remaining open interest in such future. 

X 

On December 8, 1953, there was a total of approximately 42 carlots of shell 

eggs stored in Chicago warehouses, and by December 23, 1953, the final day for 

trading in the December egg future, this total had declined to approximately 25 

carlots. During the four days prior thereto, the quantity of the December 

future held by respondent Fox DeLuxe for 

its house account was approximately twice as large as total stocks of shell eggs 

in Chicago warehouses, and the quantity of such future held by the said 

respondent and its customers during these four days was from seven to nine times 

as large as such total stocks. 

XI 

On December 17, 1953, respondent Fox DeLuxe purchased 52 carlots of the 

December 1953 egg future in blocks or groups which it then distributed among its 

house account and the Earl Barnes, Charles Burbulis, and J. A. Roeser accounts, 

previously described. On December 23, 1953, respondent Fox DeLuxe sold 36 

carlots of such future in the same manner and distributed them among the same 

accounts. 

XII 

Cash eggs are bought and sold on the "spot call" or "spot board" of the 

Chicago Mercantile Exchange, and the prices paid in such transactions are 

publicly posted by the said Exchange and disseminated to the trade. The prices 

of cash eggs bought and sold by private negotiation are not so posted or 

disseminated. On December 21, 22, and 23, the last three days of trading in the 

December 1953 egg future, respondent Fox DeLuxe traded actively on the spot call 

of the Chicago Mercantile Exchange, purchased substantially all the fresh cash 

eggs of deliverable grade and quality offered on the spot call, posted bids on 

the spot board for additional fresh eggs of such grade and quality, and 

immediately resold such eggs by private negotiation at prices from one to three 

cents per dozen less than cost plus expenses of resale. 

XIII 

During the trading session on December 23, 1953, all accounts on the books of 

respondent Fox DeLuxe other than its house account and the aforementioned Earl 

Barnes, Charles Burbulis, and J. A. Roeser accounts were closed out of their 
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long positions in the December 1953 egg future by sales of such future, and 

after the termination of trading on that day the long open contract position of 

the respondent corporation in such future was 96 contracts or carlots, held for 

its house account and the three accounts above described. Thereafter, the said 

96 contracts were settled by the delivery of cash eggs. Forty-nine of such 

ninety-six contracts were settled by the delivery of eggs which had been 

previously delivered to and received by respondent Fox DeLuxe and then sold by 

the said respondent to the holders of short contracts who required eggs for 

delivery purposes. In effecting such sales, respondent Fox DeLuxe demanded and 

received a uniform fixed price which was in excess of prevailing prices of cash 

refrigerator eggs of comparable grade and quality. Cut of a total of 48 carlots 

of cash eggs delivered on a 

final receiver basis to satisfy December futures contracts, respondent Fox 

DeLuxe received 47 carlots. On December 31, 1953, respondent Fox DeLuxe held a 

total of 36 carlots of eggs in Chicago warehouses, and these stocks constituted 

the entire supply of deliverable eggs in Chicago warehouses on that date. 

January 1956 Transactions 

XIV 

During January 1956, respondent Fox DeLuxe, in its capacity as a registered 

futures commission merchant, carried commodity futures trading accounts for 

approximately 115 customers who traded in the January 1956 egg future through 

the respondent corporation. During this period, respondent Fox DeLuxe also 

traded in such future for its own or house account, and for the accounts of 

approximately 11 officers or shareholders of the respondent corporation and 

members of their families, hereinafter called affiliates or affiliated accounts. 

XV 

Prior to December 30, 1955, respondent Fox DeLuxe purchased substantial 

quantities of January 1956 egg futures on the Chicago Mercantile' Exchange on 

behalf of its customers, and at the close of business December 30, 1955, the 

respondent corporation had a long open contract 

position in such future of approximately 469 contracts or carlots for the 

accounts of 65 customers, which position constituted over 28 percent of the open 

interest. During the same period, respondent Fox DeLuxe made large purchases of 

such future for its house account and for the affiliated accounts, and at the 

close of business December 30, 1955, such accounts had long open contract 

positions in the January 1956 egg future in the aggregate amount of 124 carlots, 

constituting an additional 7.5 percent of the open interest and giving 

respondent Fox DeLuxe a total long open contract position for the accounts of 

itself, its affiliates, and its customers, of approximately 593 carlots or about 

36 percent of the open interest in such future. On the same date, the 

respondent corporation had a total short open contract position in such future 

of five carlots, held for the accounts of three customers and constituting about 

0.3 percent of the open interest. 

XVI 

During January 1956, respondent Fox DeLuxe continued to purchase January 1956 

egg futures for its house account and for the accounts of its affiliates and 

customers, and the aggregate long position of such accounts increased in 

quantity and represented a steadily increasing proportion of the open interest. 

As a result, the long open contract 

 
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position of respondent Fox DeLuxe in the January future for all accounts 

increased from the 593 carlots held on December 30, 1955 to 946 carlots on 

January 16, 1956, or from about 36 percent to about 63 percent of the open 

interest. During the last seven days of trading in the future - January 16 

through January 24 - the long open contract position of respondent Fox DeLuxe 

for the house account and the affiliated accounts ranged from about 10 percent 

to about 27 percent of the open interest, and during each of these seven days, 

the respondent corporation's long open contract position for all accounts 

exceeded 59 percent of the open interest. After the close of trading on January 

24, 1956, the final trading day, the said respondent held a long open contract 

position in the January 1956 egg future for the house and affiliated accounts of 

110 carlots and a long open contract position for customers' accounts of 290 

carlots, or a total long open contract position for all accounts of 400 carlots, 

which constituted about 99 percent of the remaining open interest of 405 

carlots. Luring January 1956, the respondent corporation had no short position 

in the January future for the house account or for any of the affiliated 

accounts, and its maximum aggregate snort position for customers' accounts 

during the month was 26 carlots or about two percent of the open interest, which 

position was held for the accounts of four customers on January 12, 1956. After 

the close of trading on January 24, 1956, the said respondent had a total snort 

open contract position for customers' accounts of one carlot. 

XVII 

On December 30, 1955, there was a total of approximately 98 carlots of shell 

eggs stored in Chicago warehouses, and this quantity declined steadily 

thereafter and reached a low point of 61 carlots on January 18, 1956. During 

the week of January 16, 1956, which was the week prior to the last two days of 

trading in the January 1956 egg future, the quantity of such future held by 

respondent Fox DeLuxe for the house and affiliated accounts was approximately 

two to three times as large as total stocks of shell eggs in Chicago warehouses, 

and the quantity of such future held by the said respondent for all accounts was 

approximately 10 to 15 times as large as such total stocks. 

XVIII 

Between December 30, 1955 and January 3, 1956, the price of fresh eggs in 

Chicago declined about three cents per dozen. On January 4, 1956, respondent 

Fox DeLuxe, acting through one Mark Stewart, a floor broker employed by the 

respondent corporation for that purpose, purchased a substantial quantity of 

fresh cash eggs on the spot board of the Chicago Mercantile Exchange, and 

immediately resold such eggs by private negotiation at prices which were less 

than cost plus expenses of resale. 

XIX 

After January 4, 1956, the price of fresh eggs in Chicago continued to 

decline, and by January 16, 1956, had decreased an additional ten cents per 

dozen. On or about January 18, 1956, respondent Roland N. Gergen, acting for 

respondent Fox DeLuxe, entered into an arrangement with one Isadore Katz, 

president of S. K. Produce Company, a firm engaged in the egg breaking business, 

whereby the said Isadore Katz agreed to purchase fresh eggs of deliverable grade 

and quality on the spot board of the Chicago Mercantile Exchange in the name of 

his firm, with a guarantee by respondent Fox DeLuxe that the said S. K. Produce 

Company would suffer no loss and would, in fact, realize a profit or fee of onehalf cent per dozen on all such purchases. Pursuant to such agreement, the said 

Isadore Katz purchased approximately 12,000 cases - the equivalent of 

approximately 24 carlots - of fresh eggs of deliverable grade and quality on the 

spot call of the Chicago Mercantile Exchange on January 19, January 20, and 

January 23, 1956, at prices in excess of their true market value, such purchases 

constituting all the fresh eggs of deliverable grade and quality sold on the 

said spot call of the Exchange during such period. Subsequent thereto, 
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respondent Fox DeLuxe, in accordance with the agreement described above, paid to 

the said S. K. Produce Company and the said S. K. Produce Company received and 

accepted from respondent Fox DeLuxe, the sum of $ 26,880. At the same time 

respondent Fox DeLuxe made entries in its books and records showing that the 

said corporation 

 

had purchased a quantity of liquid eggs from the said S. K. Produce Company and 

had paid the said sum of $ 26,880 in connection therewith, and the said S. K. 

Produce Company made corresponding entries in its books and records showing that 

the said firm had sold and delivered a quantity of liquid eggs to respondent Fox 

DeLuxe and had received the said sum in payment therefor. In truth and in fact, 

no such purchase and sale had taken place, and the said entries were false and 

were placed in the records in order to conceal the fact that the said payment of 

$ 26,880 was made to carry out the above-described agreement between respondent 

Fox DeLuxe and the said Isadore Katz. 

XX 

On December 30, 1955, the price of fresh eggs in Chicago was about eight 

cents per dozen higher than the price of the January 1956 egg future. This 

differential was gradually reduced during the first two weeks in January and on 

January 16, 1956, the future went to a premium in relation to the price of fresh 

eggs and remained at a premium until the termination of trading in the future on 

January 24, 1956. By reason thereof, the out-of-storage movement of shell eggs 

from Chicago warehouses, which had prevailed during most of January, was 

reversed due to the fact that large quantities of fresh eggs were diverted from 

normal channels of trade, shipped to Chicago, and placed in storage for delivery 

on the 

 

January 1956 future. As a result, respondent Fox DeLuxe was the final receiver 

of 441 carlots of cash eggs out of a total of 446 carlots delivered to settle 

January futures contracts. Out of the 441 carlots so received by respondent Fox 

DeLuxe, 389 carlots were fresh eggs. 

XXI 

The respondents carried out the acts described above for the purpose and with 

the intent of raising the prices of the December 1953 and January 1956 egg 

futures and of deliverable refrigerator eggs in Chicago by means of a squeeze, 

which was intended to be and was in fact brought about by concentrating in the 

hands of the respondent corporation, its affiliates, and its customers, a 

quantity of the current egg future sufficient to constitute the major portion of 

the open interest in such future and to exceed supplies of refrigerator eggs 

available for delivery in satisfaction thereof. The futures transactions for 

the house account in December 1953 and for the house and affiliated accounts in 

January 1956 were made by the respondents for that purpose and with that intent, 

with knowledge of the trading and positions of the firm's customers, and with 

the intent and expectation that such customers would be influenced by the 

respondents' example, suggestions, advice and recommendations, would rely upon 

the respondents' superior knowledge of trading techniques, and would follow the 

respondents' lead in the hope of profiting financially, and such customers were 

in fact so influenced and did in fact 

 

so rely upon the respondents' knowledge and follow the respondents' lead. The 

cash egg transactions described in paragraphs XII, XVIII, and XIX were entered 

into and carried out by the respondents, or caused by the respondents to be 

entered into and carried out, for the purpose and with the intent of aiding the 

squeeze by supporting the price of fresh eggs and thereby increasing or 

preventing a decrease in the price of the current future. The acts of the 
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respondents brought about a squeeze and caused the price of December 1953 and 

January 1956 egg futures on the Chicago Mercantile Exchange and the price of 

cash refrigerator eggs in Chicago to be at artificial and manipulated levels 

during December 1953 and January 1956. 

XXII 

By reason of the acts described above, the respondents attempted to 

manipulate and did in fact manipulate the price of eggs in interstate commerce 

and for future delivery on or subject to the rules of a board of trade, in 

wilful violation of sections 6 (b) and 9 of the Commodity Exchange Act (7 U.S.C. 

1952 ed. §§ 9, 13). 

Therefore, the said respondents, Fox DeLuxe Foods, Inc., Roland N. Gergen, 

Harold W. Fox, and Bert E. Fox, are hereby notified to be and 

 

appear at a hearing, to be held at 10:00 a.m., local time, on the 28th day of 

August 1956, in Room 1200, Board of Trade Building, 141 West Jackson Boulevard, 

Chicago, Illinois, before a referee designated to conduct such hearing, and then 

and there show cause, if any there be, why an order should not be made 

suspending or revoking the registration of respondent Fox DeLuxe Foods, Inc., as 

a futures commission merchant and the registrations of respondents Harold W. Fox 

and Bert E. Fox as floor brokers, and directing that all contract markets refuse 

all trading privileges to all the respondents for such period of time as may be 

determined. 

The respondents will have twenty (20) days after the receipt of this notice 

of hearing in which to file with the Hearing Clerk, United States Department of 

Agriculture, Washington 25, D. C., an answer with an original and six copies, 

fully and completely stating the nature of the defense and admitting or denying 

specifically and in detail each material and relevant allegation of this 

complaint. Allegations that are not answered will be deemed admitted for the 

purpose of this proceeding. 

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

respondents by delivery of a true copy thereof by an employee of the Department 

of Agriculture, or by registered mail, at least twenty (20) days prior to the 

date set for hearing. 

Done at Washington, D. C., this 

23 day of July, 1956. 

/s/ Earl L. Butz 

Earl L. Butz 

Assistant Secretary 

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