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Commodity Futures Trading Commission 

CEA CASES 

NAME: CARGILL, INCORPORATED V. THE BOARD OF TRADE OF THE CITY OF CHICAGO 

DOCKET NUMBER: 6 

DATE: FEBRUARY 24, 1938 

DOCUMENT TYPE: ORDER 

UNITED STATES OF AMERICA 

BEFORE THE SECRETARY OF AGRICULTURE, THE 

SECRETARY OF COMMERCE, AND THE ATTORNEY 

GENERAL SITTING AS A COMMISSION PURSUANT 

TO SECTION 6(a) OF THE COMMODITY EXCHANGE ACT 

COMMODITY EXCHANGE ADMINISTRATION DOCKET # 6. 

In Re Cargill, Incorporated Complainant v. The Board of Trade of the City of 

Chicago Respondent. 

ORDER AND NOTICE OF HEARING 

A complaint under the Commodity Exchange Act (U.S.C.,1934 ed., title 7, secs. 

1-17; and U.S.C., 1934 ed., Supp. II, title 7, secs. 1-17a), (copy of which is 

attached hereto as Exhibit "A" incorporated in and made a part [ILLEGIBLE TEXT] 

having been filed with the Secretary of Agriculture on February 10, 1938, by 

Cargill, Incorporated, in which it is alleged that the Board of Trade of the 

City of Chicago, a contract market designated by the Secretary of Agriculture 

under the provisions of the Commodity Exchange Act, did violate said act by 

allowing persons desiring to make delivery of a commodity on a contract of sale 

of such commodity for future delivery, to do so without giving written notice of 

the date of delivery to the person obligated under the contract to accept 

delivery at least one business day prior to such date of delivery, and further 

by not providing for the prevention of manipulation of prices and, in fact, 

permitting its business conduct committee to aid and abet manipulation of 

prices; and 

It having been determined that a hearing should be held before the commission 

designated by the Commodity Exchange Act, composed of the Secretary of 

Agriculture, the Secretary of Commerce and the Attorney General, as authorized 

by Section 6(a) of said act, for the purpose of determining whether the Board of 

Trade of the City of Chicago has violated the provisions of said act in the 

manner and form as alleged and to the end that appropriate action may be taken 

pursuant to the said act. 

IT IS THEREFORE ORDERED that a hearing before this commission be held at 10 

a.m., eastern standard time, on the 18th day of April, 1938, at Room 202, 

Administration Building, Department of Agriculture, Washington, D.C., or at such 

other time or place as may be designated by the Secretary of Agriculture, as 

chairman of the commission, at which time and place the Board of Trade of the 

City of Chicago, the respondent, and Cargill, Inc., the complainant, will have 

the right to appear and present such evidence with respect to the matters and 

things set forth herein as may be relevant and material. 

IT IS FURTHER ORDERED that the Board of Trade of the City of Chicago, the 

respondent, may file with the Secretary of Agriculture, the chairman of this 

commission, within ten days after the receipt of the complaint, an answer in 

quadruplicate fully and completely stating the nature of the defense and 
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admitting or denying specifically in detail each material and relevant 

allegation of the complaint. 

IT IS FURTHER ORDERED, that a copy of this notice and order be served 

personally or by registered mail on the Board of Trade of the City of Chicago 

and Cargill, Incorporated, by serving copies 

hereof as hereinbefore directed upon one of the officers of each of said 

corporations. 

IN WITNESS WHEREOF, the Acting Secretary of Agriculture, as acting chairman 

of the commission de signated by the Commodity Exchange Act, has hereunto set 

his hand in the city of Washington, District of Columbia, this 24th day of 

February, 1938. 

/s/ M. L. WILSON 

Acting Secretary of Agriculture 

Acting Chairman of Commodity Exchange Commission. 

COPY 

Exhibit "A" 

2-10-38 

TO THE HONORABLE, THE SECRETARY OF AGRICULTURE, 

Washington, D. C. 

Sir: 

Cargill, Incorporated, complains to the Honorable, the Secretary of 

Agriculture, and presents to him, as a basis for such complaint, a statement of 

facts as follows: 

1. The Board of Trade of the City of Chicago is a corporation organized by 

special legislative enactment of the State of Illinois, and is a "contract 

market," designated as such by the Secretary of Agriculture under the provisions 

of the federal Commodity Exchange Act, being the Act of Congress of September 

21, 1922, as amended by the Act of June 15, 1936. 

2. Cargill, Incorporated, is a Delaware corporation, having an office and 

place of business in the Chamber of Commerce Building, Minneapolis, Minnesota. 

Cargill Grain Company, a Minnesota corporation, was one of the predecessors in 

interest to Cargill, Incorporated, and Cargill Grain Company of Illinois, an 

Illinois corporation, is presently the wholly owned subsidiary of Cargill, 

Incorporated. Cargill, Incorporated, is engaged in the cash grain business as 

was Cargill Grain Company, and as is Cargill Grain Company of Illinois, and in 

this connection these companies used and use the facilities of and were and are 

affected by operations on the Board of Trade of the City of Chicago. Cargill, 

Incorporated, herein complains of violations by the Board of Trade of the City 

of Chicago of certain provisions of the Commodity Exchange Act from which 

Cargill, Incorporated, Cargill Grain Company and Cargill Grain Company of 

Illinois, or some one or more of them, suffered injury. 

3. Section 5a of the Commodity Exchange Act provides in part as follows: 

"Each contract market shall - * * * * 

"(5) require the party making delivery of any commodity on any contract of 

sale of such commodity for future delivery to furnish the party obligated under 

the contract to accept delivery, written notice of the date of delivery at least 

one business day prior to such date of delivery. --" 
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4. Section 5b of the Commodity Exchange Act provides as follows: 

"The failure or refusal of any board of trade to comply with any of the 

provisions of this Act, or any of the rules and regulations of the Secretary of 

Agriculture thereunder, shall be cause for suspending for a period not to exceed 

six months or revoking the designation of such board of trade as a 'contract 

market' in accordance with the procedure and subject to the judicial review 

provided in paragraph (a) of section 6 of this Act." 

5. Section 6b of the Commodity Exchange Act provides as follows: 

"If any board of trade, or any director, officer, agent, or employee of any 

board of trade is violating or has violated any of the provisions of this Act or 

any of the rules or regulations of the Secretary of Agriculture thereunder, or 

any order issued by the commission pursuant to any provision of this Act, the 

commission, in lieu of revoking the designation of such board of trade as a 

'contract market' may, upon notice and hearing and subject to appeal as in other 

cases provided for in paragraph (a) of section 6 of this Act, make and enter an 

order directing that such board of trade, director, officer, agent, or employee 

shall cease and desist from such violation or violations, and if such board of 

trade, director, officer, agent, or employee, thereafter and after the lapse of 

the period allowed for appeal of such order or after the affirmance of such 

order, shall fail or refuse to obey or comply with such order, such board of 

trade, director, officer, agent, or employee shall be guilty of a misdemeanor 

and, upon conviction thereof, shall be fined not less than $ 500 nor more than $ 

10,000 or imprisoned for not less than six months nor more than one year, or 

both. Each day during which such failure or 

refusal to obey such order continues shall be deemed a separate offense." 

6. On September 29, 1936, at about 11:30 A. M. Central Daylight Saving Time, 

Cargill Grain Company received the following communication from the Secretary of 

the Board of Trade of the City of Chicago: 

"September 29, 1936 

TO MEMBERS: 

"At a special meeting of the Board of Directors held today, the following 

resolution was adopted: 

"Acting under the provisions of Rules 251 and 287, the Directors hereby 

declare that notices of intention to deliver may be delivered to the Clearing 

House continuously on Tuesday, September 29, 1936 up to 8 o'clock P. M. and that 

payment shall be made on such deliveries prior to 2 o'clock P. M. on Wednesday, 

September 30, 1936. 

"Such notices may consist of statement of intention to deliver and the 

customary documents shall be made available to the buyer at the time payment is 

made. 

Yours very truly, 

Fred H. Clutton, 

Secretary." 

7. The action taken by the Board of Directors of the Board of Trade of the 

City of Chicago, as evidenced by this communication from its Secretary, was in 

reckless disregard and in clear violation of Section 5a (5) of the Commodity 

Exchange Act above quoted, in that under such action of said Board of Directors 

persons desiring to make delivery of a commodity on a contract of sale on the 

Board of Trade of the City of Chicago were permitted to do so without giving 

written notice of the 
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date of delivery at least one business day prior to such date of delivery as 

required by Section 5a (5) of the Commodity Exchange Act. 

8. Cargill Grain Company promptly objected to said proposed action by the 

Board of Trade of the City of Chicago, and such protest was delivered to the 

Board of Trade of the City of Chicago in time so that its Board of Directors 

could have recalled their improper and illegal action. The following telegram 

from Cargill Grain Company was delivered to the Secretary of the Board of Trade 

of the City of Chicago on September 29, 1936 at about 12:30 o'clock P. M. 

Central Daylight Saving Time: 

"Minneapolis, Minn. 

Sept. 29, 1936. 

"Fred H. Clutton, 

Secretary, Board of Trade, 

Chicago. 

"We are just advised of the action of the Board of Directors in deferring 

requirements for notices of intention to deliver until eight o'clock this 

evening. 

"We invite your attention to Section 5A5 of the Commodity Exchange Act 

requiring that notice of delivery must be given at least one business day prior 

to the date of such delivery. Please accept this as notice on our part that we 

do not intend to waive any legal rights we may have under this statute. 

CARGILL GRAIN COMPANY 

By John H. MacMillan Jr. 

Vice President and General Manager" 

9. Further, on September 29, 1936, a communication was addressed by Messrs. 

Junell, Driscoll, Fletcher, Dorsey & Barker, of Minneapolis, attorneys for 

Cargill Grain Company, to the Secretary of the Board of Trade of the City of 

Chicago, stating 

unequivocally that in t heir opinion the contemplated action of the Board of 

Trade of t he City of Chicago was in violation of the Commodity Exchange Act. A 

copy of said letter is attached to this petition as "Exhibit A" thereto and by 

this reference made a part hereof. 

10. Cargill Grain Company did not complain to the Commodity Exchange 

Commission of violations of the Commodity Exchange Act by the Board of Trade of 

the City of Chicago in 1936, hereinbefore and hereinafter set forth, because it 

was assured that such violations would not be repeated. However, in connection 

with deliveries on September, 1937 futures contracts, violations of the 

Commodity Exchange Act were continued. 

11. In addition to the aforesaid violation of Section 5a(5) of the Commodity 

Exchange Act by the Board of Trade of the City of Chicago in 1936, both in 1936 

and as recently as in September of 1937 the governing board thereof, being the 

Board of Directors, did not provide for the prevention of manipulation of prices 

but, to the contrary, permitted the so-called Business Conduct Committee of the 

Board of Trade of the City of Chicago to aid and abet manipulation of prices 

downward. Said Business Conduct Committee issued orders, made known to short 

sellers, upon holders of futures contracts for purchase of corn for September 

1937 delivery to dispose of their commitments without any equivalent orders to 

holders of futures contracts for sale of corn for September delivery either to 

buy in their contracts or to refrain from further extending their short 

position. The same unauthorized demands made upon holders of futures contracts 
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in 1937 were also made in 1936 by the Business Conduct Committee of the Board of 

Trade of the City of Chicago to holders of futures contracts for purchase of 

wheat and corn for December delivery. These several actions constituted 

downward market manipulation by said Business Conduct Committee which was 

permitted by the governing body (Board of Directors) of the Board of Trade of 

the City of Chicago in direct violation of the Commodity Exchange Act, and 

particularly Section 5d thereof. 

12. These repeated violations of the Commodity Exchange Act by the Board of 

Trade of the City of Chicago not only seriously injured and if not terminated 

will continue seriously to injure Cargill, Incorporated, but also are inimical 

to the best interests of the producers of grain, the grain trade and the public 

at large. The manipulation of prices for futures contracts downward with the 

resultant depressant effect on the price of cash commodities is injurious to the 

farmer. Violations of the provisions of law as to notice of delivery are 

injurious to the grain trade and members of the public who deal in futures 

contracts. Last minute decisions to deviate from the requirements of law as to 

time of notice of delivery benefit only those in control of the decision who 

themselves operate in the market, the public at large having no sufficient 

advance information to take advantage of such "emergency" relaxations. Such 

maneuvering causes grave uncertainty as to the sanctity of futures contracts and 

the general integrity of those who operate upon or through the Board of Trade of 

the City of Chicago and will 

inevitably lead to public suspicion of all grain merchants. 

13. Cargill, Incorporated, has been informed through various governing bodies 

of the Board of Trade of the City of Chicago and believes that the Board of 

Trade of the City of Chicago will in the future under the guise of alleged 

"emergencies" continue from time to time the aforesaid violations of the 

Commodity Exchange Act. Such violations are presently threatened and imminent 

in connection with futures contracts now being traded in on the Board of Trade 

of the City of Chicago and will work great injury to Cargill, Incorporated, and 

the public generally unless forthwith restrained. 

In view of the foregoing, Cargill, Incorporated, respectfully requests that 

the Commission under the Commodity Exchange Act, consisting of the Secretary of 

Agriculture, the Secretary of Commerce, and the Attorney General, be convened to 

give consideration to the matters here involved; that proper notice of the 

sitting of said Commission be given to the proper officers of the Board of Trade 

of the City of Chicago, to-wit: 

Kenneth S. Templeton, President, and Fred H. Clutton, Secretary, 

both of the City of Chicago, Illinois, with offices in the Board of Trade 

Building, and that such notice be also given to all present directors of the 

Board of Trade of the City of Chicago, to-wit: 

Kenneth S. Templeton, 

Barnett Faroll, 

Orrin S. Dowse, 

Charles V. Essroger, 

Richard I. Mansfield, 

James A. Prindiville, 

Winthrop H. Smith, 

George H. Tanner, 

James E. Bennett, 

John E. Brennan, 
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Philip R. O'Brien, 

Harry C. Schaack, 

John G. McCarthy, 

Harvey S. Austrian, 

John J. Coffman, 

Edwin J. Kuh, Jr. 

George E. Booth, 

 

and to all present members and acting substitutes of the Business Conduct 

Committee of the Board of Trade of the City of Chicago, to-wit: 

Kenneth S. Templeton, 

W. H. Smith, 

R. F. Uhlmann, 

M. R. Glaser, 

T. Rodman, 

that upon and after such notice and hearing before said Commission, the 

Commission in its discretion shall either (a) enter an order revoking the 

designation of the Board of Trade of the City of Chicago as a "contract market", 

(b) enter an order suspending such designation for a period not to exceed six 

months, or (c) enter an order directing that the Board of Trade of the City of 

Chicago, and such officers, directors and agents above designated, shall cease 

and desist from the violations hereinabove mentioned. 

CARGILL, INCORPORATED 

By (s) E. J. Grimes 

Its (s) Vice-Pres't. 

EXHIBIT A 

September 29, 1936 

Mr. Fred H. Clutton, Secretary 

Board of Trade of the 

City of Chicago 

Chicago, Illinois 

Dear Sir: 

We are attorneys for Cargill Grain Company. We are informed that at a 

special meeting of the Board of Directors of the Board of Trade of the City of 

Chicago, held this morning, the following resolution was adopted: 

Acting under the provisions of Rules 251 and 287 the Directors hereby declare 

that notices of intention to deliver may be delivered to the Clearing House 

continuously on Tuesday, September 29, 1936, up to 8 o'clock P.M. and that 

payment shall be made on such deliveries prior to 2 o'clock P.M. on Wednesday, 

September 30, 1936. Such notices may consist of statement of intention to 

deliver and the customary documents shall be made available to the buyer at the 

time payment is made. 

Our client informs us that it had open contracts in September grain futures 

in substantial amounts on the Board of Trade of the City of Chicago. We are 

also informed that this resolution purports to apply to these transactions. 
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We have considered this matter and have advised our client that this 

resolution is invalid for the reason that it is contrary to the provisions of 

the Commodity Exchange Act and is also not within the scope of the powers of the 

Board of Trade under its own applicable rules and regulations. It is further 

our opinion that no emergency [ILLEGIBLE TEXT] itself is not equitable, and that 

it is [ILLEGIBLE TEXT] within the powers of the Board of Directors to pass 

resolutions such as this applicable in substance only to one situation. 

By reason of the foregoing, we have advised our client that they have the 

alternative of refusing to accept deliveries tendered after notices of intention 

based upon the above resolution, or to make payments therefor under protest and 

to sell the grain so received for the account of whosoever may be interested 

therein and to charge any loss arising therefrom accordingly. 

/s/ Very truly yours, 

JUNELL, DRISCOLL, FLETCHER, DORSEY & 

BARKER 

by James E. Dorsey 

Registered Mail and Special Delivery 

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