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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 

DOCKET NUMBER: 34 

DATE: SEPTEMBER 10, 1948 

DOCUMENT TYPE: REFEREE'S REPORT 

UNITED STATES DEPARTMENT OF AGRICULTURE 

BEFORE THE SECRETARY OF AGRICULTURE 

In re General Foods Corporation et al., Respondents 

CEA Docket No. 34 

Referee's Report 

Preliminary Statement 

1. 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), now the Production and Marketing Administration, 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 manipulated and cornered rye and rye futures in 

Chicago, and that General Foods Corporation had exceeded the trading limits in 

rye futures. 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. 

2. All of 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. 

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

Charles W. Buoy, 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. 
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4. 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. 

5. The transcript contains 1,585 pages, and 93 exhibits were introduced, many 

of which contain a number of pages. The exhibits and testimony are so 

voluminous that no attempt is made to summarize them So many points, minor as 

well as major, were contested that even a listing of them all would tend to 

obscure the material issues. The entire record has been considered, including 

the various contentions, exceptions, motions, requests, and arguments of the 

parties on each point raised. Some of these are specifically mentioned below in 

the Conclusion. Failure to mention the others does not mean that they have not 

been considered nor that they are still pending, and the issuance of this order 

may be considered as denying or overruling every recorded request or contention 

inconsistent with such issuance. 

6. 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 

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. His denial was proper, 

as the government had presented a prima facie case against each respondent. 

7. 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, which is here approved, 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, 

nor does it appear that the referee abused his discretion in excluding them from 

the record. 

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

and briefs, and all did so, respondents recommending dismissal and the 
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government recommending an order against all respondents. In the various 

pleadings and briefs filed, the matters in issue are discussed at considerable 

length. 

9. The record supports the findings set out below. Many other findings could 

be made on various contentions raised by the parties but which we deem 

immaterial, and such other findings being unnecessary, they are not made. For 

convenient reference, consecutive numbers have been given to the paragraphs of 

this order instead of to the Findings of Fact only. 

Proposed Findings of Fact 

10. 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. 

11. 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 

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. 

12. 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. 

13. 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. 

14. 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. 

15. 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. 

16. In December 1942 and January 1943 General Foods bought 1,065,000 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. 

17. 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 
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Trade. It held the rye in Chicago, and on May 29, 1943, its 2,960,000 bushels 

constituted approximately 52 percent of the total of 5,697,985 bushels of 

deliverable rye then in Chicago. 

18. 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 its 5,000,000 

bushels constituted about 69 percent of the 7,274,202 bushels of deliverable rye 

in Chicago. 

19. 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. 

20. From April 24 to December 25, 1943, the deliverable supply of rye in 

Chicago rose from 3,273,726 to 9,495,003 bushels, an increase of 6,221,277 

bushels. During this period General Foods took delivery and held 8,690,000 

bushels, or more than the increase in the deliverable supply. 

21. 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 

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. 

22. 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 in 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." 

23. In December 1943 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. 

24. On March 21, 1944, Rice and Company wrote 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." 

25. 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 
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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, 

respondents kept their rye from becoming available to others for delivery on 

Chicago rye futures. 

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

May 1944 rye futures. On November 29 he switched from this short position 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. 

27. 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. 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. 

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

or directed the trading of 23 customers of Rice end Company in rye on the 

Chicago and Winnipeg markets. Those are called Schedule A customers, as they 

were listed in Schedule A attached to the complaint. 

29. 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 hold 700,000 out of 805,000 bushels received on delivery. 

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

F. Rice and Lawrence J. Ryan, switched 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. 

31. 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. 

32. 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. 

33. In May 1944 Lawrence J. Ryan took delivery of 120,000 bushels 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. 

34. On December 31, 1943, Rice, Schedule A customers, and Ryan held 974,984 

bushels of deliverable rye in Chicago. When added to the 7,230,000 bushels held 

by General Foods, this constituted over 86 percent of the deliverable rye in 

Chicago (Paragraph 19). 
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35. 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, on January 4, 

1944, O'Brien 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. 

36. 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. Of the 

four accounts, 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, and on April 26 this 

long position was increased to 125,000 bushels. These accounts held 50,000 

bushels of deliverable rye in Chicago from January 26 to May 13, 1944. Metcalf 

failed to file some of the reports required under the Commodity Exchange Act in 

connection with these holdings. 

37. 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. 

38. From December 31, 1943, through April 29, 1944, the volume of deliverable 

rye in Chicago and Chicago May 1944 rye futures contracts held by Rice, Schedule 

A customers, Ryan, O'Brien, and General Foods exceeded the total volume of 

deliverable rye in Chicago. 

39. On April 29, 1944, the respondents mentioned in Paragraph 38 held 

13,897,755 bushels of deliverable rye in Chicago and Chicago May 1944 rye 

futures. There were then 12,766,950 bushels of rye of all grades in Chicago, of 

which 12,390,660 bushels were deliverable on Chicago futures contracts. 

40. 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 rye and other grain 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. 

41. 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 (Paragraphs 27, 29, 

31, and 33). 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 withhold to prevent its being used for 

delivery on Chicago May 1944 rye futures contracts. 

42. 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. 
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43. Between December 1, 1942, and May 5, 1944, the price of rye futures on 

the Chicago Board of Trade rose from $ .64-1/4 to $ 1.32-5/8 per bushel. This 

price increase was accompanied by: (1) an increase in the deliverable supply of 

rye in Chicago from 3,273,726 bushels on April 24, 1943, to 12,521,062 bushels 

on May 6, 1944; (2) an increase in the rye of all grades in storage and afloat 

at Chicago from 5,015,063 bushels on April 24, 1943, to 13,056,025 bushels on 

May 6, 1944; and (3) an increase in the visible supply of rye from 21,929,000 

bushels on October 2, 1943, to 23,065,000 bushels on May 6, 1944. 

44. The price per bushel of the Chicago May 1944 rye future reached a high 

for the month of May 1944 of $ 1.32-5/8 on May 5. It then began 

 

to drop, and reached a low for the month of $ 1.11 on May 22, the last day of 

trading in the future. 

45. The drop in price mentioned in Paragraph 44 was accompanied by deliveries 

of substantial quantities of rye on Chicago rye futures contracts and by 

indications that enough rye would be shipped to Chicago to make delivery on all 

May 1944 rye futures contracts. The delivery of comparable quantities of rye on 

the May 1943 Chicago rye future in May 1943 was not accompanied by a drop in the 

price of the May 1943 future, which was below that of the Chicago July and 

September 1943 futures. 

46. 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 less than that of the 

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

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

September future. 

47. 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 76,000 bushels on May 18. 

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

office in the offices 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 was advised that 2,000,000 bushels of 

"distress rye" was about to be dumped on the 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. 

49. In June 1944 Philip R. O'Brien told an investigator for the government 

that the reported presence of O'Brien and Rice in New York on April 25 and 26, 

1944, was not in connection with the rye market. He did not mention that he and 

Rice had been at a meeting in New York in connection with rye in April or May. 

50. As a result of the authorization mentioned in Paragraph 48, 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 
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bushels (mentioned in Paragraph 47) 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. 

51. Before the purchase of this rye by General Foods there was no 

consultation with the Business Conduct Committee, as mentioned in Paragraphs 21 

and 22. 

52. The purpose of the transactions mentioned in Paragraph 50 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 and out 

of the control of respondents. 

53. 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. 

54. 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 (See 

Paragraph 46). 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. 

55. From late in 1943 until up in May 1944 the respondents noted together, 

jointly, collectively, and in concert to acquire rye and May 1944 rye futures 

holdings in Chicago which exceeded the deliverable supplies of rye in Chicago 

(Paragraphs 38 and 39). 

56. Respondents' activities in rye were among the principal causes of the 

increase in price of rye futures and the increase of rye in Chicago mentioned in 

Paragraph 43, the excess of the price of the May over the July and September 

futures mentioned in Paragraph 46, and the drop in price mentioned in Paragraph 

44, and they caused the Chicago May 1944 rye futures prices to be artificial 

manipulated prices. 

57. Respondents tried to corner Chicago rye and rye futures, and for a time 

were successful in doing so. Their corner was broken during May 1944 

principally by the bringing of large quantities of deliverable rye into Chicago, 

much of which was done by Cargill, Inc. They tried to and did manipulate the 

prices of rye and rye futures in Chicago, raising them above what they would 

have been on a free and open market (Paragraph 56), and preventing them from 

dropping (Paragraph 52). 

Proposed Conclusions 

58. Section 2 of the act (7 U.S.C. 4) makes both the agent and principal 

responsible for acts of the agent within the scope of his authority. 

Accordingly, for the purposes of this proceeding, Metcalf is equally responsible 

with General Foods for the corporation's dealings in rye. 

59. It is rather apparent that respondents, by obtaining and retaining such a 

large proportion of rye and rye futures in Chicago, dominated the rye market in 

Chicago, manipulated the price of rye futures and rye, and cornered Chicago rye 

and rye futures, as shown in the Findings of Fact. Respondents do not dispute 
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the figures, the amounts of their holdings, prices, etc., but make various 

claims in arguing that their holdings should not be combined, that there was no 

corner, that Cargill was responsible, etc. 

60. Respondents say there is no evidence that they acted together. There are 

many circumstances and situations, shown in the Findings, that are clearly 

explained only by joint actions When respondents, confronted with these, offer 

no other plausible explanation, only one conclusion can be drawn from the 

evidence, that of one purpose, participated in and furthered by each and all. 

It is unnecessary to repeat all these circumstances here, but a few questions 

will point to the significance of some of them. Why did General Foods not keep 

a record of its agreement with Rice and Company, involving millions of dollars 

worth of rye? And of the meeting about the two million bushel purchase? Why 

were offers restricted to "users" of rye? Was General Foods not concerned when 

Rice and Company failed to sell its rye? Or was that what Rice and Company was 

supposed to do? Why did Rice and Ryan hold rye in Canada to keep it from 

Chicago? Why did Rice, Ryan, and O' Brien take and hold rye in Chicago when 

they could have made money by selling it and buying the July and September 

futures? Were the quantities in the two million deal 

 

divided equally between Rice, Ryan, and O' Brien by mere coincidence? If there 

is an answer to any of these, and other questions raised by the facts, why did 

Rice, Ryan, O'Brien, and Metcalf fail to give it? 

61. Respondents complain that there is no charge of conspiracy here, and that 

they do not know what the charge of collective action means, the word collective 

having no meaning in law. It may be that the facts alleged in the complaint in 

this proceeding would constitute a conspiracy to commit an offense against the 

United States, so as to warrant criminal proceedings under 18 U.S.C. 88, but 

that is immaterial here, for Congress has not given us jurisdiction over such 

matters. It has given us certain jurisdiction over violations of the Commodity 

Exchange Act, whether committed by one only or by five or six, and that 

jurisdiction is what we are here exercising. It would have been entirely 

ineffective, if not even improper, to allege conspiracy in this proceeding. As 

to what collective means, we think respondents know, and as Congress has used 

the word in legislation (e.g., 15 U.S.C. 839, 29 U.S.C. 157, 45 U.S.C. 152), we 

suppose that Congress and the courts know what it means. We do not think its 

use misled respondents in any way. 

62. In arguing that there was no corner, respondents say that under present 

conditions there can be no corner in Chicago, but that to run a corner one must 

get control of the commodity over the whole country. The reason given is that 

after trading in the future stops, there are now seven days in which rye can be 

brought into Chicago for delivery on the future. This may make it more 

difficult to get a corner and make the 

 

effect less severe as the month draws to a close, but we do not agree that as a 

matter of law there is no such thing as a corner of one market. What was 

charged and what is here involved is a corner on one rye market, Chicago. 

63. Some of the respondents spent much time at the hearing and in their 

briefs complaining of the acts of Cargill, Inc., in the rye market. The record 

contains exhibits showing some of Cargill's activities in rye, but we have found 

nothing in these which would alter or affect any of the findings herein, or 

excuse any of the acts of respondents which we consider violations of the act. 

Even if it were shown conclusively in this record that Cargill had violated the 

act, which has not been shown, this would not excuse respondents' manipulation 

and corner. 

64. The purchase by General Foods of 2,000,000 bushels of rye in May 1944 to 

prevent a drop in price was clearly an attempt to influence, or manipulate, the 

price of rye, and quite likely did so. No one denied its purpose. All of the 
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respondents were involved in this transaction. Even if separated from other 

matters here involved, this one incident constituted a serious violation of 

section 9 of the act (7 U.S.C. 13). The mere fact that General Foods held so 

much rye that it was to its pecuniary advantage to keep the price up did not 

give it and the other respondents the right to influence the price as they tried 

to do and probably did here. When considered in connection with respondents' 

other activities, this violation was even more serious. 

65. When General Foods and O'Brien made such purchases as to give them 

speculative holdings exceeding the two million bushel limit (Paragraphs 16 and 

35), they violated section 4a of the act (7 U.S.C. 6a). Ordinarily this would 

authorize a suspension order against General Foods, Metcalf, and O' Brien ( In 

re Martin et al., 5 Agric. Dec. 435 (5 A.D. 435), 1946), but as the complaint 

did not explicitly charge O' Brien with exceeding the limit, and as these 

violations are of negligible importance in comparison with the other matters 

involved, no sanction is invoked because of them. Also, no sanction is involved 

because of Metcalf's failure to file complete reports (Paragraph 36). 

66. We agree with the government's suggestion that while Ryan and O'Brien 

participated in and contributed to the manipulation and the corner, they were 

not the motivating factors. General Foods and its vice president accumulated a 

large quantity of rye, thus creating the situation which made the corner 

possible, gave Rice control of these holdings, and went along with his handling 

of them. Their responsibility for the situation is greater than that of Ryan 

and O'Brien. Rice and his company were the experts employed by General Foods to 

handle the situation, and they were the dominant and directing figures after the 

employment. The sanctions invoked against Rice, Metcalf, and their companies 

should be greater than those against Ryan and O'Brien. 

67. The registration of Rice and Company should be revoked, the trading 

privileges on contract markets of Rice, Rice and Company, 

 

General Foods, and Metcalf should be suspended for a year, and the registrations 

and trading privileges of Ryan and O' Brien should be suspended for 60 days. 

Proposed Sanctions 

68. The registration of Daniel P. Rice and Company as a futures commission 

merchant is revoked. 

69. The registration of Lawrence J. Ryan as a futures commission merchant is 

suspended for 60 days. 

70. The registration of Philip R. O'Brien as a floor broker is suspended for 

60 days. 

71. All contract markets shall refuse Respondents General Foods Corporation, 

Charles W. Metcalf, Daniel F. Rice and Company, and Daniel F. Rice, and each of 

them, all trading privileges thereon for a period of one year, and shall refuse 

Respondents Lawrence J. Ryan and Philip R. O'Brien, and each of them, all 

trading privileges thereon for a period of 60 days. 

72. The revocation, suspensions, and refusals of trading privileges mentioned 

in the preceding four paragraphs shall begin on the 40th day after this date. 

Copies hereof shall be served on the parties or their counsel of record, and on 

each contract market. 

/s/ Jack W. Bain 

Referee 

September 10, 1946. 
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