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Commodity Futures Trading Commission 

CEA CASES 

NAME: PACIFIC WEST COMMODITIES, INC., KENNETH M. MUELLER, BETHEL G. BUCKALEW, 

NORMAN C. LONG, AND LESTER J. SUTER 

CITATION: 25 Agric. Dec. 11 

DOCKET NUMBER: 128 

DATE: JANUARY 17, 1966 

DOCUMENT TYPE: DECISION AND ORDER 

(No. 10,310) 

In re PACIFIC WEST COMMODITIES, INC., KENNETH M. MUELLER, BETHEL G. BUCKALEW, 

NORMAN C. LONG, AND LESTER J. SUTER. CEA Docket No. 128. Decided January 17, 

1966. 

Customers' funds -- Denial of trading privileges -- Revocation of 

registration -- Default

Respondents' failures to segregate customers' funds and to keep records 

thereof and the misuse of such funds to extend credit of other customers are 

violations of the act and the regulations for which the registration of the 

corporate respondent is revoked and the trading privileges of all respondents 

are denied for three years. 

Mr. Earl L. Saunders for Commodity Exchange Authority. Mr. Will Rogers, Hearing 

Examiner. 

Decision by Thomas J. Flavin, Judicial Officer.

PRELIMINARY STATEMENT

This is a proceeding under the Commodity Exchange Act (7 U.S.C. 1 et seq.),

instituted by a complaint filed July 21, 1965, by 

an Assistant Secretary of Agriculture. The respondents are Pacific West 

Commodities, Inc., a California corporation which is registered as a futures 

commission merchant under the act, and 4 individuals who are officers of 

respondent corporation. Respondents are charged with improper use and handling 

of customers' funds, including failure to segregate and keep records with 

respect to such funds, in willful violation of the act and the regulations 

issued thereunder. A copy of the complaint and a copy of the rules of practice 

were served upon each respondent. 

At the time of service of the complaint each respondent was notified in 

writing that an answer to the complaint should be filed within 20 days of its 

receipt and that, in accordance with the rules of practice, failure to answer 

would constitute an admission of the facts alleged in the complaint and failure 

to request a hearing would constitute a waiver of hearing. Notwithstanding such 

notice, respondents have not filed answers and have not requested a hearing. 

The matter was referred to Will Rogers, 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 December 13, 1965, the hearing 

examiner filed a report recommending that the respondents be found to have 

violated the act as charged, that respondent corporation's registration as a 

futures commission merchant be revoked and that an order be issued directing all 
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contract markets to refuse all trading privileges to each respondent for a 

period of 3 years. No exceptions to the hearing examiner's report were filed. 

FINDINGS OF FACT

1. Respondent Pacific West Commodities, Inc., is a corporation organized and 

existing under the law of the State of California with its principal office and 

place of business at all times material herein at 1250 Prospect Street, LaJolla, 

California. This respondent is now and was at all times material herein a 

registered futures commission merchant under the act. 

2. Respondents Kenneth M. Mueller, Bethel G. Buckalew, Norman C. Long, and 

Lester J. Suter are individuals whose business address at all times material 

herein was 1250 Prospect Street, LaJolla, California, and who are now and were 

at all times material herein the president, executive vice president, vice 

president-treasurer, and secretary, respectively, of respondent corporation. 

Respondent Kenneth M. Mueller was at all times material herein a member of the 

Board of Trade of the City of Chicago, a duly designated contract market under 

the act. 

3. The acts and transactions hereinafter described in the Findings of Fact 

were ordered by, or carried out by means of the acts of, or subject to the 

supervision and control of, Kenneth M. Mueller, Bethel G. Buckalew, Norman C. 

Long and Lester J. Suter, acting in their capacities as officers of respondent 

corporation. 

4. At the time hereinafter stated in the Findings of Fact, respondent Pacific 

West Commodities, Inc., in the regular course of its business as a futures 

commission merchant, carried accounts of customers who traded in commodity 

futures subject to the provisions of the act and the regulations issued 

thereunder. At all such times, respondent corporation had to its credit with a 

bank or other depository, sums of money in varying amounts, held in segregated 

accounts and identified as customers' funds, representing deposits of margins by 

and trading profits accruing to such customers. 

5. On 46 business days during the period January 29 through June 15, 1965, 

respondent Pacific West Commodities, Inc., was undersegrated in amounts ranging 

up to approximately $ 31,600 on June 15, 1965, that is, the total amount of 

customers' funds held in segregation, as described in Finding of Fact 4, was 

insufficient, by such amounts, to pay all credits and equities due to such 

customers. 

6. On 24 business days during the period January 29 through June 15, 1965, 

respondent Pacific West Commodities, Inc., failed to make any computations or 

permanent record of the amount of money, securities, and property required to be 

held in segregated account in order to pay all credits and equities due to its 

customers. 

7. Beginning on or about December 1, 1964, and continuing until on or about 

June 10, 1965, respondent Pacific West Commodities, Inc., made purchases and 

sales of commodity futures for its own use and benefit, and placed such trades 

in its customers' account carried by a correspondent firm, by reason of which 

the open contract positions and financial results of such trades were commingled 

with the open contract positions and financial results of the transactions of 

the customers of respondent corporation. 

8. During the period January 29 through June 15, 1965 respondent Pacific West 

Commodities, Inc., purchased and sold commodity futures for the use and benefit 

of certain customers and margined, guaranteed, or secured such purchases and 

sales with funds belonging to other customers of respondent corporation. 

CONCLUSIONS
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The corporate respondent, under the supervision or direction, or by means of 

the acts of the individual respondents, knowingly failed to treat and deal with 

customers' funds as belonging to such customers, failed to segregate and account 

separately for such funds, used funds held for customers to margin and guarantee 

the trades and secure and extend the credit of customers other than those for 

whom such funds were held, commingled customers' funds with funds belonging to 

the corporate respondent, and failed to prepare and maintain the records 

required under the act and the regulations issued thereunder as a basis for such 

segregation and accounting. By reason thereof, respondents willfully violated 

sections 4d(2) and 4g of the act (7 U.S.C. 6d(2) and 6g) and sections 1.20, 

1.21, 1.22, 1.23 and 1.32 of the regulations issued therunder (17 CFR 1.20, 

1.21, 1.22, 1.23, 1.32). See In re Harry Kay et al., 23 Agric. Dec. 743 (23 

A.D. 743) (1964). 

The nature and scope of the violations by respondents indicate a willful and 

flagrant disregard of the act and the regulations and justify a substantial 

sanction. The registration of respondent corporation as a futures commission 

merchant should be revoked and all respondents should be denied trading 

privileges for a period of three years, as recommended by complainant. 

ORDER

Effective February 14, 1966, the registration of Pacific West Commodities, 

Inc., as a futures merchant is revoked. 

Effective February 14, 1966, all contract markets shall refuse all trading 

privileges to Pacific West Commodities, Inc., Kenneth M. Mueller, Bethel G. 

Buckalew, Norman C. Long and Lester J. Suter for a period of three years, such 

refusal to apply to all trading done and positions held by them, or any of them, 

directly or indirectly. 

A copy of this decision and order shall be served upon each respondent and 

upon each contract market. 

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