Page 1 

Commodity Futures Trading Commission 

CEA CASES 

NAME: CARGILL, INCORPORATED, ERWIN E. KELM, H. ROBERT DIERCKS, WALTER B. 

SAUNDERS, AND BENJAMIN S. JAFFRAY 

DOCKET NUMBER: 120 

DATE: JUNE 3, 1964 

DOCUMENT TYPE: COMPLAINT 

UNITED STATES DEPARTMENT OF AGRICULTURE 

BEFORE THE SECRETARY OF AGRICULTURE 

In re: Cargill, Incorporated, Erwin E. Kelm, H. Robert Diercks, Walter B. 

Saunders, and Benjamin S. Jaffray, Respondents 

CEA Docket No. 120 

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

Act 

There is reason to believe that the respondents, Cargill, Incorporated, Erwin 

E. Kelm, H. Robert Diercks, Walter B. Saunders, and Benjamin S. Jaffray, have 

violated the Commodity Exchange Act (7 U.S.C. § 1 et seq.), and the regulations 

made pursuant thereto (17 CFR, Part 1), and in accordance with the provisions of 

section 6(b) of the Act (7 U.S.C. § 9), this complaint and notice of hearing is 

issued stating the charges in that respect as follows: 

I 

Respondent Cargill, Incorporated, hereinafter referred to as the respondent 

corporation, is a Delaware corporation with its principal office and place of 

business at the Cargill Building, Minneapolis, Minnesota. The respondent 

corporation is now and was at all times material to this complaint engaged in 

the grain merchandising business, registered as a futures commission merchant 

under the Commodity Exchange Act, and a clearing member of the Board of Trade of 

the City of Chicago. 

II 

Respondent Erwin E. Kelm, an individual whose business address is the same as 

that of the respondent corporation, is now and was at all times material to this 

complaint the president and a director of the respondent corporation, and a 

member of the Board of Trade of the City of Chicago. 

III 

Respondent H. Robert Diercks, an individual whose business address is the 

same as that of the respondent corporation, is now and was at all times material 

to this complaint an executive vice president and a director of the respondent 

corporation, and a member of the Board of Trade of the City of Chicago. 

IV 

Respondent Walter B. Saunders, an individual whose business address is the 

same as that of the respondent corporation, is now and was at all times material 

to this complaint a vice president of the respondent corporation, and a member 

of the Board of Trade of the City of Chicago. 

V 

Respondent Benjamin S. Jaffray, an individual whose business address is 1660 

Field Building, Chicago, Illinois, is now and was at all times material to this 
Page 2 

complaint an assistant vice president of the respondent corporation, and a 

member of the Board of Trade of the City of Chicago. 

VI 

The Board of Trade of the City of Chicago, hereinafter referred to as the 

Board of Trade, is now and was at all times material to this complaint a board 

of trade duly designated as a contract market under the Commodity Exchange Act. 

VII 

The transactions hereinafter described were carried out under the direction 

and supervision and by means of the acts of respondents Walter B. Saunders and 

Benjamin S. Jaffray, each in his capacity as an officer of the respondent 

corporation, and with the knowledge, authorization and approval of respondents 

Erwin E. Kelm and H. Robert Diercks. 

VIII 

The futures transactions and positions referred to in this complaint relate 

to the May 1963 wheat future on the Board of Trade. The last day for trading in 

the May 1963 wheat future on the Board of Trade was May 21, 1963. The last day 

on which wheat could be delivered in satisfaction of contracts in such future 

was May 31, 1963. Except during the last three business days in May 1963, a 

person making delivery on such future was required by the rules of the Board of 

Trade to deliver wheat located in a grain elevator (in the Chicago switching 

district) which was federally licensed or which was approved by the Board of 

Trade for such delivery. The rules of the Board of Trade also 

provided that during the last three business days in May 1963, delivery of wheat 

on such future could have been made in railroad cars located on track within the 

Chicago switching district and consigned or ordered to a federally licensed 

warehouse in such district, or to a grain elevator in such district approved by 

the Board of Trade for delivery. 

IX 

The futures transactions and positions of the respondent corporation referred 

to in this complaint did not constitute hedging transactions or positions. 

X 

The respondent corporation on April 15, 1963, bought 820,000 bushels of May 

wheat futures, covering its previous short position and creating a new long 

position of 250,000 bushels. By Friday, May 17, 1963, the respondent 

corporation had increased its net long position to 1,930,000 bushels. On 

Monday, May 20, 1963, the day prior to the last day for trading in the May wheat 

future, the respondent corporation reduced its long May position by 40,000 

bushels to 1,890,000 bushels. 

XI 

As of the close of business on May 16, 1963, the respondent corporation held 

in its Chicago elevator, a federally licensed warehouse located in the Chicago 

switching district, 1,147,810 bushels of deliverable wheat, that is, wheat which 

was eligible for delivery on the May 1963 wheat future on the Board of Trade. 

On May 17, 1963, the respondent corporation 

loaded out 354,000 bushels of such wheat, 352,000 bushels of which it shipped on 

the S.S. Algacen to Baie Comeau, Canada. Such load-outs reduced the stock of 

deliverable wheat stored by the respondent corporation in its elevator in 

Chicago to 793,810 bushels as of the close of business on May 17, 1963. On 

Saturday, May 18, 1963, the respondent corporation loaded out 418,000 bushels of 
Page 3 

deliverable wheat from its elevator in Chicago aboard the S.S. Patterson for 

shipment to Baie Comeau, Canada. Such load-out, together with some minor stock 

changes, reduced the deliverable wheat stored by the respondent corporation in 

its Chicago elevator to 377,972 bushels as of the close of business on Saturday, 

May 18, 1963. Such stock of deliverable wheat was unchanged on May 20, 1963, 

and by the close of business on May 21, 1963, had increased slightly to 378,671 

bushels. 

XII 

The respondent corporation on May 14, 1963, sold to its affiliated company, 

Tradax International, S.A., 466,667 bushels of No. 2 Red Winter wheat, at a 

price f.o.b. Baie Comeau, Canada, equivalent to $ 2.13 per bushel, f.o.b. 

Chicago. 

XIII 

The respondent corporation on May 15, 1963, offered to sell up to 15,000 long 

tons of No. 2 Red Winter wheat to the said Tradax Internacional, S.A., at a 

price f.o.b. one St. Lawrence port, equivalent to 

$ 2.03 1/2 per bushel, f.o.b. Chicago. Such offer was accepted on or about May 

18, 1963, by the said Tradax Internacional, S.A., and on May 20, 1963, the 

respondent corporation confirmed to the said Tradax Internacional, S.A., the 

sale of 541,333 bushels of No. 2 Red Winter wheat, at a price f.o.b. Baie 

Comeau, Canada, equivalent to $ 2.08 1/2 per bushel, f.o.b. Chicago. 

XIV 

The deliverable wheat loaded out of respondent corporation's Chicago 

elevator, as set forth in paragraph XI above, was applied by the respondent 

corporation against the sales referred to in paragraphs XII and XIII above. 

XV 

As of the close of business on May 17, 1963, the respondent corporation owned 

all except 20,000 bushels of the deliverable wheat in deliverable position. 

Such stocks of deliverable wheat not owned by the respondent corporation 

remained at or about such level during the remainder of the delivery month. 

XVI 

At all times material to this complaint the stocks of deliverable wheat in 

deliverable position in Chicago constituted substantially all of the wheat 

available for delivery on the May 1963 wheat future on the Board of Trade. 

XVII 

At all times on May 21, 1963, there was an insufficient supply of deliverable 

wheat in deliverable position not owned or controlled by the respondent 

corporation, and of long May wheat futures held by persons other than the 

respondent corporation to permit holders of short contracts in the May 1963 

wheat future to satisfy such short contracts without purchasing May wheat 

futures or deliverable wheat from the respondent corporation. Such fact was 

known to the respondents. 

XVIII 

On Friday, May 17, 1963, the price of the Hay 1963 wheat future on the Board 

of Trade ranged from $ 2.05 1/4 to $ 2.09 1/2 per bushel, and closed at $ 2.09 

1/8 -- $ 2.09 1/2 per bushel. On Monday, May 20, 1963, the price of such future 

ranged from $ 2.11 to $ 2.19 per bushel, and closed at $ 2.18 3/4 -- $ 2.18 1/2 

per bushel. On May 21, 1963, the price of the future ranged from $ 2.15 1/4 to 

$ 2.28 5/8 per bushel, and expired at a bid price of $ 2.28 5/8 per bushel. 

This last price was the highest price permitted under the rules of the Board of 

Trade for the May 1963 wheat future on May 21, 1963. 
Page 4 

XIX 

On May 21, 1963, prior to 11:00 a.m., the respondent corporation purchased 

100,000 bushels of May wheat futures, 50,000 bushels at $ 2.17 1/2 per bushel 

and 50,000 bushels at $ 2.18. Such purchases increased the long May wheat 

position of the respondent corporation 

to 1,990,000 bushels. At or about 11:00 a.m., on the same day, the respondent 

corporation entered into a transaction with another grain merchant whereby the 

respondent corporation sold 50,000 bushels of cash wheat to the merchant and 

took control over 50,000 bushels of long May wheat futures held by the merchant 

by obtaining from the merchant the exclusive authority to liquidate such futures 

for the account of the merchant. 

XX 

At or about 11:45 a.m., on May 21, 1963, the respondent corporation placed 

orders for the sale of 1,990,000 bushels of May 1963 wheat futures, such orders 

setting forth the price limits below which such futures could not be sold. On 

the same date, at or after 11:00 a.m., the respondent corporation placed an 

order for the sale of the 50,000 bushels of futures controlled by the respondent 

corporation as specified in paragraph XIX above, at a price of $ 2.26 per bushel 

or at the market price on the close. 

XXI 

Subsequent to 11:53 a.m., on May 21, 1963, the respondent corporation sold 

for the account of the grain merchant referred to in paragraph XIX above, 50,000 

bushels of May wheat futures at a price of $ 2.26 per bushel pursuant to the 

order for such sale referred to in paragraph XX above. From about 11:54 a.m., 

on May 21, 1963, until the expiration of the May 1963 wheat future at 12:00 noon 

on that day, 

the respondent corporation sold 1,625,000 bushels of May 1963 wheat futures at 

prices ranging from $ 2.27 to $ 2.28 5/8 per bushel, pursuant to the orders for 

the sale of 1,990,000 bushels of such futures referred to in paragraph XX above. 

XXII 

In initiating and carrying out the transactions described in paragraphs X, 

XI, XII, XIII, XIV, XIX, XX and XXI above, the respondents acted with the 

purpose and intent of causing prices in the May 1963 wheat future which were 

arbitrary and artificial, and demanded and received such prices in the May 1963 

wheat future. By reason thereof, the respondents, Cargill, Incorporated, Erwin 

E. Kelm, H. Robert Diercks, Walter B. Saunders, and Benjamin S. Jaffray, 

attempted to manipulate and did in fact manipulate the price of a commodity for 

future delivery on or subject to the rules of the Board of Trade in willful 

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

and 13). 

XXIII 

The operations of the respondents as described in paragraphs X, XI, XII, 

XIII, XIV, XVII, XIX, XX, XXI and XXII above, had the effect of causing No. 2 

Red Winter wheat in Chicago to sell at prices ranging from $ 2.27 to $ 2.29 per 

bushel on May 20, 1963, and at prices ranging from $ 2.26 1/2 to $ 2.37 per 

bushel on May 21, 1963. Such prices for cash No. 2 Red Winter wheat were 

artificial. By such operations, the 

respondents, Cargill, Incorporated, Erwin E. Kelm, H. Robert Diercks, Walter B. 

Saunders, and Benjamin S. Jaffray, attempted to manipulate and did in fact 
Page 5 

manipulate the price of a commodity in interstate commerce in willful violation 

of sections 6(b) and 9 of the Commodity Exchange Act (7 U.S.C. §§ 9 and 13). 

WHEREFORE, it is hereby ordered that this complaint and notice of hearing be 

served upon the said respondents. 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, D. C. 20250, 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 

allegation of this complaint. Allegations not answered will be deemed admitted 

for the purpose of this proceeding. Failure to file an answer will constitute 

an admission of all the allegations of this complaint and a waiver of hearing. 

The respondents are hereby notified that unless hearing is waived, either 

expressly or by failure to file an answer, or by filing an answer in which all 

of the material allegations of fact contained in the complaint are admitted and 

a hearing is not requested, a hearing will be held at 10:00 a.m., local time, on 

the 19th day of August, 1964, in Minneapolis, Minnesota, at a place therein to 

be specified later, before a referee designated to conduct such hearing. At 

such hearing 

 

the respondents will have the right to appear and show cause, if any there be, 

why an order should not be made directing that all contract markets refuse all 

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

determined, and suspending or revoking the registration of respondent Cargill, 

Incorporated, as a futures commission merchant. 

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

respondents at least twenty (20) days prior to the date set for hearing. 

Done at Washington, D. C., 

JUN - 3 1964 

[SEE SIGNATURE IN ORIGINAL] 

Assistant Secretary 

LOAD-DATE: June 12, 2008 
Page 6