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Commodity Futures Trading Commission 

CEA CASES 

NAME: BENEDICT K. GOODMAN 

CITATION: 18 Agric. Dec. 1121 

DOCKET NUMBER: 81 

DATE: OCTOBER 12, 1959 

DOCUMENT TYPE: DECISION AND ORDER 

(No. 6161) 

In re BENEDICT K. GOODMAN. CEA Docket No. 81. Decided October 12, 1959. 

Trading Limits -- Reporting Requirements -- Denial of Trading Privileges

Respondent exceeded the maximum speculative limit in rye futures and failed 

to file with the Commodity Exchange Authority the required reports as to 

respondent's positions and trading in rye futures. All contract markets are 

ordered to refuse all trading privileges to respondent for a period of 20 days. 

Mr. Benj. M. Holstein, for Commodity Exchange Authority. Mr. Homer E. 

Rosenberg, of Chicago, Illinois, for respondent. Mr. Jack W. Bain, Hearing 

Examiner. 

Decision by Thomas J. Flavin, Judicial Officer

PRELIMINARY STATEMENT

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

instituted by a complaint filed April 14, 1958, by an Assistant Secretary of 

Agriculture. Respondent is charged with holding positions in rye futures in 

excess of the maximum permissible quantity in violation of the act and with 

violating the reporting requirements of the act and the regulations issued 

thereunder. Respondent is also alleged to have attempted to conceal his 

violations of the act by keeping his trading in rye futures with any one futures 

commission merchant below the level required to be reported to the Commodity 

Exchange Authority by the futures commission merchant. 

The complaint alleges that between December 31, 1957, and February 21, 1958, 

respondent held speculative net long positions in the March 1958 rye future on 

the Chicago Board of Trade ranging from 580,000 to 700,000 bushels, and 

speculative net long positions in all rye futures ranging from 730,000 to 

1,085,000 bushels, which positions were in excess of the speculative limit of 

500,000 bushels; that since these positions exceeded 200,000 bushels in a single 

future, respondent was in reporting status under the regulations and required to 

submit reports with respect to all his trades and positions in rye futures 

during such status, but that he failed to do so; and that respondent was aware 

of his obligations with respect to these matters and attempted to conceal such 

violations by distributing the positions among various futures commission 

merchants in quantities just below the level at which the futures commission 

merchant would have been required to report the respondent's position. 

Respondent filed an answer July 7, 1958, in which he denied the substantive 

allegations of the complaint, challenged the Secretary's jurisdiction over the 

respondent and the subject matter, and asserted that the act, the regulations 

thereunder, and the order of the Commodity Exchange Commission establishing 

trading limits are unconstitutional, void, and of no effect. By way of 

affirmative defense, respondent alleged that he engaged in the trading in 

question in reliance upon erroneous information as to speculative limits 
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furnished to him by a representative of the Commodity Exchange Authority, and 

contended that the Secretary should, therefore, be estopped from proceeding 

against him. 

An oral hearing was held in Chicago, Illinois, August 8, 1958, before Jack W. 

Bain, Hearing Examiner, Office of Hearing Examiners, United States Department of 

Agriculture. The respondent was represented by Homer E. Rosenberg, Attorney at 

Law, Chicago, Illinois, and complainant was represented by Benjamin M. Holstein, 

Office of the General Counsel, United States Department of Agriculture. After 

the hearing, both parties filed briefs. On March 24, 1959, the hearing examiner 

filed a report containing proposed findings of fact and conclusions and 

recommending that respondent be found to have violated the act substantially as 

charged and that all contract markets be ordered to refuse trading privileges to 

respondent for a period of 20 days. Both parties filed exceptions to the 

hearing examiner's 

report and oral argument was held before the Judicial Officer on August 26, 

1959. 

FINDINGS OF FACT

1. Respondent, Benedict K. Goodman, is an individual whose address is 636 

Church Street, Evanston, Illinois. The respondent is now, and has been since 

1927, a member of the Board of Trade of the City of Chicago, a duly designated 

contract market under the act. 

2. From December 31, 1957, through February 21, 1958, the respondent held 

speculative net long positions in the March 1958 rye future on the Chicago Board 

of Trade which ranged between 580,000 and 700,000 bushels, and speculative net 

long positions in the March and May 1958 rye futures combined which ranged 

between 730,000 and 1,085,000 bushels. Such positions were held through seven 

different brokerage houses or futures commission merchants, and the maximum 

quantity in any one future held through any one futures commission merchant was 

195,000 bushels. 

3. On ten days during the period December 31, 1957, through February 21, 

1958, that is, on January 22, 23, 24, 28, February 4, 5, 10, 12, 17 and 19, 

1958, respondent bought or sold March or May 1958 rye futures on the Chicago 

Board of Trade through one or more of the seven futures commission merchants 

referred to above, but respondent did not report these transactions or the 

resulting positions to the Commodity Exchange Authority. 

4. Effective December 3, 1945, the Commodity Exchange Commission reduced the 

limit on the maximum speculative position in rye for future delivery which any 

person could hold or control on any one contract market from 2,000,000 to 

500,000 bushels (17 CFR 150.3; 10 F.R. 14363), and at or about the same time the 

Chicago Board of Trade addressed a letter to its members setting forth in full 

the order of the Commission with respect to the reduction. The respondent was a 

member of the Board of Trade at that time. The 500,000 bushel limit has 

remained in effect continuously since December 3, 1945. 

5. During the period February 23 through March 2, 1956, respondent held a 

speculative position in rye futures on the Chicago Board of Trade in excess of 

500,000 bushels. The matter was called to his attention by the Commodity 

Exchange Authority, and in a conference with representatives of that agency the 

respondent explained that he did not know that the limit had 

been reduced to 500,000 bushels, and stated that he would bring himself into 

compliance by reducing his position, which he did within a short time. On or 

about March 1, 1956, as a result of this occurrence, respondent received from 

the Chicago office of the Commodity Exchange Authority a document specifying the 

speculative limits on trading and positions under the act, which stated that the 
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maximum allowable position in rye was 500,000 bushels. Shortly thereafter, the 

respondent received a letter from the Administrator of the Commodity Exchange 

Authority containing similar information and requesting the respondent's 

cooperation in observing limits in the future. 

6. In August or September 1957, respondent inquired of Paul Murin, senior 

partner in David A. Noyes and Company, one of the brokerage firms through which 

respondent traded, as to the speculative limit on rye futures, and was informed 

by Paul Murin that the limit was two million bushels. Respondent questioned the 

accuracy of this information, and Murin said he would verify or check the 

speculative limit. Murin then informed respondent that he had "checked with the 

Commodity Exchange and it is two million." Respondent told his secretary at his 

office in Evanston, Illinois, the same day, that "I'm going into rye and we 

don't have to concern ourselves about rye. We can go up to two million. That 

is all we have to worry about. Let me know as I approach two million." 

7. Respondent made no further inquiry with respect to the rye speculative 

limit until after he learned, on February 21, 1958, that his trading and 

positions were being examined by the Commodity Exchange Authority, whereupon he 

again inquired of his brokers and was told by John Murin and Sigmund Mika, 

partner and office manager, respectively, in David A. Noyes and Company, that 

the limit was 2,000,000 bushels. Respondent again questioned the accuracy of 

this figure and replied that he believed the limit to be 500,000 bushels. Mika 

then telephoned the Chicago office of the Commodity Exchange Authority and asked 

for Albert W. Kibby, chief accountant. When informed that Kibby was not in, 

Mika asked for Mr. Stone, an accountant who had previously examined the 

brokerage firm's books and was, therefore, known to Mika. In answer to Mika's 

inquiry, Stone erroneously informed him that the rye limit was 2,000,000 

bushels. Later the same day, respondent made inquiry of his attorney who 

ascertained and informed respondent that the limit in question was 500,000 

bushels. 

8. Under the regulations issued pursuant to the act, a trader is obligated to 

report to the Commodity Exchange Authority whenever he holds a position in any 

one grain future (including rye) on any one contract market in the amount of 

200,000 bushels or more, regardless of whether such position is held through one 

or more than one broker or futures commission merchant. Each futures commission 

merchant is required to report to the Commodity Exchange authority with respect 

to any customer's position which reaches or exceeds that quantity. Respondent 

was aware of the regulations. Over a period of approximately 20 years prior to 

1958, he had, as required from time to time by his market position, filed 

reports with the Commodity Exchange authority with respect to his trading in 

wheat, corn, rye, and soybeans. 

9. Between December 31, 1957, and January 23, 1958, respondent had a 

reportable position in corn futures, which included 200,000 bushels or more in a 

single future through each of three futures commission merchants. During this 

period, the Commodity Exchange Authority received reports as required with 

respect to such positions from each of the futures commission merchants and also 

from respondent. On February 21, 1958, respondent's position in wheat futures 

reached 200,000 bushels or more in one future. This position was on the books 

of one futures commission merchant, and the Commodity Exchange Authority 

received a report as required with respect thereto from the futures commission 

merchant and also from respondent. Between January 14 and February 14, 1958, 

respondent had a reportable position in soybean futures, consisting of positions 

of less than 200,000 bushels with each of several futures commission merchants, 

which positions, in the aggregate, totaled more than 200,000 bushels in a single 

future. On January 14, 20, 22, 28, and February 12 and 14, 1958, reportable 

transactions in soybean futures were executed for respondent's account, but 

respondent did not report these transactions to the Commodity Exchange Authority 

until February 24, 1958. 

10. In accordance with the practice followed by respondent during 1958 and 

for several years prior thereto, reports concerning his trading and positions 

were prepared by his secretary from information contained in brokers' 
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confirmations, and forwarded by her to the Commodity Exchange Authority without 

any prior examination by respondent. The secretary who prepared reports for 

respondent in 1958 had been employed by respondent 

and had prepared and submitted such reports for many years. 

CONCLUSIONS

The record establishes and respondent concedes that respondent exceeded the 

maximum speculative limit in rye futures and failed to file with the Commodity 

Exchange Authority required reports as to respondent's positions and trading in 

rye futures as charged in the complaint. 

Respondent, however, argues that the violations were only technical in 

nature, that he was misled by erroneous information supplied by representatives 

of complainant to the effect that the rye trading limit was 2,000,000 bushels, 

that he suffered a loss in reducing his rye futures holdings to the 500,000 

bushel limit and that his failure to file reports was due to a misunderstanding 

of instructions given by him to his secretary and to "clerical error." He 

contends that the complaint should not have been filed and should be dismissed. 

Complainant contends that the violations were intentional and excepts to the 

hearing examiner's recommended suspension of trading privileges for 20 days and 

urges that respondent be denied trading privileges for 90 days. 

Examining first respondent's argument that respondent relied upon information 

from complainant's representatives in exceeding the 500,000 bushel trading 

limit, that respondent was "trapped" and that therefore complainant is subject 

to some kind of estoppel in bringing the complaint, we observe that the 

developments outlined in Finding of Fact 7 occurred after respondent had gone 

beyond the limit and respondent cannot have relied upon anything he was told 

then in trading previously beyond the limit. Assuming that prior to doing the 

trading Murin told respondent as described in Finding of Fact 6 that he, Murin, 

had checked with the Commodity Exchange Authority's office in Chicago and that 

he, Murin, had been told that the trading limit was 2,000,000 bushels, we do not 

believe that respondent escapes blameworthiness or that there is any possible 

application of any such principle as estoppel. 

After respondent's violation of the rye limit in 1956, he was supplied by 

complainant with a document entitled "Speculative Limits On Trading And 

Positions" which listed 500,000 bushels as such limit for rye and 2,000,000 

bushels for the other regulated grains. In addition, respondent was informed 

orally and by letter at that time of the rye limit. When respondent decided 

to speculate again in rye futures in 1958, however, he did not refer to the 

documentary materials supplied him and he did not communicate with the employees 

of the regulatory agency whom he dealt with in 1956. Instead, he inquired of a 

brokerage firm as to the speculative limit in rye. That firm dealt primarily in 

securities and not in commodity futures. Also, relatively little trading is 

done in rye futures in comparison with other grain futures and the record does 

not indicate that the broker had much experience with rye futures. Apparently 

the fact that the trading limit for rye is 500,000 bushels when the limit for 

all other grains is 2,000,000 bushels is not widely known because of the 

relatively small trading in rye. But respondent knew what it was 18 months 

before because he was officially and personally notified. Moreover, respondent 

does not seem to have asked specifically about the limit for rye alone but asked 

for the limits on grains. At any rate while respondent expressed doubt when 

told that the limit was 2,000,000 bushels he did not make reference in his 

conversation with his broker to the 500,000 bushel limit in 1956 or to the 

document he had received listing speculative limits on regulated commodities. 

Respondent's behavior does not impress us as that of a reasonable man attempting 

to comply with the requirements of law, especially in view of his prior 
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experience and the information he had previously acquired with respect to the 

trading limit in rye futures. 

A similar lack of care is present in respondent's failure to comply with the 

reporting requirements of the act and the regulations issued thereunder. 

Respondent contends that his secretary misunderstood his instructions (see 

Finding of Fact 6) and, in effect, thought that it was unnecessary to file 

reports with respect to rye futures transactions. Respondent knew that he was 

required to file the reports and "assumed" his secretary was doing so. 

Respondent's employee was experienced in filing reports required under the act 

including reports on respondent's positions in rye futures and had done so for 

many years. Furthermore, it happened that respondent reported only those 

positions which he knew his brokers would also report and not those positions 

which he knew his brokers would not report (see Findings of Fact 8 and 9). In 

any event, the responsibility for filing reports rested upon respondent and the 

record indicates at least a failure on his part to exercise reasonable care or 

any supervision in the performance of such duty. In view of the foregoing, it 

is concluded that, at the least, respondent 

negligently violated section 4a of the act (7 U.S.C. 6a) by exceeding the rye 

speculative limit established by the order of the Commodity Exchange Commission 

and violated section 4i of the act (7 U.S.C. 6i) and the regulations issued 

thereunder (17 CFR 2.10, 2.11, 2.12, and 2.21) by failing to file reports of his 

rye positions (see Finding of Fact 3). Accordingly, such violations are wilful. 

n1 See e.g., Mercado v. Brannan, 173 F.2d 554, 555 (1st Cir. 1949), cert. 

denied, 338 U.S. 820 (1949). See also United States v. Illinois Central Railroad 

Company, 303 U.S. 239, 243-244 (1938). 

n1 Section 9(b) of the Administrative Procedure Act (5 U.S.C. 1008(b)) 

states that there shall be no withdrawal, suspension, etc., of any 

"license" except in cases of "willfulness . . ." unless prior to the 

institution of the administrative proceeding an opportunity is accorded to 

demonstrate or achieve compliance. "License" is defined in section 2(e) of 

that act (5 U.S.C. 1001(e)) in terms of a permit, certificate, approval, 

etc., "or other form of permission." Unlike required registration of 

brokers and futures commission merchants, a trader does not have to receive 

permission from the Department to trade. But at any rate, the violations 

here constituted a case of "willfulness" within the meaning of this part of 

the Administrative Procedure Act. 

Our findings herein have been based upon respondent's negligence in complying 

with the requirements of the act. However, the manner in which respondent's 

position in rye futures was distributed among the seven brokers through whom he 

traded indicates a possible intent to conceal his position in such future from 

complainant and to violate the act knowingly. His position in the March 1958 

future with two of the seven brokers in question was kept at 195,000 bushels 

with each broker. A position of 200,000 bushels with a futures commission 

merchant would have required the broker to report such position to the 

regulatory agency. Respondent testified that this was done to prevent any 

discovery or "leak" of his futures holdings and that he tries to keep his 

holdings in grain with any one brokerage house below this reporting limit. Yet, 

during the period of the violations involved, respondent had reportable 

positions in corn and wheat futures with several futures commission merchants, 

that is, positions of 200,000 bushels or more in corn and wheat futures with or 

through one or more brokers and he filed reports with respect to these 

positions. We do not, however, rely upon the distribution of respondent's rye 

position in concluding that he wilfully violated the act. 

Respondent claims that the act, the regulations issued thereunder and the 

order of the Commodity Exchange Commission setting trading limits in rye futures 

at 500,000 bushels are unconstitutional, invalid and void. While of course 

respondent is 
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free to raise the issue of the constitutional validity of the act in this 

proceeding and perhaps should do so if he expects to argue the point upon 

judicial review, he cannot expect an agency charged with administering a statute 

to hold the statute unconstitutional. Panitz et al. v. District of Columbia,

112 F.2d 39 (D.C. Cir. 1940); In re Corn Products Refining Co., 13 Agric. Dec. 

1117 (13 A.D. 1117), 1139 (1954), aff'd, 232 F.2d 554 (2d Cir. 1956); In re 

Edward R. Byer et al., 13 Agric. Dec. 873 (13 A.D. 873), 874 (1954). See also 

Engineers Public Service Co. v. Securities and Exchange Commission, 138 F.2d 

936, 952-953 (D.C. Cir. 1943), ordered dismissed as moot on motion of parties, 

332 U.S. 788 (1947). Respondent's contention that the contested order of the 

Commodity Exchange Commission is invalid because of the absence of findings of 

basic or evidentiary facts raises an interesting question as to whether the 

Secretary of Agriculture in this proceeding or his delegatee can hold an action 

of the Commodity Exchange Commission invalid. We conclude, however, that the 

contention is without merit as the facts stated in the order are sufficient to 

support the order. 

We now address ourselves to the difficult question of determining the 

sanction to be ordered for the violations of the act found above. The hearing 

examiner recommended that all contract markets be ordered to refuse trading 

privileges to respondent for a period of 20 days. Complainant filed exceptions 

to this recommendation of the hearing examiner and proposed that trading 

privileges be refused to respondent for a period of 90 days. Respondent's 

trading is speculative, that is, he does not merchandise commodities for which 

he needs to hedge in the futures markets and he trades for himself and not for 

others such as a futures commission merchant or floor broker. In view of our 

conclusions and the recommendation of the hearing examiner who had an 

opportunity to observe the witnesses at the hearing and to get "the feel of the 

case," we adopt the recommendation of the hearing examiner. 

ORDER

Effective on the 30th day after the date of this order, all contract markets 

shall refuse all trading privileges to respondent for a period of 20 days, such 

refusal to apply to all trading done and positions held by respondent directly 

or indirectly. 

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