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Commodity Futures Trading Commission 

CEA CASES 

NAME: LANDON V. BUTLER, BLACK GIN COMPANY, BUTLER-FOSTER MILLING COMPANY, AND 

ALABAMA GRAIN ELEVATOR COMPANY 

CITATION: 14 Agric. Dec. 429 

DOCKET NUMBER: 65 

DATE: JUNE 20, 1955 

DOCUMENT TYPE: DECISION AND ORDER 

AGRICULTURE DECISIONS

BEFORE THE SECRETARY OF AGRICULTURE

UNITED STATES DEPARTMENT OF AGRICULTURE

(No. 4283) 

In re LANDON V. BUTLER, BLACK GIN COMPANY, BUTLER-FOSTER MILLING COMPANY, AND 

ALABAMA GRAIN ELEVATOR COMPANY. CEA Docket No. 65 -- Decided June 20, 1955. 

Suspension of Trading Privileges -- Control of Soybean Market -- Transmission 

of False, Misleading or Inaccurate Reports -- Default

Where the complaint alleged that respondents attempted to manipulate the 

price of soybeans and soybean futures and disseminated false or misleading 

market information with respect to such commodity in violation of the act, and 

respondents failed to file an answer, held, respondents' failure to file an 

answer constitutes, under the rules of practice, an admission of the allegations 

in the complaint and a waiver of hearing, and, as the violations admitted appear 

to be deliberate, flagrant, and serious, all contract market trading privileges 

shall be refused to respondents until further order of the Secretary of 

Agriculture. 

Mr. Benjamin M. Holstein for the complainant. Mr. John Curry, Referee. 

Decision by Thomas J. Flavin, Judicial Officer

PRELIMINARY STATEMENT

This is a quasi-judicial proceeding under the Commodity Exchange Act. (7 

U.S.C., 1952 ed. Chapter 1) instituted by a complaint and notice of hearing 

issued under Section 6 (b) of the Commodity Exchange Act. (7 U.S.C., 1952 ed. § 

9) on February 4, 1955, by the Assistant Secretary of Agriculture, hereinafter 

called the complainant. 

The complaint names four respondents: one individual and three corporations. 

Landon V. Butler, the individual respondent, is the president and managing 

officer and a substantial shareholder in each of the respondent corporations. 

The complaint charges that the respondents attemped to manipulate the price 

of soybeans and soybean futures and disseminated false and misleading market 

information with respect to such commodities, in violation of Sections 6 (b) and 

9 of the Commodity 

Exchange Act (7 U.S.C., 1952 ed. §§ 9,13). These charges are based upon 

allegations that respondent Butler, acting for himself and the corporate 

respondents, acquired possession or control of large quantities of cash soybeans 

and soybean futures, withheld deliverable cash soybeans from sale and entered 
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into contracts or sales which were intended to remove large quantities of cash 

soybeans from delivery channels, caused the execution of soybean futures 

transactions on the Chicago Board of Trade at a time and under circumstances 

designed to result and which did result in artificial price increases, and 

circulated false and misleading information with respect to the movement of cash 

soybeans from Chicago and with respect to the ability of elevator operators to 

honor warehouse receipts issued by them covering soybeans in store in Chicago 

(Complaint, paragraphs IV-IX, inclusive). It is further alleged that such acts 

were done for the purpose and with the intent of manipulating the price of cash 

soybeans and soybean futures (Complaint, paragraph X). 

On February 23, 1955, counsel for the respondents requested a 45-day 

extension of the answer and hearing dates, and the referee accordingly extended 

these dates to April 16, 1955 and May 18, 1955, respectively. By letter dated 

March 4, 1955, counsel for the respondents informed the hearing clerk of the 

Department of Agriculture that he no longer represented the respondents, and a 

copy of the hearing clerk's acknowledgment of such withdrawal was mailed 

directly to the respondents. That acknowledgment recites as follows: "It is 

assumed that the order extending date for filing answer and changing date of 

hearing in this proceeding has been turned over to the respondents." 

No answer has been filed. Section 0.9 (b) of the rules of practice (17 CFR 

0.9 (b)) provides as follows: 

"Failure to file an answer to or plead specifically to any allegation of the 

complaint shall constitute an admission of such allegation." 

Section 0.9 (c) of the rules of practice (17 CFR 0.9 (c)) provides as 

follows: 

"The admission, in the answer or by failure to file an answer, of all the 

material allegations of fact contained in the complaint shall constitute a 

waiver of hearing. Upon such admission of facts, the referee without further 

investigation or hearing, shall prepare his report, in which he shall adopt 

as his proposed findings of fact the material facts alleged in the complaint." 

The complainant filed proposed findings and conclusions so that the referee 

and the Judicial Officer might have the benefit of the complainant's 

recommendations with respect to the sanction to be imposed. The referee issued 

a report recommending that the respondents be found to have violated the act as 

charged. Copies of the report were served upon the respondents who did not file 

exceptions. The referee's report is adopted herein. 

FINDINGS OF FACT

1. Respondent Landon V. Butler, an individual whose address is 60 South Front 

Street, Memphis, Tennessee, was at all times material herein a trader in 

commodity futures and engaged in various business enterprises through 

respondents Black Gin Company, Butler-Foster Milling Company, and Alabama Grain 

Elevator Company, more particularly described hereinafter. At all such times 

the said Landon V. Butler was also a partner in F. M. Crump and Company, 

Memphis, Tennessee, a registered futures commission merchant under the Commodity 

Exchange Act. Respondent Landon V. Butler and the said Crump and Company were 

at all such times members of the Board of Trade of the City of Chicago. 

2. Respondent Black Gin Company, a Missouri corporation, is engaged in the 

business of ginning and merchandising cotton and trading in commodity futures. 

Respondent Butler-Foster Milling Company, a Missouri corporation, and respondent 

Alabama Grain Elevator Company, a corporation operating in Alabama, are engaged 

in the business of milling and merchandising grain and trading in commodity 

futures. Each of the said corporations maintains an office at 60 South Front 

Street, Memphis, Tennessee, and respondent Landon V. Butler is the president and 

managing officer of each of such corporations. All the stock in respondents 

Black Gin Company and Butler-Foster Milling Company is held, in equal amounts, 
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by respondent Landon V. Butler, Sydney J. Butler, his wife, not a respondent 

herein, and Robert Foster and his wife, not respondents herein. Respondent 

Landon V. Butler is also a substantial stockholder in respondent Alagama Grain 

Elevator Company. 

3. The Board of Trade of the City of Chicago, hereinafter called the Chicago 

Board of Trade, was at all times material 

herein a duly designated contract market under the Commodity Exchange Act. 

4. During the calendar year 1954, respondent Landon V. Butler and each of the 

corporate respondents had commodity trading accounts with F. M. Crump and 

Company, and the said F. M. Crump and Company also carried commodity trading 

accounts for certain other persons and firms, hereinafter called Crump accounts 

or Crump customers, including the following: 

Allen-Davis Company 

Sydney J. Butler 

Dabney Crump 

Frank Crump 

Jackson Davis 

Virginia Emmert 

Robert Foster 

Hunter S. George 

Walter Regnery 

Rodgers, Fay & Brown 

Alexander Sprunt & Son, Inc. 

J. K. Willey 

5. During the period from January 1, 1954 through November 30, 1954, 

respondent Landon V. Butler, acting for himself or on behalf of the corporate 

respondents, traded actively and extensively in soybeans and soybean futures 

contracts on the Chicago Board of Trade, and during this period there was also 

active trading in the Crump accounts. In the course of such trading the 

respondents and the Crump customers purchased and sold substantial quantities of 

March, May, July, and September, 1954, soybean futures, established large long 

positions in each of the said futures, stood for delivery thereon, received 

large quantities of deliverable cash soybeans in satisfaction thereof, and 

purchased and received, and entered into contracts to purchase and receive, 

additional large quantities of cash soybeans in store in Chicago grain elevators 

and available for delivery in satisfaction of such futures contracts. In 

connection with such trading, respondent Landon V. Butler purchased and received 

from various Crump customers, and the said customers sold and delivered to 

respondent Landon V. Butler, large quantities of deliverable cash soybeans which 

such customers had received in satisfaction of soybean futures contracts which 

they held. As a result of such trading activities, the combined futures and 

cash holdings of the respondents and the Crump customers represented a 

substantial portion of the deliverable stocks of soybeans in Chicago during most 

of 1954. These holdings were approximately 21 percent on the last day of 

trading in the March 1954 future, approximately 

46 percent on the last day of trading in the May 1954 future, and approximately 

94 percent on the last day of trading in the July 1954 future. 
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6. During the period from January 1, 1954 through November 30, 1954, and as 

part of and in connection with the activities described in paragraph 5, 

respondent Landon V. Butler, acting for himself or on behalf of the corporate 

respondents: 

(a) Sold and entered into contracts to sell large quantities of deliverable 

soybeans under terms and conditions which made them unavailable for delivery in 

satisfaction of soybean futures contracts on the Chicago Board of Trade; 

(b) Withheld deliverable cash soybeans from sale except under terms and 

conditions which made them unavailable for delivery in satisfaction of soybean 

futures contracts on the Chicago Board of Trade; 

(c) Shipped large quantities of deliverable soybeans out of Chicago under 

conditions which made these shipments economically unjustified, in order to make 

such soybeans unavailable for delivery in satisfaction of soybean futures 

contracts on the Chicago Board of Trade; and 

(d) Entered into purported contracts for the purchase and sale of cash 

soybeans, or for the exchange of cash soybeans, which were not bona fide cash 

contracts but which, in effect, constituted transactions in futures under which 

respondent Landon V. Butler was able to control additional large quantities of 

soybean futures and determine the disposition thereof. 

7. On or about March 12, 1954, May 24, 1954, and July 15, 1954, respondent 

Landon V. Butler transmitted in interstate commerce to members of the grain 

trade and other interested persons, information purporting to relate to 

impending large shipments of deliverable cash soybeans from Chicago. Such 

information was false, misleading, or knowingly inaccurate, and was transmitted 

by the said respondent with knowledge of the fact that it would be widely 

circulated or disseminated, and for the purpose and with the intent of causing a 

price movement in the soybean market. 

8. On or about August 13, 1954, respondent Landon V. Butler transmitted in 

interstate commerce to the United States Department 

of Agriculture and the Chicago Board of Trade, reports that a Chicago grain 

elevator containing large quantities of deliverable soybeans against which 

negotiable warehouse receipts had been issued was unable to comply with loading 

out orders given by the holder of such receipts. At the same time, the said 

respondent published or caused the publication of similar representations or 

information among members of the grain trade and other interested persons. Such 

information, reports, and representations were false, misleading, or knowingly 

inaccurate in that they were designed to indicate that such grain elevator did 

not have in its possession and could not deliver soybeans of the quality and in 

the quantity called for by such receipts, which was contrary to fact. 

Respondent Landon V. Butler transmitted such reports and published or caused the 

publication of such information with knowledge of the fact that such reports and 

information would be widely circulated or disseminated, and for the purpose and 

with the intent of causing a price movement in the soybean market. 

9. On or about May 19, 1954, near the termination of trading in the May 1954 

soybean futures contract, Jackson Davis, a Crump customer, ordered a floor 

broker on the Chicago Board of Trade to purchase 625,000 bushels of May 1954 

soybean futures. The said Jackson Davis gave the order at a time and under 

circumstances designed to cause an increase in the price of soybean futures, and 

for that purpose and with that intent, and as a result of such order, the price 

of May 1954 soybean futures was increased substantially by rapid and successive 

bids on an ascending scale made on the floor of the Chicago Board of Trade by 

brokers attempting to execute the said order. The said brokers were able to 

purchase only 125,000 bushels of the 625,000 bushels ordered, prior to the close 

of trading. Such purchases were allocated and distributed among the accounts of 

various Crump customers, including accounts influenced or controlled by 

respondent Landon V. Butler. 
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10. Respondent Landon V. Butler, in his capacity as president and managing 

officer of the respondent corporations, initiated, supervised, directed and 

controlled the above-described corporate transactions and was responsible for 

their execution. The said respondent also advised with respect to and 

influenced the trading in the Crump accounts, and the above-described 

transactions by the Crump customers were undertaken and carried out pursuant to 

his recommendations and guidance. Respondent Landon V. Butler and the corporate 

respondents acted for the purpose and with the intent of manipulating the price 

of deliverable cash soybeans in Chicago and soybean futures on the Chicago Board 

of Trade in order to enable them to realize larger profits on their cash and 

futures holdings. 

CONCLUSIONS

The soybean futures contracts and cash soybeans which the respondents owned 

or controlled represented 21 percent of the available deliverable stocks of 

soybeans in Chicago on the last trading day in March 1954, and increased to 46 

percent and 94 percent at the close of trading in May and July, 1954, 

respectively. These figures justify the conclusion that the respondents 

controlled the soybean market in Chicago, particularly during June and July, 

1954. 

The fact that the Crump customers stood for and received delivery of cash 

soybeans which they then sold to respondent Butler supports the complainant's 

allegation that these accounts were influenced or controlled by Butler. This 

allegation is further supported by the fact that a block of 125,000 bushels of 

May soybean futures, purchased through orders given by one of these customers, 

was distributed among the accounts of various other Crump customers. 

Control of the market, together with the sale of deliverable soybeans under 

terms and conditions which made them unavailable for delivery on futures, the 

withholding of deliverable soybeans except under such terms and conditions, the 

shipment of large quantities of soybeans out of Chicago under conditions which 

made such shipments uneconomic, and the entry of an order designed to increase 

and which did substantially increase futures prices on the Chicago Board of 

Trade, all indicate an intent to manipulate prices as alleged in the complaint. 

The circulation of false information concerning large shipments of deliverable 

soybeans out of Chicago, and the transmission of similarly false reports that 

warehouse receipts calling for large quantities of soybeans in Chicago could not 

be honored, lend further support to the allegation that the purpose and intent 

were to cause a rise in the price of soybeans and soybean futures. 

The transmission in interstate commerce of "false or misleading or knowingly 

inaccurate reports concerning crop or market 

information or conditions that affect or tend to affect the price of any 

commodity in interstate commerce," is, in itself, a violation of the act 

regardless of its connection with any manipulation or attempt to manipulate 

prices (7 U.S.C., 1952 ed. § 13). In re Ralph W. Moore, 9 Agric. Dec. 1299 (9 

A.D. 1299), affirmed, 191 F. 2d 775 (C.A. D.C.), certiorari denied, 342 U.S. 

860. 

These violations are extremely flagrant and serious. They were obviously 

planned and deliberate and they involved large quantities of the commodity and 

continued over a long period of time. The Chicago soybean futures market is an 

important, active, and sensitive market, and is widely used by producers, 

dealers, manufacturers, and other processors of soybeans and related products, 

and the disturbance of that market by artificial influences disrupts the orderly 

flow of soybeans and soybean products in interstate commerce and operates to the 

detriment of producers and consumers. It is the primary purpose of the 

Commodity Exchange Act to prevent such disturbances (7 U.S.C., 1952 ed. § 5). 
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When the introduction of artificial influences is deliberate and is designed for 

the personal profit of the parties responsible, as is the case here, the 

sanction should be commensurate with the offense in order to afford the fullest 

measure of protection to producers, merchandisers, processors and other users of 

the market. 

The recommendation of the Commodity Exchange Authority that trading 

privileges on all contract markets be denied to the respondents until further 

order of the Secretary of Agriculture is adopted in this case. 

ORDER

Effective thirty (30) days after the date of this order, all contract markets 

shall refuse all trading privileges to Landon V. Butler, Black Gin Company, 

Butler-Foster Milling Company, and Alabama Grain Elevator Company, until further 

order of the Secretary of Agriculture, such refusal to apply to all trading done 

and positions held directly by Landon V. Butler or by any of the said firms, and 

also to all trading done and positions held indirectly through persons owned or 

controlled by them, or any of them, or otherwise. 

A copy of this decision and order shall be served upon each of the parties by 

registered mail or in person and upon each contract market. 

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