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Commodity Futures Trading Commission 

CEA CASES 

NAME: AMERICAN COMMODITY BROKERS, INC., PHYLLIS C. DEMPSTER, AND JOHN WHELAN 

CITATION: 32 Agric. Dec. 1765 

DOCKET NUMBER: 185 

DATE: NOVEMBER 19, 1973 

DOCUMENT TYPE: DECISION AND ORDER 

(No. 15,538) 

In re AMERICAN COMMODITY BROKERS, INC., PHYLLIS C. DEMPSTER, AND JOHN WHELAN. 

CEA Docket No. 185. Decided November 19, 1973, with respect to respondent John 

Wehlan.

Failure to meet financial requirements -- Filing of false financial reports -

- Undersegregation of customers' funds -- Failure to pay money due and owing to 

customers -- Failure to keep accounts and records as required under the 

regulations -- Responsibility for functions of corporation -- Aiding and 

abetting in violations -- Denial of trading privileges

Where respondent John Whelan, as Vice President of respondent corporation, 

aided and abetted respondent Phyllis C. Dempster, President of said corporation, 

in the wilful violations of the Act and regulations by the respondent 

corporation, and acted in combination or in concert with respondent Dempster as 

to such violations, respondent Whelan is punishable as a principal. Respondent 

John Whelan is ordered to cease and desist from the violations found herein, and 

is denied all trading privileges on all contract markets for three years, as 

stated in the order herein. The sanction is to deter. 

Richard W. Davis, for complainant. 

Richard L. Schmidt, Jr., Detroit, Mich., for respondent John Whelan. 

Decision by Donald A. Campbell, Judicial Officer.

DECISION AND ORDER

PRELIMINARY STATEMENT

This is a disciplinary proceeding under the Commodity Exchange Act (7 U.S.C. 

Chapter 1), hereafter sometimes referred to 

as the Act, instituted by a complaint and notice of hearing issued by the Under 

Secretary of Agriculture and filed on September 13, 1971. The respondents are 

the American Commodity Brokers, Inc., and two officers of the corporation, 

Phyllis C. Dempster, President, and John Whelan, Vice-President. 

The complaint alleges that the respondent corporation was managed, directed 

and controlled by the individual respondents; that the corporation operated as a 

registered futures commission merchant without meeting the minimum financial 

requirements of the Act and the regulations thereunder; that it filed with the 

Commodity Exchange Authority a false financial report; that it failed to 

properly segregate the funds of its customers; that it failed to compute and 

record daily the amount of customers' funds which should have been segregated; 

and that it failed and refused to pay to some of its customers money due and 

owing to them. 
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Respondent John Whelan filed an answer on November 1, 1971, generally denying 

the allegations of the complaint and stating that he was not responsible for 

making final decisions regarding management, direction and control. Respondents 

American Commodity Brokers and Phyllis C. Dempster filed an answer on December 

6, 1971, generally admitting the jurisdictional allegations and denying the 

substantive allegations. 

As a result of the first pre-hearing conference in this proceeding, 

complainant, the respondent corporation, and the respondent Dempster agreed to 

settle the matter by stipulation and consent to an order. The respondent 

corporation and the respondent Dempster admitted for the purposes of the 

administrative proceeding that they had violated the Act and regulations, as 

alleged in the complaint, and consented to a cease and desist order and an order 

suspending their trading privileges on contract markets for five years. The 

respondent Whelan refused to accept the same consent terms agreed to at the prehearing conference by the respondent corporation and Mrs. Dempster. 

Respondent Whelan was not represented by counsel at the pre-hearing 

conference and was granted a postponement of the hearing in order to obtain 

counsel and file a substitute answer, which he did. In his answer, he generally 

admitted the allegations of the complaint as to the respondent corporation but 

denied his responsibility for the corporation's actions. 

At another pre-hearing conference preceding the rescheduled hearing, the 

complainant and respondent Whelan agreed and stipulated 

to most of the factual allegations of the complaint, and that the sole issue 

involved was respondent Whelan's contention that his authority and 

responsibility were such that he should not be held responsible for any 

wrongdoing of the respondent corporation. 

Respondent Whelan was represented at the oral hearing held in Detroit, 

Michigan, on June 15, 1972, by Richard L. Schmidt, Jr., Esq., Detroit, Michigan. 

Richard W. Davis, Jr., Esq., Office of the General Counsel, United States 

Department of Agriculture, appeared as counsel for the complainant. Both sides 

offered oral testimony; and complainant introduced documentary evidence. The 

record contains 88 pages of oral testimony and 10 exhibits, some of which are 

multi-page documents. Briefs were filed by both parties; the final brief being 

filed on August 2, 1972. 

Harry S. McAlpin, Chief Administrative Law Judge, filed an initial Decision 

and Order on September 17, 1973, in which he found that the complainant failed 

to carry its burden of proof, and he proposed that the complaint be dismissed. 

An appeal was filed by the complainant on October 16, 1973, and respondent 

Whelan's response was filed on October 30, 1973. Oral argument was heard before 

the Judicial Officer on November 8, 1973, in the Detroit, Michigan, area. The 

Judicial Officer has final administrative authority to decide cases under the 

Commodity Exchange act. n1 

n1. The office of Judicial Officer is a career position established 

pursuant to the Act of April 4, 1940 (7 U.S.C. 450c-450g), and 

Reorganization Plan No. 2 of 1953 (5 U.S.C. 1970 ed., Appendix, p. 550). 

The Department's first Judicial Officer held the office from 1942 to 1972. 

The present Judicial Officer was appointed in January 1971, having been 

involved with the Department's regulatory programs since 1949 (including 3 

years' trial litigation; 10 years' appellate litigation relating to appeals 

from the decisions of the prior Judicial Officer; and 8 years as 

administrator of the Packers and Stockyards Act regulatory program). 

FINDINGS OF FACT

1 Respondent American Commodity Brokers, Inc., a corporation organized and 

existing under the laws of the State of Michigan, with offices at 415 South 
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Monroe, Monroe, Michigan, was at all times material herein, a registered futures 

commission merchant under the Commodity Exchange Act, engaged in trading in 

commodities for future delivery for the accounts of customers and holding for 

such customers sums of money, representing deposits 

of margin by and trading profits accruing to such customers. At all such times, 

the respondent corporation was subject to the minimum financial requirements 

specified in § 1.17 of the regulations under the Commodity Exchange Act (17 CFR 

1.17). 

2. Respondent Phyllis C. Dempster, an individual whose business address is 

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

material herein, President of the respondent corporation and responsible for the 

management, direction and control of its activities. Respondent John Whelan 

was, at all times material herein, the Vice-President of the respondent 

corporation. 

3. The transactions in commodities for future delivery, referred to herein, 

could have been used for hedging transactions in interstate commerce in such 

commodities or the products or by-products thereof, or for determining the price 

basis of transactions in interstate commerce in such commodities, or for 

delivering such commodities sold, shipped or received in interstate commerce. 

4. On March 31, 1970, the respondent corporation engaged as a registered 

futures commission merchant under the Commodity Exchange Act, notwithstanding 

that at that time it failed to meet the minimum financial requirements 

prescribed by § 1.17 of the regulations issued by the Secretary of Agriculture 

under the Act (17 CFR 1.17). As of March 31, 1970, the respondent corporation 

lacked approximately $ 84,000 of having enough working capital to meet such 

minimum financial requirements. 

5. During the period from March 5 to August 6, 1970, the respondent 

corporation, in the regular course of its business as a futures commission 

merchant, carried accounts of customers who traded in commodity futures on 

contract markets subject to the provisions of the Commodity Exchange Act and the 

regulations thereunder. Such accounts, the trading therein, and the handling 

and disposition of funds in connection therewith, were subject to the provisions 

of the Act and regulations. At all such times, the respondent corporation had 

to its credit with banks or other depositories, money in varying amounts, held 

in segregated accounts and identified as customers' funds representing deposits 

of margin by and trading profits accruing to such customers. 

6. During the period between March 5 and April 9, 1970, both inclusive, the 

respondent corporation was undersegregated, that 

is, during the period mentioned the total amount of customers' funds held in 

segregation as above described in Finding 5 was less than the amount necessary 

to pay all credits and equities due to such customers. As of March 5, March 31 

and April 9, 1970, such deficits amounted to approximately $ 10,000, $ 18,000 

and $ 20,000 respectively. 

7. During the period from April 10 through August 6, 1970, the respondent 

corporation failed to make any computation or permanent record, as of the close 

of the market on each business day, 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, as provided in § 1.32 of the regulations (17 

CFR 1.32). 

8. On May 7, 1970, the respondent corporation submitted to the Commodity 

Exchange Authority a financial report (Form 1-FR) as of March 31, 1970, assigned 

by respondent Phyllis C. Dempster. The report contained material false 

statements in that: (1) it stated the firm had an excess of adjusted working 
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capital in the amount of $ 22,971.94, when actually it had an insufficiency of 

adjusted working capital in the amount of approximately $ 84,000; (2) it stated 

the firm had current assets of approximately $ 56,000, when it actually had 

current assets of approximately $ 20,000; and (3) it stated the firm had current 

liabilities of approximately $ 22,000, when it actually had current liabilities 

of approximately $ 94,000. 

9. As of April 21, 1970, the respondent corporation had failed and refused to 

remit to its customers $ 2,606.95 due and owing by it to such customers in 

connection with transactions in commodities for future delivery which the 

respondent corporation had made for the account and benefit of such customers. 

During March 1970, the respondent corporation issued checks to four customers in 

purported payment of $ 2,518.95 of the aforesaid sum, but such checks were 

returned by the bank upon which they were drawn because of insufficient funds in 

the corporate respondent's account. 

10. The respondent Phyllis C. Dempster, President of respondent corporation, 

met the respondent John Whelan when she was a customer at the Trenton State 

Bank, where he was Assistant Vice-President. She hired him in 1969 as Assistant 

to the President to be an "overseer" of all of her various corporations, 

including the respondent corporation. After being employed for about 

a month as Assistant to the President, respondent Whelan went to Chicago to 

manage the Chicago office of the respondent corporation. He held that position 

for about five or six weeks when he returned to Detroit to be the "overseer" of 

the respondent corporation. He became Vice-President of the respondent 

corporation in September of 1969. 

11. Although the respondent corporation had several branch offices which were 

franchise operations, respondent John Whelan, as Vice-President of the 

respondent corporation, was responsible for the following functions with respect 

to all of the corporation's offices: the execution of the customers' orders; the 

recording of the orders in the customers' contract ledgers; seeing that the 

customers' accounts were properly maintained and accounted for; making sure that 

the customers' funds were properly deposited in segregated accounts; making 

payment to the customers; and reconciling the checking accounts of the four 

branch offices of the respondent corporation and the home office. 

12. Respondent John Whelan was in charge of preparing the financial report as 

of March 31, 1970, involved in this case. The report was prepared by Mr. 

Whelan, together with Mr. James F. Thorne, Director of Corporate Planning of 

Dempster Investment Company, the parent company of the respondent corporation. 

Mr. Brand, the Comptroller of both the parent company and the respondent 

corporation, who was next in command of the respondent corporation after the 

respondent Whelan, also participated in preparing the March 31, 1970, financial 

report. Mrs. Dempster signed the March 31, 1970, financial report without 

making any changes in it. 

13. The respondent John Whelan knew that the respondent corporation was 

operating while seriously underfinanced, as charged in the complaint; that the 

financial report as of March 31, 1970, was materially false; that the respondent 

corporation did not maintain customers' funds properly segregated on the dates 

involved in this case; that the segregation records were not kept during the 

period involved in this case; and that the customers involved in this case were 

not paid. 

14. The respondent John Whelan wilfully aided and abetted the respondent 

Phyllis C. Dempster in the violations by the respondent corporation involved in 

this case and acted in combination or concert with her as to such violations. 

CONCLUSIONS

It is admitted in this proceeding that the respondent corporation violated 

the Act and regulations as set forth in the findings of fact. The violations 
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are of two types -- (1) violations relating to the minimum financial 

requirements, i.e., operating while underfinanced and filing a false report as 

to the firm's financial condition; and (2) violations relating to customers' 

funds, i.e., failing to properly segregate such funds, keep proper records, and 

remit amounts due to customers. 

Specifically, it is admitted (1) that the corporation lacked approximately $ 

84,000 on March 31, 1970, of having the required working capital; (2) that the 

corporation filed a false financial report with the Commodity Exchange Authority 

as of March 31, 1970, stating (i) that the firm had $ 22,971.94 excess adjusted 

working capital, when actually it had an $ 84,000 insufficiency; (ii) that the 

firm had current assets of approximately $ 56,000, when it actually had current 

assets of approximately $ 20,000; and (iii) that the firm had current 

liabilities of approximately $ 22,000, when it actually had current liabilities 

of approximately $ 94,000; (3) that the corporation failed to properly segregate 

customers' funds from March 5 to April 9, 1970, having deficits ranging from $ 

10,000 to $ 20,000 in the customers' segregated accounts; (4) that during the 

period from April 10 through August 6, 1970, the corporation failed to make any 

computation or permanent record as of the close of each business day of the 

amount of money, securities, and property required to be held in segregated 

accounts; and (5) that as of April 21, 1970, the respondent corporation had 

failed and refused to remit to customers $ 2,606.95 (four checks in purported 

payment of $ 2,518.95 of such sum were returned because of insufficient funds). 

The only issue in this proceeding relates to whether the respondent John 

Whelan, Vice-President of respondent corporation, may be held responsible as a 

principal for such violations. 

The Chief Administrative Law Judge found and concluded that the respondent 

John Whelan "was a vice president of the respondent corporation in name and 

title only, and was not responsible for the management, direction and control of 

the activities of the respondent corporation in any manner as would impute to 

him responsibility for any wrongdoing admitted by and attributable to the 

respondent corporation and its President, respondent Dempster" (Finding 16). 

It is my practice, required by reason as well as by many clear-cut judicial 

precedents, to give great weight to the findings by the Administrative Law 

Judges, who have the advantage of seeing and hearing the witnesses testify (see, 

e.g., In re Sy B. Gaiber & Co., 31 Agriculture Decisions 474, 498 (1972); In re 

Louis Rom-off, 31 Agriculture Decisions 158, 172 (1972); In re Cardwell Dishmon,

31 Agriculture Decisions 1002, 1004 (1972); In re Arthur N. Economou, 32 

Agriculture Decisions 14, 36-37 (1973), appeal pending. 

However, it is recognized that the weight to be given to an Administrative 

Law Judge's findings reaches its maximum when it turns on credibility (see Ward v. N.L.R.B., 462 F.2d 8, 11-13 (C.A. 5, 1972); Fairbank v. Hardin, 429 F.2d 264, 

268 (C.A. 9, 1970); NLRB v. Majestic Weaving Co., 355 F.2d 854, 859 (C.A. 2, 

1966); Cella v. United States, 208 F.2d 783, 788 (C.A. 7, 1953), certiorari 

denied, 347 U.S. 1016; National Labor Relations Board v. Swinerton, 202 F.2d 

511, 514 (C.A. 9, 1953), certiorari denied, 346 U.S. 814; National Labor 

Relations Board v. Dinion Coil Co., 201 F.2d 484, 490 (C.A. 2, 1952)). In this 

case, the Administrative Law Judge seems to base his ultimate finding and 

conclusion on the weight to be given to the evidence, rather than on his view as 

to the veracity of the witnesses. Hence this case does not turn on the 

credibility of the witnesses. 

Inasmuch as I believe that the Administrative Law Judge's ultimate finding 

and conclusion is contrary to the overwhelming weight of the evidence in the 

record, and is contrary to the admissions made by the respondent John Whelan at 

the hearing, I am compelled to differ with the Chief Administrative Law Judge's 

ultimate finding and conclusion (see, e.g., F.C.C. v. Allentown Broadcasting 

Co., 349 U.S. 358, 364-365 (1955); Universal Camera Corp. v. Labor Bd., 340 U.S. 

474, 492-497 (1951); Radio Comm'n v. Nelson Bros. Co., 289 U.S. 266, 285-286 

(1933); Southern Nat. Mfg. Co., Inc. v. Environmental Pro. Agcy., 470 F.2d 194, 

197 (C.A. 8, 1972); Retail, Wholesale and Department Store U. v. N.L.R.B., 466 
Page 6 

F.2d 380, 387 (C.A.D.C., 1972); OKC Corp. v. F.T.C., 455 F.2d 1159, 1162-1163 

(C.A. 10, 1972); Nix v. N.L.R.B., 418 F.2d 1001, 1008 (C.A. 5, 1969); Joy Silk 

Mills v. National Labor Relations Board, 185 F.2d 732, 742 (C.A.D.C., 1959), 

certiorari denied, 341 U.S. 914; Canteen Corp., 32 AdL 2d 768, 769-773 (NLRB, 

1973); Davis, Administrative Law Treatise (1958 and 1970 Supp.) § 10.04)). 

I. The Respondent Whelan Aided and Abetted in the Respondent Corporation's 

Violations, and Acted in Combination or Concert with Respondent Dempster in Such 

Violations.

Section 13 (a) of the Commodity Exchange Act, as added February 19, 1968, 

provides (7 U.S.C. 13c(a)): n2 

(a) Any person who commits, or who willfully aids, abets, counsels, commands, 

induces, or procures the commission of, a violation of any of the provisions of 

this chapter, or any of the rules, regulations, or orders issued pursuant to 

this chapter, or who acts in combination or concert with any other person in any 

such violation, or who willfully causes an act to be done or omitted which if 

directly performed or omitted by him or another would be a violation of the 

provisions of this chapter or any of such rules, regulations, or orders may be 

held responsible in administrative proceedings under this chapter for such 

violation as a principal. 

n2. The legislative history with respect to this and other amendments 

enacted in 1968 states (H. Rep. No. 743, 90th Cong., 1st Sess., pp. 1, 7 

(1967): 

The 28-to-1 vote by which the committee has approved this bill reflects 

the overwhelming support that this legislation enjoys from the various 

segments of agriculture and the general public that have either an interest 

in or a responsibility for the maintenance of sound and honest futures 

markets. 

* * * 

With these three changes, the committee is of the opinion that the bill 

contains such additional regulatory authority as is clearly indicated as 

being desirable and feasible at the present time and under existing 

conditions. The committee believes that this extension of authority will 

provide a useful tool for the Commodity Exchange Authority in its 

regulation of the commodity futures markets, will add to the usefulness of 

the markets, and will in no way interfere with any legitimate activity. 

Under § 13(a) of the Act, it is only necessary to show that the respondent 

John Whelan wilfully aided or abetted in the respondent corporation's 

violations, or acted in combination or concert with the respondent Phyllis C. 

Dempster in such violations; it is not necessary to show that he had the power 

to compel Mrs. Dempster, President of respondent corporation, to stop engaging 

in such violations. 

To illustrate that point, which is at the heart of this case, if the VicePresident in charge of managing a corporation dealing in stocks and bonds 

learned that the firm was selling stolen stocks 

and bonds, and so advised the President of the firm, who refused to end the 

practice, the Vice-President could not continue to deal in the stolen securities 

for the firm, selling some stolen securities himself and supervising the sale of 

stolen securities by other employees of the firm, without being subject to a 

criminal prosecution. 

It is well established that an official of a firm having a responsible share 

in the furtherance of an unlawful transaction is criminally responsible for the 

violation. United States v. Dotterweich, 320 U.S. 277, 281-285 (1943); United 

States v. Eskow, 422 F.2d 1060, 1068-1069 (C.A. 2, 1970), certiorari denied, 398 
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U.S. 959; Carolene Products Co. v. United States, 140 F.2d 61, 65-66 (C.A. 4, 

1944), affirmed on other grounds, 323 U.S. 18; Wood v. United States, 204 F.55, 

58 (C.A. 4, 1913), certiorari denied sub nom. Rhea v. United States, 229 U.S. 

617. See, also, Restatement of the Law, Agency 2d, § 359A. 

The common law principle, in this respect, is codified in 18 U.S.C. 2 

(formerly 18 U.S.C. 550). It is provided in 18 U.S.C. 2: 

§ 2. Principals. 

(a) Whoever commits an offense against the United States or aids, abets, 

counsels, commands, induces or procures its commission, is punishable as a 

principal. 

(b) Whoever willfully causes an act to be done which if directly performed by 

him or another would be an offense against the United States, is punishable as a 

principal. 

Section 13(a) of the Commodity Exchange Act, quoted above, was drafted by the 

Department to make applicable in the administrative proceedings under the Act 

the same type of responsibility applicable in criminal proceedings under 18 

U.S.C. 2 (formerly 18 U.S.C. 550). This was explained by the Department's 

attorney as follows: n3 

Mrs. Prokop. What we are trying to accomplish here is to make applicable to 

administrative proceedings, the same type of responsibility that applies in 

criminal proceedings under the provisions of title 18 U.S.C., section 2. Now, 

title 18 U.S.C., section 2, does not have the word "willfully" in it. It is 

perhaps inherent under the decisions in regard to offenses 

 

like abetting and I think it would be implied with respect to counseling, 

commanding, inducing, procuring, and so forth. It is not so clear that it is 

inherent in the word "aiding." We did not tend to hold someone responsible for 

an unintentional aiding of someone's improper actions in an administrative 

proceeding. So we put in the word "willfully" in conjunction with "aiding," 

feeling that this would solve the problem from the standpoint of the trade who 

were concerned. 

Mr. Dole. In other words, you mean one can commit a violation unknowingly or 

unwillfully and be punished under section 27 [which added § 13(a) to the Act]? 

Mrs. Prokop. No. 

You see, we put the word "willfully" ahead of "aiding," because the word 

"aid" under some of the decisions was not clearly limited to situations in which 

there was a knowing participation. It did not seem to be necessary to add that 

word with respect to the rest of the activities in that series, because 

inherently, they include some element of knowledge. 

What we are trying to do in this section is to make applicable to 

administrative proceedings the same standard that would apply under 18 U.S.C. 2. 

n3. Hearings before the Committee on Agriculture, House of 

Representatives, 90th Cong., 1st Sess., on H.R. 11930 and H.R. 12317, p. 66 

(1967). 

The criminal law provisions of 18 U.S.C. 550 (now 18 U.S.C. 2) were applied 

in United States v. Dotterweich, 320 U.S. 277 (1943), in holding the President, 

who was also General Manager, of a corporation liable for the firm's violations 

under the Federal [Food, Drug, and Cosmetic Act] The Court explained the 

applicability of 18 U.S.C. 550 as follows (320 U.S. at 281): 

The statute makes "any person" who violates § 301 (a) guilty of a 

"misdemeanor." It specifically defines "person" to include "corporation." § 

201(e). But the only way in which a corporation can act is through the 

individuals who act on its behalf. New York Central & H. R.R. Co. v. United 
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States, 212 U.S. 481. And the historic conception of a "misdemeanor" makes all 

those responsible for it equally guilty, United States v. Mills, 7 Pet. 138, 

141, a doctrine given general application in § 332 of the Penal Code (18 U.S.C. 

§ 550). 

Under the Federal Food, Drug, and Cosmetic Act and the aiding and abetting 

provisions of 18 U.S.C. 550, the defendant was held liable for the corporation's 

violations even though he did not 

 

have personal knowledge of the specific violations involved in the case. The 

Court held (320 U.S. at 284-285): 

To speak with technical accuracy, under § 301 a corporation may commit an 

offense and all persons who aid and abet its commission are equally guilty. 

Whether an accused shares responsibility in the business process resulting in 

unlawful distribution depends on the evidence produced at the trial and its 

submission -- assuming the evidence warrants it -- to the jury under appropriate 

guidance. The offense is committed, unless the enterprise which they are 

serving enjoys the immunity of a guaranty, by all who have such a responsible 

share in the furtherance of the transaction which the statute outlaws, namely, 

to put into the stream of interstate commerce adulterated or misbranded drugs. 

Hardship there doubtless may be under a statute which thus penalizes the 

transaction though consciousness of wrongdoing be totally wanting. Balancing 

relative hardships, Congress has preferred to place it upon those who have at 

least the opportunity of informing themselves of the existence of conditions 

imposed for the protection of consumers before sharing in illicit commerce, 

rather than to throw the hazard on the innocent public who are wholly helpless. 

It would be too treacherous to define or even to indicate by way of 

illustration the class of employees which stands in such a responsible relation. 

To attempt a formula embracing the variety of conduct whereby persons may 

responsibly contribute in furthering a transaction forbidden by an Act of 

Congress, to wit, to send illicit goods across state lines, would be mischievous 

futility. In such matters the good sense of prosecutors, the wise guidance of 

trial judges, and the ulimate judgment of juries must be trusted. Our system of 

criminal justice necessarily depends on "conscience and circumspection in 

prosecuting officers," Nash v. United States, 229 U.S. 373, 378, even when the 

consequences are far more drastic than they are under the provisions of law 

before us. See United States v. Balint, supra (involving a maximum sentence of 

five years). For present purpose it suffices to say that in what the defense 

characterized as "a very fair charge" the District Court properly left the 

question of the responsibility of Dotterweich for the shipment to the jury, and 

there was sufficient evidence to support its verdict. 

Similarly, the President and Vice-President, who were the directing heads, of 

a corporation were held liable, under 18 U.S.C. 550, for violating the Federal 

Filled Milk Act in Carolene Products Co. v. United States, 140 F.2d 61 (C.A. 4, 

1944), affirmed on other grounds, 323 U.S. 18. The Court recognized that there 

was no evidence that the defendants knew of the specific violations involved in 

the case, stating (140 F.2d at 65): 

In this connection, the Government expressly admits that there is no evidence 

in the record to show that either of the individual defendants personally made, 

or even had any personal knowledge of, the eight specific shipments set out in 

the indictment. 

In holding the defendants liable under 18 U.S.C. 550, the Court held (140 

F.2d at 66): 

There is ample authority in support of the principle that the directing heads 

of a corporation which is engaged in an unlawful business may be held criminally 

liable for the acts of subordinates done in the normal course of business, 
Page 9 

regardless of whether or not these directing heads personally supervised the 

particular acts done or were personally present at the time and place of the 

commission of these acts. 

Moreover, "[t]o be guilty of the crime of 'aiding and abetting' one does not 

have to have an active stake in the outcome of the crime but merely participate 

therein." Wyatt v. United States, 388 F.2d 395, 400 (C.A. 10, 1968). 

In view of the fact that the aiding and abetting provisions in § 13(a) of the 

Commodity Exchange Act were based on the provisions in 18 U.S.C. 2 (formerly 18 

U.S.C. 550), it is clear that under § 13 (a) of the Act, the Vice-President of a 

firm who managed the firm is liable as a principle for the firm's violations if 

he wilfully n4 aided and abetted in the firm's violations, or acted in concert 

with others in the violations. Moreover, as to his area of responsibility, he 

is also liable as a principal for the acts of subordinates done in the normal 

course of business if, in the exercise of reasonable care, he should have known 

of the violations. 

n4. The issue as to wilfulness is discussed in the following section of 

this decision. 

Turning to the facts of this case, although there are some situations in 

which the Vice-President of a firm is a mere figurehead (e.g., because of 

nepotism or a State statute requiring a certain 

 

number of officers), this was admittedly not the case with respect to the 

respondent John Whelan. He was hired on merit. Mrs. Dempster, President of the 

respondent corporation, met respondent Whelan when she was a customer at Trenton 

State Bank, where he was Assistant Vice-President (Tr. 61). Mr. Whelan 

testified that he was "hired in as Assistant to the President which supposedly 

would have been an overseer of all of the various corporations she had working 

at the time" (Tr. 61). 

Mr. Whelan testified that he worked as Assistant to the President for about a 

month, when "[e]arly in June of 1969 the two people that were running the 

Chicago Office [of respondent corporation] had decided to leave the 

organization, and there was no one prepared to take over as office manager for 

taking care of the segregation" (Tr. 61). Mr. Whelan testified that he went to 

Chicago for five or six weeks "to take that job" (Tr. 61), and then went back to 

Detroit as "[k]ind of an overseer of the [respondent corporation] American 

Commodity Brokers" (Tr. 62). He got the title of Vice-President of respondent 

corporation in September 1969 (Tr. 62). 

The respondent Whelan admitted that, as Vice-President, he was responsible 

(Tr. 73-74) -- 

as far as having the customer's orders executed in commodity exchanges, as 

far as handling the execution of those orders recorded in the customer's 

contract ledgers, as far as having the financial records of those accounts 

recorded in the customer's financial ledger accounts, as far as seeing that 

those accounts were properly maintained and accounted for, [and] as far as 

making sure the customer funds were properly deposited in segregated accounts. 

The foregoing admissions by the respondent Whelan are sufficient by 

themselves to be decisive with respect to all of the violations involved in this 

case. The Act and regulations require any person performing such functions to 

meet minimum financial requirements, file correct financial reports, handle 

customers' funds properly, remit money owing to customers, and keep adequate 

segregation records. And § 13(a) of the Act makes a Vice-President in charge of 

such activities liable as a principal for any violations with respect thereto. 

The respondent Whelan further testified as to his duties involving the 

segregation of customers' funds, record keeping as to the segregated funds, and 

making payment to customers, as follows: 
Page 10 

In handling the customers' accounts when a commodity customer would want his 

money, I would write him a check, things of that sort, without approval (Tr. 64-

65). 

* * * 

Q What were your duties in regard to the segregation audit, the funds in 

segregation? 

A Primarily to write checks to the customers and transfer the funds to the 

Chicago Office when it was needed there for marginals, when customers wanted out 

of the market. I would send them their checks (Tr. 66). 

* * * 

HEARING EXAMINER MC ALPIN: Anytime you became aware of any under segregation, 

whether as a result of seeing it on Daily Reports or writing a check and finding 

out that the account was insufficient or about to write a check, whatever might 

have happened, what was your responsibility to do about it? 

A I would report it to Mrs. Dempster. 

HEARING EXAMINER MC ALPIN: Is that the only thing you could do about it? 

A That is what I did. I don't knew if it was the only thing I could do, sir. 

HEARING EXAMINER MC ALPIN: Did you have authority to do anything else? 

A I don't knew if this is what you are asking me. Let me put it this way. 

If the funds were needed in Chicago, I had the authority to transfer the funds 

from other banks that we had accounts with, have Grand Rapids to transfer money 

for marginals, things such as that. I don't know if I have answered your 

question. That would be the authority that I had. 

HEARING EXAMINER MC ALPIN: Let me clarify that point in my mind now. Were 

these also customer accounts ? 

A Right, we would transfer the accounts, deposits to the branch cities to the 

regulated and non-regulated security 

 

checking account and Continential and National in Chicago. 

HEARING EXAMINER MC ALPIN: Now, when you say "transfer", you mean you would 

take out of one account and deposit it or have it deposited in another account? 

A Right, sir. I would send checks to our manager in Chicago and he would 

deposit them in Chicago (Tr. 83-84). 

The respondent Whelan also testified that his duties as Vice-President were - - 

to reconcile the checking accounts of the four offices for [respondent 

corporation] A.C.B. plus our own, plus somewhat on the new business end of it 

where I would try and contact people to try and get some customers in the 

commodity market, helping with seminars, things such as that (Tr. 62-63). 

* * * 

Q Did you have any other responsibilities other than those that you just 

mentioned to me? Did you have responsibility? Did you have brokers, customers 

men working in the Detroit Office? 

A Yes, there were customers men working in the Detroit Office. We had, I 

would say -- yes, they would have been working. As far as working for someone, 

they would have been working for me. 

Q You oversaw their activities? 
Page 11 

A Yes, sir (Tr. 71). 

The respondent Whelan admitted taking part in the preparation of the 

financial report, Form 1-F.R., which was involved in the respondent 

corporation's violations (Tr. 65): 

Q Are you familiar with the 1F.R. Form which is filed? 

A Yes, I am. 

Q What role did you play, particularly, the report of March 31, 1970? Do you 

recall what your role in the representation of that report was? 

A In all the reports I would analyze the customer's position, check the Wall 

Street Journal from the day that the C.E.A. wanted the report, get the prices, 

figures, the longs and shorts and where we were indebted and then make the last 

computations and summaries of that. Those were the duties I had. 

Q Did you actually do the figuring yourself? 

A As far as the customer's positions, yes. 

Mr. Whelan admitted that he was aware of the minimum financial requirements 

and the segregation regulations (Tr. 75-76), and he knew of the previous 

administrative action against respondent corporation in 1969 for failing to meet 

the minimum financial requirements (Tr. 74). 

Mr. Whelan further admitted that he knew of various violations by respondent 

corporation as to the segregation requirements and as to the failure to remit 

money to customers. He testified: 

Q During the course of your employment did you ever become aware of the fact 

that there were shortages in the various segregation accounts? 

A I would say, yes, I was aware of them. 

Q Did you bring this to Mrs. Dempster's attention? 

A Well, she knew it. In other words, I would be aware of it when she asked 

me to write a check and there weren't any funds there. I wouldn't ask her to 

write them if I had brought them to her attention. I would think she would know 

at the same time that I knew. 

Q Did you actually ever refuse to write a check because you knew there was a 

shortage? 

A Correct, yes, I did refuse to write checks. 

Q What happened then? 

A I would give her the checkbook and obviously she didn't write them (Tr. 

67). 

* * * 

Q Except for the period which we alleged in our Complaint that the Daily 

Segregation Record was not maintained, 

 

and except for some other specific dates, was the Daily Segregation Record 

normally maintained? Are you familiar with what the Daily Segregation Record 

is? 

A Yes. I believe it was maintained to the point, it seemed to me the fellow 

that was working for us in Chicago left and then it went for several days 

without a pay maintained, and I am not really familiar with the date that 

happened. During that time we had supposedly discussed transferring the 

customer's positions to Woodstock. 
Page 12 

Q The purpose of that Daily Segregation Record is to inform in the Futures 

Commission Merchant of how much money you should have in to meet the 

requirements of the Act, is it not? 

A Yes, sir, I believe so (Tr. 79-80). 

* * * 

Q * * *. Do you recall, Mr. Whelan, that we agreed to a stipulation this 

morning with regards to the failure of American Commodity Brokers to pay four 

named customers the funds that were owed to them. When did you first become 

aware of that situation? 

A At the time we transferred the customer's funds to Woodstock. I believe 

that is around the time that I wrote a letter to Washington asking for help to 

get this money from the Chicago Open Board of Trade. 

Q You had not realized prior to the time then the accounts were transferred 

to Woodstock that these checks which were written and signed to those customers 

could not be met because of insufficient funds ? 

A No, sir. In one instance I had a direct reply with one of the customers 

(Tr. 81-82). 

Although Mr. Whelan denied that he was aware of the segregation and payment 

violations on the specific dates involved in this case when they occurred (Tr. 

77, 82), his admissions establish that, as Vice-President, he was specifically 

responsible for this aspect of the firm's business. Although I infer that he 

knew of the specific violations when they occurred, based on the foregoing 

testimony, it is sufficient that he was responsible for this function 

 

and, in the exercise of reasonable care, should have known of the specific 

violations. 

Mr. Whelan admittedly was aware of the failure to keep the Daily Segregation 

Record when one of the firm's employees left (Tr. 79), and I infer that he was 

aware of the specific violations, in this respect, involved in this case. 

In addition, I infer that respondent Whelan knew that the financial report 

prepared as of March 31, 1970, was false, notwithstanding his denial (Tr. 81). 

Complainant's Exhibit No. 5 shows that whereas the financial statement prepared 

by Mr. Whelan and his colleagues showed an adjusted working capital of almost $ 

33,000, there actually was a deficiency of working capital of more than $ 

74,000. That is a discrepancy of over $ 107,000. 

The largest single discrepancy in a specific item of the statement was an 

overstatement of the general funds bank account by $ 40,000. A personal check 

for $ 40,000 from Mrs. Dempster, President of the firm, payable to the firm, was 

deposited on April 2, 1970, two days after the effective date of the financial 

statement. This check was not paid because of insufficient funds and was 

returned by the bank on April 7, 1970, eighteen days before the financial 

statement was completed and signed. See Item (2), page 2, Comp. Ex. No. 5 and 

Item (2) page 1, Comp. Ex. No. 7. That $ 40,000 accounted for practically all 

of the cash on hand and more than two-thirds of the claimed current assets 

(Comp. Ex. No. 7, p. 1). 

Another major discrepancy in the March 31, 1970, financial report was in the 

amount of customers' funds in segregation, an area for which Mr. Whelan 

admittedly had complete responsibility. The financial statement showed an 

excess of funds in segregation of over $ 2,000 (Comp. Ex. No. 7, Item (1), p. 1; 

Comp. Ex. No. 5, p. 2), whereas there was actually a deficiency of funds in 

segregation of over $ 18,000, which should have been reported as a current 

liability (Comp. Ex. No. 5, p. 4). Moreover, on the same day, the segregated 

funds bank account was overdrawn by nearly $ 3,000 (Comp. Ex. No. 5, p. 4), 

which also should have been reported as a current liability. 
Page 13 

The correction of the foregoing discrepancies alone would have more than 

wiped out the illusory excess of working capital. Although I infer that Mr. 

Whelan was aware of these specific discrepancies, even if Mr. Whelan was not 

aware of them, he should, 

 

with the exercise of reasonable care, have known that substantial parts of the 

financial report were false. 

In short, I would be compelled to find that the respondent Whelan is liable 

as a principal for the violations in this case based upon his own admissions. 

His admissions establish that he managed or supervised all of the activities of 

the respondent corporation subject to regulation under the Commodity Exchange 

Act. 

But the record does not stop there. Other strong testimony supports Mr. 

Whelan's admissions. 

Mr. James F. Thorne, Director of Corporate Planning for Dempster Investment 

Company, testified that the respondent corporation, American Commodity Brokers, 

Inc., was a subsidiary of Dempster Investment Company (Tr. 25). He testified 

that the two firms held joint weekly staff meetings which were attended by two 

persons from the respondent corporation, viz., Mrs. Dempster and Mr. Whelan, two 

other persons and himself from the Dempster Investment Company, and Mr. Brand, 

who was Comptroller of both firms. Mr. Thorne testified that Mr. Whelan's 

duties as Vice-President of respondent corporation were to "run the company" 

(Tr. 37). Mr. Thorne explained, of course, that the "president always has the 

ultimate authority" (Tr. 39). 

Mr. Thorne testified that the March 31, 1970, financial report was prepared 

by Mr. Whelan, Mr. Brand (the Comptroller for both corporations), and himself. 

He testified that "in this particular case it would be Mr. Whelan who would have 

been in charge" of preparing the March 31, 1970, report (Tr. 33). Although Mr. 

Whelan testified that he filled in only certain figures on the report (Tr. 65-

66), he did not contradict Mr. Thorne's prior testimony that he, Mr. Whelan, was 

in charge of the preparation of the March 31, 1970, report. Mr. Thorne 

testified specifically that the whole report was "Mr. Whelan's duty to fill out" 

(Tr. 36). Mr. Whelan did not contradict that testimony. 

Mr. Thorne participated in preparing the March 31, 1970, report since the 

firm was late in getting the report in and had to get it done quickly (Tr. 36-

37). The report is lengthy, consisting of 10 pages, and 143 entries of figures. 

Although the report was signed by Mr. Dempster, President of respondent 

corporation, there is nothing in the record to suggest that she changed the 

report in any respect, after it was prepared under Mr. Whelan's supervision. 

Mr. Robert Piccirillo, an auditor for the Commodity Exchange Authority, 

testified that he dealt primarily with Mr. Whelan when he was conducting audits 

of the respondent corporation (Tr. 44-48). He testified that "Mr. Whelan 

appeared to have direction and control of the activities of American Commodity 

Brokers in the absence of Mrs. Dempster, and in certain situations in which I 

spoke with Mr. Whelan, he dealt with me on this basis and I asked him questions 

with regard to certain situations" (Tr. 45). Mr. Whelan signed letters to the 

Commodity Exchange Authority with respect to the respondent corporation's 

business activities (Comp. Exs. 9 and 10). 

Mr. Piccirillo testified that in the case of serious instances of failures to 

comply with the Act, he spoke with Mrs. Dempster as the owner of the firm (Tr. 

48), and that in some cases when he came across a question of policy or failing 

to comply with the Act he saw Mrs. Dempster and Mr. Whelan (Tr. 48-49). 

Specifically, Mr. Piccirillo testified (Tr. 48-49): 

Q So actually what you did, correct me if I am wrong. If it was a matter 

that was, let us say, a procedural matter of examining the record or having 
Page 14 

questions about the date of the operation, you saw Mr. Whelan, but if you came 

across a matter that appeared to be, let us say, a question of policy or failing 

to comply with the Act, you went to see Mrs. Dempster, is that correct? 

A And Mr. Whelan. 

The record as a whole compels the finding and conclusion that the respondent 

John Whelan is liable as a principal for the respondent corporation's 

violations. 

The Chief Administrative Law Judge, I believe, gave insufficient weight to 

the foregoing evidence, which includes decisive admissions by the respondent 

Whelan. He relied, instead, on facts and circumstances which, in my view, are 

irrelevant to this case. 

The Chief Administrative Law Judge states (Decision, pp. 9-10): 

It is commonly accepted knowledge that the responsible corporate officers are 

elected or selected by the corporate Board of Directors. There was no evidence 

offered that respondent Whelan was ever elected to or selected for the office of 

Vice President by the respondent corporation's Board of Directors. 

The uncontradicted evidence shows that the respondent Whelan was in fact the 

Vice-President of the corporation. This was admitted in his Answer, p. 1, 

paragraph II. It was admitted by Mr. Whelan in his testimony (Tr. 62). There is 

no evidence to the contrary. In these circumstances, it must be conclusively 

presumed that whatever corporate formalities were necessary to make Mr. Whelan 

Vice-President of respondent corporation were fulfilled. 

The Chief Administrative Law Judge states (Decision, p. 10): 

There was no showing on the record what were his responsibilities and duties 

as may have been or should have been delineated in the corporate by-laws or in 

the Board of Director's Minutes. Respondent Whelan maintained that he was given 

the title of vice president in September 1969 and that no one told him or 

discussed with him what were his duties or responsibilities. 

The short answer to this is that the respondent Whelan testified at the 

hearing as to his duties. By his own admissions, set forth above, he was 

responsible for the activities involved in the respondent corporation's 

violations. 

The Chief Administrative Law Judge states (Decision, p. 10): 

He continued to perform the same duties he had been performing before given 

the title [of Vice-President]. 

True! But respondent Whelan admitted that his duties prior to becoming VicePresident were to act as "[k]ind of an overseer of the [respondent] American 

Commodity Brokers" (Tr. 62). 

The Chief Administrative Law Judge states (Decision, pp. 10, 12): 

There was no testimony from the corporation's president, respondent Dempster, 

as to respondent Whelan's authorization, responsibilities and duties in the 

management, direction and control of the corporation's activities. Respondent 

Dempster was not called as a witness and the only statement from her is a 

stipulation of record in which she asserts that she herself was responsible for 

the management, direction and control of the activities of the respondent 

corporation. 

* * * 

Not to be ignored is the stipulation of the respondent corporation and the 

respondent Dempster, made a part of the record 

 
Page 15 

in this proceeding, that respondent Dempster herself was responsible for the 

management, direction and control of the corporation. In her stipulation she 

made no reference to any joint or shared control, she made no mention of any 

such responsibility of respondent Whelan, and she was not called and did not 

testify at the hearing. 

The stipulation by the respondent Dempster that she was responsible for the 

management, direction and control of the activities of the respondent 

corporation sheds no light on the issue of whether the respondent Whelan aided, 

abetted, or participated in the violations within the meaning of § 13(a) of the 

Commodity Exchange Act. In the Decision and Order which I issued suspending the 

trading privileges of respondents American Commodity Brokers Inc., and Phyllis 

C. Dempster for five years, I found that respondent Dempster was "at all times 

material herein, president of the respondent corporation and responsible for the 

management, direction and control of its activities" (Findings of Fact, No. 2, 

p. 2). I knew at that time that the issue was being litigated as to whether the 

respondent Whelan's activities also made him responsible under § 13 (a) of the 

Act as a principal. That finding as to respondent Dempster is not inconsistent 

with a finding that respondent Whelan, as Vice-President, was also responsible 

for the management and direction of the firm with respect to the violations 

involved herein. A fortiori it sheds no light on the precise issue involved 

herein, i.e., whether respondent Whelan wilfully aided or abetted the 

violations, or acted in combination or concert with respondent Dempster as to 

the violations. 

In addition, if any inference were to be drawn from the failure of respondent 

Dempster to be called as a witness, there would be as much reason to draw such 

an inference against the respondent Whelan as there would be to draw such an 

inference against the complainant. The complainant was recommending that 

respondent Dempster's trading privileges be suspended for five years; so there 

is no basis for believing that she would have been a "friendly" witness for the 

complainant. 

The Chief Administrative Law Judge states (Decision, p. 11): 

Complainant points to respondent Whelan's testimony that he was responsible 

for having customers' orders executed on the Exchange, for having their trades 

and the results thereof properly recorded in their accounts, and for insuring 

that their funds were properly handled. These, however, were all 

 

functional duties which could be performed by any competent employee, the 

performance of which, under all the circumstances, did not denote responsibility 

for the management, direction and control of the corporation's activities. 

Here, in one sentence, the Chief Administrative Law Judge brushes aside all 

of the decisive admissions by respondent Whelan which prove conclusively his 

responsibility as a principal under § 13(a) of the Act for all of the 

violations. In other words, when Mr. Whelan admitted "that he was responsible 

for having customers' orders executed on the Exchange, for having their trades 

and the results thereof properly recorded in their accounts, and for insuring 

that their funds were properly handled," he conceded the whole case as to the 

violations involved herein. 

These "functional duties which could be performed by any competent employee," 

according to the Chief Administrative Law Judge, were the primary duties of the 

corporation's commodity brokerage business. If they could have been 

satisfactorily performed by any of the corporation's employees, why did Mrs. 

Dempster go outside of the firm and hire the Assistant Vice-President of a bank 

to perform them? In any event, that is beside the point. The point is that the 

respondent Whelan was hired to perform these duties; and they are the duties 

directly involved in this case. Any person performing such functions is 

required by the Act and regulations to meet minimum financial requirements, file 

correct financial reports, handle customers' funds properly, remit money owing 

to customers, and keep adequate segregation records. Under § 13(a) of the Act, 
Page 16 

a Vice-President in charge of such functions is liable as a principal for any 

violations with respect thereto. 

The Chief Administrative Law Judge states (Decision, p. 11): 

Complainant points to testimony of Mr. Thorne [Tr. 33] that respondent Whelan 

was in charge of preparation of the financial statements submitted March 31, 

1970 to the Commodity Exchange Authority. But Mr. Thorne also testified that 

the figures used in that report would have come from whoever was in charge of 

Whelan -- whoever was Comptroller at that date. 

First, when Mr. Thorne referred to where the figures came from, he was not 

referring to the March 31, 1970, report. He was referring to the financial 

reports in general. Specifically, he testified (Tr. 32-33); 

Q You designated yourself, Mr. Whelan and Mr. Brand. Was any one of these 

people in charge of the preparation of that report or not, or was it just a 

collaborative effort? 

A That report, prior to my coming to the company, evidently had been filled 

out numerous times, I would assume. The figures would have either come from 

whoever would be in charge of Mr. Whelan or the previous controller or the 

controller at that date. 

Q But as far as you recall, in the preparation of this particular statement 

in which you participated, were you in charge? Was Mr. Whelan in charge? Was 

Mr. Brand in charge, or was it simply all three of you working together? 

A I would say in this particular case it would be Mr. Whelan who would have 

been in charge. 

Second, when Mr. Thorne referred to figures supplied by "whoever would be in 

charge of Mr. Whelan," he was undoubtedly referring only to the President of the 

firm, Mrs. Dempster, Mr. Thorne testified categorically that Mr. Whelan's duties 

were to "run the company" (Tr. 37); that Mr. Whelan was second in the chain of 

command in the company (Tr. 39-40); and that the comptroller, Mr. Brand, was 

"next in command after the vice-president" (Tr. 40). Hence, the figures were 

either supplied by Mr. Whelan or by someone he was supervising, unless they were 

supplied to him by the President, Mrs. Dempster. As shown above, the inference 

is inescapable that Mr. Whelan knew the figures were false. Even if he prepared 

a false report using figures supplied by Mrs. Dempster, he aided, abetted, and 

participated in the violation within the meaning of § 13(a) of the Act. 

The Chief Administrative Law Judge states (Decision, p. 11): 

On the other hand, respondent Whelan testified and was unrefuted, that he was 

not a stockholder in the respondent corporation, that he was not on its Board of 

Directors, that he was on straight salary with no bonuses or profit sharing 

arrangements, that he had to have the President's approval of the hiring of his 

own secretary, that he signed no pay checks, that he reported any shortages or 

under-segregation to the President so she could do something about it, and he 

made no important decisions on corporation activities. 

These circumstances do not detract in any manner from the decisive admissions 

by the respondent Whelan as to his responsibilities. Nothing in § 13(a) of the 

Act suggests that it applies only to stockholders, Directors, or officers on a 

profit sharing arrangement. n5 Contrariwise, it applies to any person who 

wilfully aids or abets a violation or who acts in combination or concert with 

another (7 U.S.C. 13c). The word "any" is a word of broad and comprehensive 

import. Nigro v. United States, 276 U.S. 332, 344-351 (1928); Export Leaf 

Tobacco Co. v. American Insurance Co., 260 F.2d 839, 843-844 (C.A. 4, 1958). 
Page 17 

n5. As shown above, "[t]o be guilty of the crime of 'aiding and 

abetting' one does not have to have an active stake in the outcome of the 

crime but merely participate therein." Wyatt v. United States, 388 F.2d 

395, 400 (C.A. 10, 1968). 

In addition, the record is silent as to the size of the respondent Whelan's 

salary. There is no basis for any inference that it was minuscule. 

The evidence is conflicting as to whether the respondent Whelan had the 

authority to hire and fire employees. Mr. Thorne testified that Mr. Whelan had 

such authority (Tr. 37-38). But accepting the Chief Administrative Law Judge's 

finding that he did not, the violations in this case do not involve hiring or 

firing. Nor do they involve signing pay checks. The checks involved in the 

corporation's violations were customers' checks, which admittedly was in the 

area of Mr. Whelan's responsibility. 

The record supports the Chief Administrative Law Judge's finding that the 

President of the respondent corporation, Mrs. Dempster, retained ultimate 

authority to make the important decisions for the firm. It is likely that the 

Chief Administrative Law Judge dismissed the case as to respondent Whelan 

because he felt that respondent Whelan had no power to compel Mrs. Dempster to 

deposit sufficient funds in the corporation to meet the requirements of the Act; 

to keep sufficient funds in the respondent corporation's customer accounts; to 

put sufficient money into the firm to pay the customers who were not paid; or to 

require the respondent Dempster to sign a correct financial report as of March 

31, 1970, showing that the firm was grossly underfinanced. Nonetheless, this 

does not excuse respondent Whelan from being liable as a principal under § 13(a) 

of the Act. 

I concur in the Chief Administrative Law Judge's view that the respondent 

Whelan was completely lacking in such power to 

 

prevent these violations. n6 However, the amendment to the Act in 1968 which 

added § 13 (a) was designed precisely for this type of circumstance. The 

intention of Congress was to strengthen the enforcement of the regulatory 

requirements. If only the President of a firm who had ultimate authority were 

responsible for the firm's violations, there would be little or no incentive for 

the other officers to see that the requirements of the Act are complied with. 

Section 13(a) requires that the officers (or other responsible personnel) of a 

firm insure that the activities for which they are responsible are carried out 

in accordance with the requirements of the Act and regulations. If they do not 

have the power to compel the ultimate authority in the firm to comply with the 

Act and regulations, they must cease their affiliation with the firm, or be 

subject, as a principal, for the violations involving their field of 

responsibility. 

n6. The complainant argues that the respondent Whelan did not have to 

participate in preparing the false financial report, but it is not 

reasonable to believe that Mrs. Dempster would have signed, or permitted 

him to prepare, a financial report showing that the firm would have to 

cease operating because it was under-financed. The only violation that he 

might have prevented was the firms's failure to keep proper records for 

four months. 

As stated earlier, the Vice-President of a stockbrokerage firm in charge of 

handling the stocks bought and sold by the firm could not defend against a 

criminal action for aiding and abetting the handling of stolen securities by 

saying that he told the President of the firm that the securities were stolen, 

and the President refused to do anything about the matter. 

Since the respondent Whelan was responsible for the execution of customers' 

orders and the handling of their funds, he was responsible for carrying out such 

activities in compliance with the Act and regulations. The Act and regulations 
Page 18 

require that persons engaged in such functions meet minimum financial 

requirements, file accurate reports, handle customers' funds as trust funds, 

keep adequate records as to customers' funds in segregation, and pay customers 

the sums owing to them. The respondent Whelan aided and abetted in the 

violations involved in this case and acted in combination or concert with the 

respondent Dempster in such violations. He is, therefore, liable as a principal 

in this administrative action. 7 U.S.C. 13c. 

The case of Campbell v. Nixon, 207 F. Supp. 826 (E.D. Mich., 1962), relied on 

by the Chief Administrative Law Judge (Decision, 

 

 

pp. 8-9), is not in point. The case involves a tax statute, which did not 

contain aiding and abetting provisions similar to those at issue herein. The 

tax statute provided for a penalty if a person "required to collect, truthfully 

account for, and pay over any tax" failed to do so. The term "person" included 

an officer of a corporation "under a duty to perform the act in respect of which 

the violation occurs." 

The facts in that case showed clearly that the plaintiff, who was VicePresident of the firm, was not under a duty to pay the withholding and social 

security taxes for the firm. The plaintiff had done accounting work for the 

firm, and when the Vice-President resigned, plaintiff was elected VicePresident. But he received only $ 100 per month from the firm, which was less 

than 10% of his income. He was a director of eight or nine other companies. 

His primary function was to "confer with and advise" the President of the firm 

with respect to the firm's business affairs and tax matters (207 F.Supp. at 

828). 

For the first five years after he was elected Vice-President of the firm, 

plaintiff visited the firm's offices "no more than two or three times a year" 

(207 F.Supp. at 828). However, from October 1955 to April 1956, plaintiff spent 

considerable time at the firm's offices, "principally to perform accounting 

services for the firm" (207 F.Supp. at 828). The plaintiff had on authority to 

sign checks without the President's approval, and the President refused to pay 

the taxes in question. 

In these circumstances, the Court found and concluded that the plaintiff "was 

neither the disbursing officer for the corporation nor did he have the authority 

to direct the payment of tax obligations out of corporate funds against the 

wishes of the president." There is no similarity between that case and the 

present case either as to the statutory language or as to the factual 

circumstances involved. A person could not be liable under the tax statute 

unless he had the power to pay the tax involved, i.e., unless he had power to 

prevent the violation from occurring. But a person may be liable as an aider or 

abettor even if he has no power to prevent the violation from occurring. 

The present case is of great importance to the proper enforcement of the 

Commodity Exchange Act. It is not a case limited to the factual circumstances 

of the particular violations involved herein. 

The respondent Whelan was admittedly the Vice-President of the firm whose 

area of responsibility covered the activities which were not carried out in 

compliance with the Act and regulations. Undoubtedly, he had no power to force 

the President of the firm to put sufficient funds into the firm to carry out the 

activities lawfully. But if that were a defense, § 13(a) of the Act would be 

sterile. The owner of a firm would be able to tell the firm's officers to 

continue to carry out their activities in violation of the Act and regulations 

because, in the event of an action by the Commodity Exchange Authority, he, the 

owner, would admit full responsibility and admit that the officers of the firm 

had no power to compel him to act lawfully. Since Congress has already acted to 
Page 19 

prevent such a defense, if the respondent Whelan were to prevail in this case, 

under the admitted factual circumstances involved herein, it would be disastrous 

to the regulatory program. 

II. The Respondent Whelan's Violations Were Wilful.

Section 13(a) of the Act holds a person liable as a principal if he 

"wilfully" aids or abets a violation of the Act or regulations. However, 

wilfulness is not a requirement to hold a person liable as a principal if he 

"acts in combination or concert" with another person. In this case, the 

respondent Whelan acted in combination or concert with the respondent Dempster 

and, therefore, it is not necessary to show wilfulness. Also, since the 

respondent Whelan is not a registrant under the Act, an order denying his 

trading privileges on contract markets is not a suspension of a license which 

would involve the wilfulness (or notice) requirement of the Administrative 

Procedure Act (see In re Arthur N. Econo-mou, 32 Agriculture Decisions 14, 131 

(1973), appeal pending. 

But in any event, a violation is wilful, within the meaning of the term in a 

regulatory statute, if the violator "1) intentionally does an act which is 

prohibited, -- irrespective of evil motive or reliance on erroneous advice or 2) 

acts with careless disregard of statutory requirements" ( Goodman v. Benson, 286 

F.2d 896, 900 (C.A. 7, 1961)). Accord: United States v. Illinois Cent. R. Co.,

303 U.S. 239, 242-244 (1938); Gearhart & Otis, Inc. v. Securities & Exch. 

Com'n., 348 F.2d 798, 802-803 (C.A.D.C., 1965); Eastern Produce Co. v. Benson,

278 F.2d 606, 609 (C.A. 3, 1960); Riss & Company v. United States, 262 F.2d 245, 

247-251 (C.A. 8, 1958); United States v. Gris, 247 F.2d 860, 864 (C.A. 2, 1957); 

Trenton Chemical Co. v. United States, 201 F.2d 776, 777-780 (C.A. 6, 1953), 

certiorari denied, 345 U.S. 994; Dennis v. United 

 

States,, 171 F.2d 986, 990-991 (C.A.D.C. 1948), affirmed on other grounds, 339 

U.S. 162 (1950); American Surety Co. v. Sullivan, 7 F.2d 605, 606 (C.A. 2, 

1925); Chicago, St. P., M. & O. Ry. Co. v. United States, 162 F. 835, 840-842 

(C.A. 8, 1908), certiorari denied, 212 U.S. 579; Schwebel v. Orrick, 153 F.Supp. 

701, 705 (D.C.D.C., 1957), affirmed on other grounds, 251 F.2d 919 (C.A. D.C., 

1958), certiorari denied, 356 U.S. 927; In re David G. Henner, 30 Agriculture 

Decisions 1151, 1260-1263 (1971); In re American Fruit Purveyor's, Inc., 30 

Agriculture Decisions 1542, 1587 (1971). See, also, Great Western Food 

Distributors v. Brannan, 201 F.2d 476, 484 (C.A. 7, 1953), certiorari denied, 

345 U.S. 997. 

Wilfulness means "no more than that the person charged with the duty knows 

what he is doing," and it "does mean that, in addition, he must suppose that he 

is breaking the law." Townsend v. United States, 95 F.2d 352, 358 (C.A.D.C., 

1938), certiorari denied, 303 U.S. 664; Fields v. United States, 164 F.2d 97, 

100 (C.A.D.C., 1947), certiorari denied, 332 U.S. 851. It is only in statutes 

involving turpitude that "wilful" includes evil purpose, criminal intent, or the 

like. Spies v. United States, 317 U.S. 492, 497-499 (1943). 

In Trenton Chemical Co. v. United States, 201 F.2d 776, 777-780 (C.A. 6, 

1953), certiorari denied, 345 U.S. 994, the Court held that a company which 

exceeded its quota, under a regulatory order establishing quotas as to grain 

used by distillers, "willfully" violated the quota restriction, subjecting it to 

criminal prosecution. The defendant contended that it used grain products, not 

grain, and "that it had been advised by its attorney that it was not illegal to 

use grain products in its distilling operations," but the "District Judge 

declined to permit the * * * [Company] to show at the trial that it acted in 

good faith and on advice of counsel that its acts were not illegal, in using the 

materials in question" (201 F.2d at 778, 779). In sustaining the judgment of the 

District Court, the Court of Appeals held that inasmuch as the regulatory 

statute did not proscribe acts "in themselves wrong," evidence of "bad faith or 

evil purpose on the part of the defendant was not necessary to constitute a 

violation of the act, but it was sufficient if the prohibited act was 

intentional or voluntary" (201 F.2d at 780). 
Page 20 

Similarly, in Chicago, St. P., M. & Co. Ry. Co. v. United States, 162 F. 835, 

840-842 (C.A. 8, 1908), certiorari denied, 212 U.S. 579, the Court upheld the 

conviction of the defendants under the 

 

Elkins Act on the ground that they "willfully" granted rebates to a shipper, 

notwithstanding the reliance by the defendants on decisions by the Interstate 

Commerce Commission which, according to the Court, "might well have afforded 

ground for belief by defendants that their act * * * was justifiable and lawful" 

(162 F. at 840-841). The Court said that to "hold that the belief of an 

individual concerning the legality of his action should constitute a standard of 

innocence or guilt would establish an uncertain and dangerous doctrine. It 

would in many cases justify a violation of statutes expressive of public policy 

concerning which there may obviously be and frequently are as many different 

opinions as there are different individuals affected by them" ( id., at 842). 

See, also, Sinclair v. United States, 279 U.S. 263, 299 (1929); Armour Packing 

Co. v. United States, 209 U.S. 56, 70-71, 85-86 (1908); United States v. Union 

Pac. R. Co., 169 F. 65, 67 (C.A. 8, 1909). 

It was held in Dennis v. United States, 171 F.2d 986, 990-991 (C.A.D.C., 

1948), affirmed on other grounds, 339 U.S. 162 (1950), that in order to prove a 

wilful failure to appear before a Congressional Committee, it is not necessary 

to show that the act of refusal was done from a bad purpose or an evil motive. 

The Court held that the mere fact that the defendant claimed to have followed 

the advice of counsel "is no defense," and that "[i]f it were, many 

corporations, organizations and even individuals would maintain counsel 

permanently for the purpose of advising them against doing anything that they do 

not wish to do" (171 F.2d at 991). 

In Capitol Packing Company v. United States, 350 F.2d 67, 78-79 (C.A. 10, 

1965), the Court interpreted wilfully more narrowly, requiring a showing of "an 

intentional misdeed or such gross neglect of a known duty as to be the 

equivalent thereof." The court stated (350 F.2d at 79): 

This interpretation receives support from the legislative history of the 

Administrative Procedure Act. As stated in the House Report on the Act, in 

discussing § 9 (b): 

"The exceptions to the second sentence, regarding revocations, apply only 

when the demonstrable facts fully and fairly warrant their application. 

Wilfulness must be manifest." H.R.Rep.No. 1980, 79th Cong., 2d Sess. 41 (1946). 

See also, S.Rep.No. 752, 79th Cong., 1st Sess. 25 (1945), 92 Cong.Rec. 5654 

(remarks of Congressman Walter). 

I do not find the support for the meaning of wilfulness in the legislative 

history that the Court found. For the legislative history to show that 

"[w]ilfulness must be manifest" does not help me in defining wilfulness. Once I 

know the definition of wilfulness, then I know from the legislative history that 

it must be manifest, but I find nothing in the legislative history to shed light 

on the definition of wilfulness. 

I believe that the many cases set forth above correctly interpret the 

Congressional intent as to wilfulness, as used in the Administrative Procedure 

Act. In view of the legislative history relied on by the Court in the Capitol 

Packing Company case, supra, a finding of wilfulness should be made if it is 

manifest from the record that a person has intentionally done an act which is 

prohibited -- irrespective of evil motive or reliance on erroneous advice, or 

acted with careless disregard of statutory requirements. 

In this case, however, the conduct of the respondent Whelan was wilful under 

the most narrow meaning of the term. It is manifest from the record that the 

respondent Whelan knew of the requirements of the Act and regulations, and knew 

that the respondent corporation was not complying with them in his area of 
Page 21 

responsibility. The most that can be said on his behalf is that he told the 

President of the firm about the violations, and she refused to correct the 

matter. This is not enough to preclude a finding of wilfulness. It was his 

duty to see that violations in his area of responsibility did not occur. 

Lacking power to prevent the violations in this case, his only lawful 

alternative was to leave the firm. 

Mr. Whelan may not have known that he was personally liable as a principal 

under 7 U.S.C. 13c for the firm's violations, but even if he didn't, that would 

not preclude a finding of wilfulness under the foregoing authorities. 

Mr. Whelan left the respondent corporation on December 31, 1970 (Tr. 66), 

which was prior to the administrative complaint filed on September 13, 1971. 

But it was not soon enough to escape liability as a principal for the firm's 

violations involved in this case. 

III. The Sanction.

The Deputy Director of the Compliance Division of the Commodity Exchange 

Authority testified as to the serious nature of the violations by the respondent 

corporation (Tr. 51-52), for 

 

which respondent Whelan is liable as a principal. He emphasized the importance 

of the preventive nature of the minimum financial requirements of 7 U.S.C. 6f. 

The minimum financial requirements are designed to prevent underfinanced firms, 

which are more likely to engage in illegal practices, from operating. 

Futures commission merchants handle large sums of money belonging to 

customers. The value of all of the futures contracts regulated under the 

Commodity Exchange Act in fiscal 1973 was $ 268 billion. n7 Brokerage firms on 

the New York Stock Exchange have been failing financially in record numbers 

recently. n8 The Congressional Record for March 15, 1972, refers to several 

brokerage firms handling customers' accounts in non-regulated commodity futures 

that failed owing customers large sums of money (118 Cong. Rec. S3995). The 

Congressional hearings preceding the enactment of the financial protection 

provisions in 1968 refer to the dangers of underfinanced firms. n9 In 

discussing the proposed amendment of the Act to add minimum financial 

requirements (H.R. 13094, 90th Congress), the Report of the Senate Committee on 

Agriculture and Forestry states: "The danger to the public from such financial 

irresponsibility is obvious. The underfinanced brokerage firms have been found 

to be most likely to dip into customers' funds or resort to sharp trading 

practices to 

 

bolster their money needs" (Sen. Rep. No. 947, 90th Cong., 2d Sess. (1968)). 

n7. USDA Press Release No. 2219-73 dated July 19, 1973. Futures 

commission merchants, of course, handle only a fraction of that amount. 

n8. The Evening Star, Washington, D. C., February 24, 1972, p. A-19, 

reports as follows: 

The New York Stock Exchange, continuing to foot a huge bill for the 

collapse of member firms in the securities industry's financial crisis of 

recent years, incurred a $ 16.7 million loss in 1971, the exchange 

disclosed in its annual report. 

* * * 

Ironically, the exchange last year chalked up a record $ 18.7 million 

operating profit, but this was offset by $ 35.4 million of charge for 

assistance to customers at financially distressed members houses. 
Page 22 

This news item accurately reflects the New York Stock Exchange, Inc., 

Annual Report 1971, p. 30. Official notice is taken of the Annual Report 

under 17 CFR 0.11(e) (7). See Parker v. Brown, 317 U.S. 341, 363 (1943); 

Colonial Airlines v. Janas, 202 F.2d 914, 919, fn. 1 (C.A. 2, 1953); United 

States v. Rice, 176 F.2d 373, 374, fn. 3 (C.A. 3, 1949). Opportunity to 

contest such official notice is available through a petition to reconsider. 

17 CFR atives, 90th Cong., 1st Sess., on H.R. 11930 and H.R. 12317, pp. 45-

46, 56-57, 84-85 (1967). 

n9. Hearings before the Committee on Agriculture, House of Represent0.21(3). 

It has been the duty of the Commodity Exchange Authority, since the Act was 

amended in 1968 (7 U.S.C. 6f), to prevent financial collapses of firms handling 

regulated futures contracts. This duty cannot be met unless regulated firms are 

deterred from deliberately operating while underfinanced. See In re Sy B. 

Gaiber & Co., 31 Agriculture Decisions 474, 502 (1972); In re Arthur N. 

Economou, 32 Agriculture Decisions 14, 126-127 (1973), appeal pending. 

The minimum financial requirements at issue here are similar in purpose to 

those under the Securities and Exchange Act, under which it has been held that 

the financial requirements are not "merely to protect investors against 

'continuing' injury at the hands of those guilty of misconduct. This 

interpretation is far too narrow: the Act is also designed to protect the 

investing public against undue financial risks and future violations" ( Blaise 

D'Antoni & Associates, Inc. v. Securities & Exchange Com'n., 290 F.2d 688, 689 

(C.A. 5, 1961)). The financial requirements are "to assure confidence and 

safety to the investing public. The question is not whether actual injuries or 

losses were suffered by anyone." Blaise D'Antoni & Associates, Inc. v. Securities & Exch. Com'n., 289 F.2d 276, 277 (C.A. 5, 1961), certiorari denied, 

268 U.S. 899. 

The Deputy Director, Compliance Division, Commodity Exchange Authority, also 

testified as to the seriousness of failing to comply with the segregation 

requirements of 7 U.S.C. 6d and the regulations issued thereunder (Tr. 52-52). 

The segregation requirements insure that customers' funds are treated as trust 

funds. 

In addition, record keeping and reporting requirements are customary features 

of Federal regulatory programs. See, e.g., United States v. Ruzicka, 329 U.S. 

287, 288-289, 293 (1946); United States v. Darby, 312 U.S. 100, 125 (1941); 

Electric Bond Co. v. Comm'n., 303 U.S. 419, 439 (1938); Interstate Commerce 

Commission v. Goodrich Transit Co., 224 U.S. 194, 204-216 (1912); Baltimore & 

Ohio R.R. v. Interstate Com., 221 U.S. 612, 620-623 (1911); Hyatt v. United 

States, 276 F.2d 308, 312 (C.A. 10, 1960); Panno v. United States, 203 F.2d 504, 

510 (C.A. 9, 1953); United States v. Turner Dairy Co., 166 F.2d 1 (C.A. 7, 

1948), certiorari denied, 335 U.S. 813; United States v. Turner Dairy Co., 162 

F.2d 425, 425-428 (C.A. 7, 1947), certiorari denied, 

 

 332 U.S. 836; Bartlett Frazier Co. v. Hyde, 65 F.2d 350 (C.A. 7, 1933), 

certiorari denied, 290 U.S. 654. Failure to keep adequate records interferes 

with the enforcement of a regulatory program. And the deliberate filing of a 

false report or otherwise furnishing false information to the Commodity Exchange 

Authority deserves a substantial sanction. In re Sy B. Gaiber & Co., 31 

Agriculture Decisions 474, 503 (1972). 

Although there may be no need to impose a sanction against respondent Whelan 

to prevent him from committing, or being responsible for, future violations of 

the Act, n10 it is important to impose a sanction to serve as a deterrent to 

others. In the case of In re Sy B. Gailber & Co., 31 Agriculture Decisions 474 

(1972), a case which is to some extent factually similar to this one, the 

Judicial Officer concluded that an appropriate sanction was a cease and desist 

order and denial of trading privileges for two years. In Gaiber, the only 

allegations were failing to meet minimum financial requirements and making false 
Page 23 

reports. There was no showing that customers' funds were not properly handled 

as trust funds, or that customers' funds were not remitted to them. Moreover, 

the Gaiber case was decided before the new, and much more severe, sanction 

policy -- to be applied in pending and future cases -- was announced in In re 

George Rex Andrews, 32 Agriculture Decisions 553 (1973). My views with respect 

to the need for severe sanctions to serve as an effective deterrent to the 

respondent and to others are set forth in sections III, IV, and V of the 

decision in the Andrews case (32 Agriculture Decisions 553, 563-583), which are 

incorporated herein by reference. 

n10. The respondent Whelan is now working as Assistant Cashier of a bank 

(which is similar to his prior position of Assistant Vice-President of 

another bank). He is not now involved in futures trading, either for 

himself or for the bank. His attorney states that he has no future 

intention of engaging in futures trading. 

Considering the serious nature of the violations involved in this case, the 

cease and desist order and the suspension of trading privileges for three years 

recommended by the complainant seems reasonable and will be imposed. The 

trading privileges of the respondent corporation and Mrs. Dempster were 

suspended for five years. However, the three-year suspension imposed in this 

case against the respondent Whelan is not three-fifths as severe as that imposed 

against the respondent corporation and Mrs. Dempster. The respondent 

corporation was engaged in business as a futures commission merchant, trading 

for itself and for 

 

others. Hence, even a short period of suspension would have a substantial 

impact on its business activities. But the respondent Whelan is not now engaged 

in futures trading and does not intend to engage in futures trading in the 

future; so the three-year suspension of trading privileges will have no direct 

effect on him whatever. 

The respondent Whelan's attorney states that Mr. Whelan's only reason for 

contesting this matter is to protect his reputation and to avoid any indirect 

prejudice with respect to his future banking activities. In these 

circumstances, it is appropriate to point out that, with the exception of a 

failure to keep adequate records, the record in this case indicates that the 

respondent Whelan had no power whatever to prevent the violations from 

occurring. The record also indicates that Mr. Whelan called various violations 

of the corporation to the attention of Mrs. Dempster, but she did not put 

sufficient money into the firm to solve the firm's financial problems, which 

were at the root of the violations. Mr. Whelan was not on a profit sharing 

arrangement with the firm, and there is every reason to believe that he 

preferred to have the firm operate lawfully and tried to get the President of 

the firm to do so. Also, there is no indication that Mr. Whelan knew that he 

was personally liable for the firm's violations. Mr. Whelan left the respondent 

corporation before the administrative complaint was issued in this case. 

In these circumstances, there is no basis from this record or this decision 

to draw any adverse inference with respect to the respondent Whelan's fitness to 

assume responsible positions in the banking industry. Nonetheless, in order to 

serve as a deterrent to other officers or responsible personnel of futures 

commission firms, it is necessary to impose a sanction suspending the respondent 

Whelan's trading privileges and requiring him to cease and desist from future 

violations. 

ORDER

1. Effective on the date of service of this order upon respondent John 

Whelan, he shall cease and desist from engaging in and from aiding, abetting, or 

acting in combination or concert with any other person to cause American 

Commodity Brokers, Inc., or any other futures commission merchant to engage in 

the activities set forth below. 
Page 24 

a. Engaging as futures commission merchant without meeting the minimum 

financial requirements prescribed by § 1.17 of the regulations issued under the 

Commodity Exchange Act (17 CFR 1.17). 

b. Failing to maintain in segregation sufficient funds to pay all credits and 

equities due to its customers trading in commodity futures subject to the 

provisions of the Commodity Exchange Act. 

c. Failing to make a computation and permanent record, as of the close of the 

market on each business day, of the amount of money, securities and property 

required to be held in segregated account as provided in § 1.32 of the 

regulations (17 CFR 1.32). 

d. Making material false statements in financial reports submitted to the 

Commodity Exchange Authority. 

e. Failing and refusing to remit to customers money due and owing to such 

customers in connection with transactions in commodities for future delivery 

which were made for the account and benefit of such customers. 

2. Effective on the thirtieth day after the date this Order is issued, 

respondent John Whelan is prohibited from trading in any commodity on any 

contract market subject to the provisions of the Commodity Exchange Act for 

three years and all contract markets shall deny trading privileges to the 

respondent for that period. Such prohibition and denial shall apply to all 

trading done and positions held directly by the said respondent, either for his 

own account or as the agent or representative of any other person or firm, and 

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

owned or controlled by the said respondent, or otherwise. 

3. A copy of this Decision and Order shall be served on each of the parties 

and on each contract market. 

 

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