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Commodity Futures Trading Commission 

CEA CASES 

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

DOCKET NUMBER: 185 

DATE: SEPTEMBER 13, 1971 

DOCUMENT TYPE: COMPLAINT 

UNITED STATES DEPARTMENT OF AGRICULTURE 

BEFORE THE SECRETARY OF AGRICULTURE 

In re: American Commodity Brokers, Inc., Phyllis C. Dempster, and John Whelan, 

Respondents 

CEA Docket No. 185 

Complaint and Notice of Hearing Under the Commodity Exchange Act 

There is reason to believe that the respondents have violated the Commodity 

Exchange Act (7 U.S.C. 1 et seq.) and the regulations made pursuant thereto, and 

this complaint and notice of hearing is issued stating the charges in that 

respect as follows: 

I 

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

existing under the laws of the State of Michigan, with offices at 415 South 

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 

section 1.17 of the regulations under the Commodity Exchange Act (34 F.R. 599). 

II 

Respondents Phyllis C. Dempster and John Whelan, individuals, whose business 

address is the same as that of the respondent corporation, are now, and were at 

all times material herein, president and vice-president, respectively, of the 

respondent corporation and responsible for the management, direction and control 

of its activities. 

III 

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 

section 1.17 of the regulations issued by the Secretary of Agriculture under the 

Act. As of March 31, 1970, the respondent corporation lacked approximately $ 

84,000 of having enough working capital to meet such minimum financial 

requirements. 

IV 

(a) At the times hereinafter stated, the respondent corporation, in the 

regular course of its business as 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. 
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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. 

(b) 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, 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. 

(c) 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 section 1.32 of the 

regulations (17 CFR 1.32). 

V 

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

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

certified by respondent Phyllis C. Dempster. The 

said respondents wilfully made material false statements in such report, in 

that: (1) they stated the firm had an excess of adjusted working 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) they stated the firm had 

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

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

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

approximately $ 94,000. 

VI 

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. 

VII 

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. 

VIII 

By reason of the facts alleged in this complaint, the respondents have 

wilfully violated sections 4b, 4d, 4f, 4g and 6(b) of the Commodity Exchange Act 

(7 U.S.C. 6b, 6d, 6f, 6g and 9) and sections 1.17, 1.20, 1.32 and 1.35 of the 

regulations issued thereunder (17 CFR 1.17, 1.20, 1.32 and 1.35). 
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WHEREFORE, it is hereby ordered that this complaint and notice of hearing be 

served upon the respondents and this proceeding shall be governed by sections 

0.1, 0.2, 0.4(b), 0.5 through 0.22 and 0.28, of the rules of practice under the 

Commodity Exchange Act (17 CFR 0.1, 0.2, 0.4(b), 0.5 through 0.22, 0.28). The 

respondents will have twenty (20) days after the receipt of this complaint in 

which to file with the Hearing Clerk, United States Department of Agriculture, 

Washington, D. C. 20250, an answer with an original and three copies, fully and 

completely stating the nature of the defense and admitting or denying, 

specifically and in detail, each allegation of this complaint. Allegations not 

answered will be deemed admitted for the purposes of this proceeding. Failure 

to file an answer will constitute an admission of all the allegations of this 

complaint and a waiver of hearing. The filing of an answer in which all of the 

material allegations of fact contained in the complaint are admitted likewise 

shall constitute a waiver of hearing unless a hearing is 

requested. The respondents are hereby notified that unless hearing is waived, a 

hearing will be held at 10:00 a.m., local time, on October 27, 1971, in Monroe, 

Michigan, at a place therein to be specified later, before a referee designated 

to conduct such hearing. At such hearing, the respondents will have the right 

to appear and show cause, if any there be, why an appropriate order should not 

be issued in accordance with the Commodity Exchange Act, (1) prohibiting the 

respondents from trading on or subject to the rules of any contract market, and 

directing that all contract markets refuse all trading privileges to the 

respondents for such period of time as may be determined and (2) directing that 

the respondents shall cease and desist from violating the Act and regulations in 

the manner alleged herein. 

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

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

Done at Washington, D. C. 

September 13, 1971 

[SEE SIGNATURE IN ORIGINAL] 

J. Phil Campbell 

Under Secretary 

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