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Commodity Futures Trading Commission 

CEA CASES 

NAME: HUGH P. KING 

DOCKET NUMBER: 220 

DATE: DECEMBER 21, 1973 

DOCUMENT TYPE: COMPLAINT 

UNITED STATES DEPARTMENT OF AGRICULTURE 

BEFORE THE SECRETARY OF AGRICULTURE 

In re: Hugh P. King Respondent 

CEA Docket No. 220 

Complaint and Notice of Hearing Under Section 6(b) and 6(c) of the Commodity 

Exchange Act 

There is reason to believe that the respondent, Hugh P. King, attempted to 

manipulate and did manipulate the market price of a commodity for future 

delivery on or subject to the rules of a contract market, in wilful violation of 

the Commodity Exchange Act (7 U.S.C. 1 et seq.). In accordance with the 

provisions of section 6(b) and 6(c) of the said Act (7 U.S.C. 9 and 13b), this 

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

follows: 

I 

Respondent Hugh P. King, an individual whose business address is 141 West 

Jackson Boulevard, Room 1470, Chicago, Illinois 60604, is now, and was at all 

times material to this complaint, a member of the Board of Trade of the City of 

Chicago and a registered floor broker under the Commodity Exchange Act. 

II 

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

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

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

III 

The futures transactions and positions referred to in this complaint relate 

to the July 1972 oat future on the Board of Trade. The last day for trading in 

the July 1972 oat future on the Board of Trade was July 20, 1972. 

IV 

The futures transactions and positions of the respondent referred to in this 

complaint were speculative and did not constitute hedging transactions or 

positions. 

V 

The only class of oats deliverable with respect to the July 1972 oat future 

on the Board of Trade were white oats and the only delivery point acceptable 

under the rules of the Board of Trade then in existence was Chicago, Illinois. 

At all times material to this complaint, the value of white oats on the 

marketplace in Chicago, Illinois, was less than the cumulative cost of acquiring 

and transporting such oats from any place beyond the geographic area immediately 

surrounding that city. On account of this, the stocks of deliverable white oats 

in deliverable position in Chicago, Illinois, constituted substantially all of 

the oats available for delivery on the July 1972 oat future on the Board of 
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Trade. As of July 17, 1972, such stocks amounted to approximately 329,000 

bushels. 

VI 

During the period from July 7 up until July 17, 1972, the respondent took 

delivery of approximately 270,000 bushels of oats in partial satisfaction of a 

"long" position held by him in the July 1972 oat future on the Board of Trade, 

and in addition, received and stopped notices that delivery would be made to him 

of another 40,000 bushels of oats. Such deliveries constituted all of the oats 

delivered on the July 1972 oat future up until July 17, 1972. As a result 

thereof, the respondent owned or controlled at such time around 310,000 bushels 

of oats, or approximately 94.2 percent of the total stocks of oats available in 

Chicago, Illinois, for delivery on the July 1972 oat future. 

VII 

At the commencement of trading on July 17, 1972, the open interest on the 

Board of Trade in the July 1972 oat future amounted to 1,235,000 bushels. Of 

this total, the respondent held a "long" position in such future which amounted 

to 1,220,000 bushels, representing approximately 99 percent of the open interest 

therein. 

VIII 

In view of the size of the respondent's "long" position in the July 1972 oat 

future and the amount of deliverable oats which he had taken through delivery as 

of the commencement of trading on the Board of Trade on July 17, 1972, a 

representative of the Commodity Exchange Authority of this Department telephoned 

the respondent at approximately 8:50 a.m. of that day to express concern over 

the respondent's "long" position and 

his control of the deliverable supply of oats; to advise him that an orderly 

liquidation of the July 1972 oat future was dependent upon his trading 

activities; and to admonish him against any attempt to manipulate the market 

price of such future. During the course of such telephonic communication, the 

respondent informed the Commodity Exchange Authority's representative that he 

intended to liquidate his "long" position in the July 1972 oat future by selling 

July oat futures only at a price of 4 cents per bushel over that of the 

September oat future, and that he would probably hold his cash receipts for 

delivery on the September oat future since there was no demand for them at such 

time. A written confirmation of the July 17, 1972, telephonic communication was 

personally delivered to the respondent at approximately 12:40 p.m. of the same 

day. 

IX 

Subsequent to the telephonic communication referred to in paragraph VIII 

hereinabove, the respondent took delivery of approximately 40,000 bushels of 

oats on July 17, 1972, and approximately 25,000 bushels of oats on July 19, 

1972. By virtue of these additional deliveries, the respondent owned or 

controlled as of the commencement of trading on July 20, 1972, around 335,000 

bushels of oats, or almost all of the total stocks of oats available in Chicago, 

Illinois, for delivery on the July 1972 oat future. 

X 

At all relevant times leading up to and including July 20, 1972, there was an 

insufficient supply of deliverable oats in deliverable position not owned or 

controlled by the respondent to permit holders of "short" contracts in the July 

1972 oat future to satisfy such "short" contracts without purchasing from the 

respondent either July oat futures or deliverable stocks of oats. The 

respondent was aware of this situation on account of, among other things, the 
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remarks of the representative of the Commodity Exchange Authority during the 

telephonic communication referred to in paragraph VIII hereinabove. 

XI 

Subsequent to the telephonic communication referred to in paragraph VIII 

hereinabove, the respondent also sold 30,000 bushels of July oat futures on July 

17, 1972; sold 170,000 bushels of July oat futures on July 18, 1972; and sold 

55,000 bushels of July oat futures on July 19, 1972, while buying 5,000 bushels 

of July oat futures on that day. 

XII 

At the close of trading on July 17, 1972, the open interest on the Board of 

Trade in the July 1972 oat future amounted to 1,160,000 bushels; at the close of 

trading on July 18, 1972, the open interest therein amounted to 995,000 bushels; 

and at the close of trading on July 19, 1972, the open interest therein amounted 

to 905,000 bushels. By virtue of the deliveries of oats taken by the respondent 

as set forth in paragraph IX hereinabove and his sales of July oat futures as 

set forth in paragraph 

XI hereinabove, the respondent's "long" position in the July oat future amounted 

to 1,150,000 bushels as of the close of trading on July 17, 1972, representing 

approximately 99.1 percent of the open interest therein; his "long" position in 

such future amounted to 980,000 bushels as of the close of trading on July 18, 

1972, representing approximately 98.5 percent of the open interest therein; and 

his "long" position in such future amounted to 905,000 bushels as of the close 

of trading on July 19, 1972, representing all of the open interest therein. 

XIII 

On or about July 18 or 19, 1972, the respondent entered into negotiations 

with Stephen J. Klemen, Jr., General Partner of the Pacific Trading Co., 141 

West Jackson Boulevard, Room 1070, Chicago, Illinois 60604, for the disposition 

of approximately 350,000 bushels of deliverable oats which the respondent 

received or would receive in partial satisfaction of his "long" position in the 

July 1972 oat future. The negotiations involved the sale of such oats by 

Stephen J. Klemen, Jr., as broker for a set commission, to the Consolidated 

Grain and Barge Co., 120 Merchants Exchange Building, 5100 Oakland Avenue, St. 

Louis, Missouri 63110, at a price of 74 cents per bushel without regard to 

premiums or discounts for grades thereof. As part of such sale, Consolidated 

Grain and Barge Co. was to transport the said oats to various places outside of 

Chicago, Illinois. 

XIV 

The respondent entered into the negotiations referred to in paragraph XIII 

hereinabove for the sale of approximately 350,000 bushels of deliverable oats at 

74 cents per bushel without regard to premiums or discounts for grades thereof 

despite the fact that the price of the July 1972 oat future ranged from 75 1/8 

cents to 75 5/8 cents per bushel during the trading on July 17 and 18, 1972, and 

from 76 3/8 cents to 76 7/8 cents per bushel during the trading on July 19, 

1972. 

XV 

Prior to the commencement of trading on July 20, 1972, Consolidated Grain and 

Barge Co. withdrew from the negotiations referred to in paragraph XIII 

hereinabove. The respondent thereupon entered into an agreement with Stephen J. 

Klemen, Jr., for the direct sale to him of the aforesaid 350,000 bushels of 

deliverable oats. In accordance with such agreement, the respondent sold such 

oats to Stephen J. Klemen, Jr., for his own account, at a price of 74 cents per 

bushel without regard to premiums or discounts for grades thereof, and in 

addition, charges were paid by the respondent for the storage of such oats up 

until September 1, 1972. Taking into consideration the approximately 130,000 
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bushels of oats of a premium grade which were part of the sale to Stephen J. 

Klemen, Jr., and the storage charges paid by the respondent, the actual value of 

the respondent's sale of the 350,000 bushels of oats to Stephen J. Klemen, Jr., 

amounted to approximately 72 1/2 cents per bushel. 

XVI 

Besides the sale of 350,000 bushels of oats by the respondent to Stephen J. 

Klemen, Jr., as referred to in paragraph XV hereinabove, there were very few 

cash transactions involving oats in Chicago, Illinois, throughout the entire 

month of July 1972, and in fact, there was only a slight demand for cash oats in 

Chicago, Illinois, at all relevant times during such period. The respondent was 

aware of this circumstance as evidenced, among other things, by his remarks 

during the telephonic communication referred to in paragraph VIII hereinabove. 

XVII 

Notwithstanding the fact (1) that there was only a slight demand for cash 

oats in Chicago, Illinois, at all relevant times during the month of July 1972, 

and it was economically unsound to bring oats into that city from places not in 

the immediate vicinity thereof, (2) that the aforementioned agreement entered 

into by the respondent with Stephen J. Klemen, Jr., called for the sale of 

approximately 350,000 bushels of deliverable oats at an actual sales value of 

only approximately 72 1/2 cents per bushel, and (3) that a strong warning had 

been given to the respondent by the Commodity Exchange Authority regarding the 

orderly liquidation of his sizable "long" position, the respondent, as the sole 

person selling July 1972 oat futures throughout the trading session on July 20, 

1972, placed orders with certain floor brokers before or during such trading to 

sell July oat futures at a price of 4 1/8 cents per bushel over that of the 

September oat future; failed and refused to offer to execute sales 

and thereby liquidate his "long" position in the July oat future at a price less 

than 77 1/4 cents per bushel at any time during the trading on July 20, 1972, 

prior to the closing bell at 12:00 noon of that day; and sold on that date 

505,000 bushels of July oat futures ranging in price from 77 1/4 cents to 78 1/4 

cents per bushel. 

XVIII 

The trading activities described in paragraph XVII hereinabove were taken by 

the respondent at a time when his holdings on the July 1972 oat future 

constituted all of the open interest therein and his holdings of deliverable 

oats constituted almost all of the available stocks thereof. 

XIX 

At the expiration of trading on July 20, 1972, the open interest on the Board 

of Trade in the July 1972 oat future amounted to 405,000 bushels. As a result 

of the trading activities described in paragraph XVII hereinabove, the 

respondent held a final "long" position in such future which amounted to 405,000 

bushels, representing all of the open interest therein. Including those oats 

received through delivery prior to July 20, 1972, the respondent ultimately took 

delivery of approximately 735,000 bushels of oats, which such deliveries 

constituted all of the oats delivered on the July 1972 oat future. Of this 

total, approximately 620,000 bushels thereof were eventually redelivered on the 

September 1972 oat future, further indicating the lack of demand for oats which 

existed in Chicago, Illinois, at the time of the aforesaid trading activities of 

the respondent on July 20, 1972. 

XX 

The respondent engaged in the acts and practices described in the paragraphs 

set forth hereinabove for the purpose and with the intent of causing prices in 

the July 1972 oat future which were arbitrary and artificial, and demanded and 
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received such prices in connection with the trading in such future. By reason 

thereof, the respondent attempted to manipulate and did, in fact, manipulate the 

price of a commodity for future delivery on or subject to the rules of a 

contract market, in wilful violation of section 6(b) and 6(c) of the Commodity 

Exchange Act (7 U.S.C. 9 and 13b). 

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

served upon the respondent 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 

respondent 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 five 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 the 

material allegations of fact contained in this complaint 

 

are admitted likewise shall constitute a waiver of hearing unless a hearing is 

requested. The respondent is hereby notified that unless the hearing is waived, 

a hearing will be held in Chicago, Illinois, at a place therein and date to be 

specified later, before an Administrative Law Judge designated to conduct such 

hearing. At such hearing, the respondent 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 respondent from 

trading on or subject to the rules of any contract market, and directing that 

all contract markets refuse all trading privileges to the respondent for such 

period of time as may be determined, (2) directing that the respondent shall 

cease and desist from violating the Commodity Exchange Act in the manner alleged 

herein, and (3) suspending or revoking the registration of the respondent as a 

floor broker. 

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

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

Done at Washington, D. C. 

December 21 1973 

[SEE SIGNATURE IN ORIGINAL] 

CLAYTON YEUTTER 

Assistant Secretary 

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