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Commodity Futures Trading Commission 

CEA CASES 

NAME: KHALIL HADDAD 

DOCKET NUMBER: 110 

DATE: NOVEMBER 21, 1962 

DOCUMENT TYPE: COMPLAINT 

UNITED STATES DEPARTMENT OF AGRICULTURE 

BEFORE THE SECRETARY OF AGRICULTURE 

In re: Khalil Haddad, Respondent 

CEA Docket No. 110 

Complaint and Notice of Hearing under Section 6(b) of the Commodity Exchange 

Act 

There is reason to believe that the respondent, Khalil Haddad, attempted to 

cheat and defraud and did cheat and defraud persons in or in connection with the 

making of contracts of sale of a commodity for future delivery on or subject to 

the rules of a board of trade in violation of § 4b(A) of the Commodity Exchange 

Act (7 U.S.C. § 6b(A)), and in accordance with the provisions of § 6(b) of the 

said Act (7 U.S.C. § 9), this complaint and notice of hearing is issued stating 

the charges against the respondent as follows: 

I 

The respondent, Khalil Haddad, an individual whose place of business is at 

228 North La Salle Street, Chicago 1, Illinois, is now and was at all times 

material to this complaint a floor broker registered under the Commodity 

Exchange Act. The respondent was at all times material to this complaint a 

member of the Chicago Mercantile Exchange, and an agent or employee of a firm 

(hereinafter referred to as the respondent's employer) which is now, and was at 

all times material to this complaint, a futures commission merchant registered 

under the 

Commodity Exchange Act and a clearing member of the Chicago Mercantile Exchange. 

II 

The Chicago Mercantile Exchange 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 

At all times material to this complaint, the respondent was authorized to 

solicit or accept commodity futures orders for and in the name of the 

respondent's employer, and was engaged in executing orders on the Chicago 

Mercantile Exchange on behalf of the respondent's employer and its customers. 

The respondent also performed clerical duties in connection with the maintenance 

of records for the respondent's employer pertaining to commodity futures 

transactions on the Chicago Mercantile Exchange and on other contract markets. 

In addition to the respondent's duties for the respondent's employer, the 

respondent traded in commodity futures in his personal account which was carried 

with the customers' accounts of the respondent's employer. 

IV 
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The futures transactions referred to in this complaint relate to the January 

1962 frozen whole egg future and the September 1962 shell egg future on the 

Chicago Mercantile Exchange. Such contracts could have been used for (a) 

hedging transactions in interstate commerce in eggs or the products or 

byproducts thereof, (b) determining the price basis of transactions in 

interstate commerce in eggs, and (c) delivering 

eggs sold, shipped, or received in interstate commerce for the fulfillment of 

such futures contracts. 

V 

On December 4, 1961, the respondent caused two contracts of January 1962 

frozen whole egg futures to be sold on the Chicago Mercantile Exchange and 

cleared by the respondent's employer in its customers' account, but, in 

accordance with the respondent's instructions to the bookkeeper of the 

respondent's employer who recorded such transactions, the transactions were not 

allocated to any specific account. 

VI 

On December 20, 1961, the respondent sold two contracts of January 1962 

frozen whole egg futures and caused two additional contracts of January 1962 

frozen whole egg futures and one contract of September 1962 shell egg futures to 

be sold on the Chicago Mercantile Exchange. The respondent caused all of such 

contracts to be cleared by the respondent's employer in its customers' account, 

but, in accordance with the respondent's instructions to the bookkeeper of the 

respondent's employer who recorded such transactions, the transactions were not 

allocated to any specific account. 

VII 

On Thursday, January 11, 1962, an accountant from the Chicago office of the 

Commodity Exchange Authority visited the offices of the respondent's employer to 

audit records of the firm. The bookkeeper referred to in paragraphs V and VI 

above thereupon asked the respondent to give him the names of the persons for 

whom the sales referred to in paragraphs V and VI above were made. The 

respondent instructed the 

bookkeeper to allocate the transactions to the accounts of six persons whose 

accounts with the respondent's employer were handled by the respondent. 

Pursuant to these instructions, the bookkeeper recorded the transactions in such 

accounts. The persons in whose accounts the contracts were placed had not 

authorized such transactions and had no knowledge of such transactions or of the 

bookkeeping entries made with respect to such transactions. At the time the 

respondent gave the bookkeeper the instructions to place the transactions in the 

specified accounts, substantial losses had accrued with respect to each of the 

transactions. 

VIII 

The bookkeeper referred to in paragraphs V through VII above insisted that 

the matters referred to in such paragraphs be brought to the attention of the 

office manager of the respondent's employer, and at a meeting held after the 

close of the market on January 11, 1962, the office manager ordered that the 

transactions be liquidated on the following day. 

IX 

Pursuant to the instructions of the office manager of the respondent's 

employer, the futures transactions referred to in this complaint were liquidated 

on January 12, 1962, at a substantial loss. The liquidating transactions and 

losses were entered in the ledger accounts of the persons referred to in 
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paragraph VII above in whose accounts the initial transactions had been placed. 

However, no statements were sent to such persons notifying them of such losses. 

X 

On Sunday, January 14, 1962, all of the facts relating to the foregoing 

matters were brought to the attention of the president of the respondent's 

employer, and the president of the firm determined that the futures transactions 

should be removed from the customers' accounts and that the losses should be 

charged to the respondent's personal account. Pursuant to such determination, 

bookkeeping entries were made removing the transactions and losses from the 

customers' accounts and placing the transactions and losses in the respondent's 

account. 

XI 

By reason of the facts set forth in this complaint, the respondent attempted 

to cheat and defraud and did cheat and defraud persons in or in connection with 

the making of contracts of sale of a commodity for future delivery on or subject 

to the rules of a board of trade in willfull violation of § 4b(A) of the 

Commodity Exchange Act (7 U.S.C. § 6b(A)). 

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

served upon the said respondent. The respondent will have twenty (20) days 

after the receipt of this notice of hearing in which to file with the Hearing 

Clerk, United States Department of Agriculture, Washington 25, D. C., 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 

purpose 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 respondent is 

hereby notified that unless hearing is waived, either expressly or by failure to 

file an answer, or by filing an answer in which all of the material allegations 

of fact contained in the complaint are admitted and a hearing is not requested, 

a hearing will be held at 10:00 a.m., local time, on the 17th day of December, 

1962, in Chicago, Illinois, at a place therein to be specified later, before a 

referee 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 order should 

not be made revoking, or suspending for such period of time as may be 

determined, the respondent's registration as a floor broker and directing that 

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

period of time as may be determined. 

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., this 

21st day of November, 1962. 

/s/ John P. Duncan, Jr. 

John P. Duncan, Jr. 

Assistant Secretary 

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