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Commodity Futures Trading Commission 

CEA CASES 

NAME: SECRETARY OF AGRICULTURE, V. B. FRANK STERLING AND HARRY V. BAKER 

DOCKET NUMBER: 15 

DATE: DECEMBER 14, 1939 

DOCUMENT TYPE: DECISION AND ORDER 

UNITED STATES OF AMERICA 

BEFORE THE SECRETARY OF AGRICULTURE 

C. E. A. DOCKET NO. 15 

§ecretary of Agriculture, Complainant, v. B. Frank Sterling and Harry V. Baker, 

Respondents. 

Proceedings, Findings of Fact, Conclusions, and Order. 

PROCEEDINGS 

On July 28, 1939, complaint was issued by the Acting Secretary of 

Agriculture, pursuant to the provisions of the Commodity Exchange Act (7 U. S. 

C., 1934 ed., and Supp. IV, secs. 1-17a), against B. Frank Sterling and Harry V. 

Baker, alleging that they were partners trading as Sterling & Baker, a 

registered futures commission merchant, during the year 1937. It is charged 

that, between June 1 and November 3 of that year, in Houston, Texas, the 

respondents failed to account separately for their commodity customers' funds, 

as required by the act, with the result that, on November 3, there was a 

shortage of approximately $ 7,100 in such funds. The respondents were directed 

to show why the registration of their firm should not be revoked and trading 

privileges on contract markets denied them, at a hearing in Washington, D. C., 

on August 11, 1939. 

The complaint was served on each of the respondents by registered mail on 

August 8, 1939. The referee wrote each of them that, due to the short time 

between the date of service and August 11, the hearing had been postponed until 

September 1, 1939, and that, if either of them desired to be heard at some place 

other than Washington, he should so request. No communication of any sort was 

received from either of them. 

The hearing was held in Washington, D. C., before Jack W. Bain, Esquire, the 

referee, on September 1, 1939. Charles W. Bucy, Esquire, Office of the 

Solicitor, Department of Agriculture, appeared for the Government. There was no 

appearance for either respondent. At the request of Mr. Bucy, judicial notice 

was taken that the Chicago Board of Trade and the New Orleans Cotton Exchange 

were contract markets during 1937. Douglas B. Bagnell, in charge of the 

Division of Violations and Complaints, Commodity Exchange Administration, 

Department of Agriculture, called by the Government, was the only witness. He 

produced the official report, containing work papers, of an examination of 

Sterling & Baker's records for the period June 1 to November 3, 1937, which 

examination was made at his direction as a result of a routine segregation audit 

previously made. The report shows that the funds of customers trading in 

futures in commodities named in the Commodity Exchange Act were not separately 

accounted for, or segregated, during the period involved, and that on November 3 

there was a shortage of more than $ 7,000 in such 
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funds. Mr. Bagnell testified that trades in wheat and cotton, as shown in the 

report, could be used for hedging transactions in interstate commerce in those 

commodities. 

After the hearing, copies of the referee's report, proposed findings of fact, 

conclusions, and recommended order were served upon each respondent on November 

6, 1939, and a period of twenty days was given for filing exceptions and 

requesting oral argument before the Secretary. The time has expired, and no 

exceptions, briefs, or requests have been filed. 

FINDINGS OF FACT 

1. B. Frank Sterling and Harry V. Baker, as partners in the firm of Sterling 

& Baker, engaged as futures commission merchants in Houston, Texas, from June 1 

to November 3, 1937, inclusive, and registered with the Secretary of Agriculture 

as futures commission merchants for the period ending December 31, 1937. 

2. The respondents, from June 1 to November 3, 1937, failed to segregate and 

to account separately for funds received from and accruing to their customers in 

connection with sales of wheat for future delivery on the Board of Trade of the 

City of Chicago, a contract market, and sales of cotton for future delivery on 

the New Orleans Cotton Exchange, a contract market. 

3. On November 3, 1937, the respondents should have had $ 7,371.39 segregated 

as their commodity customers' funds, but they 

had segregated only $ 262.04, leaving a shortage of more than $ 7,000 in such 

funds. 

CONCLUSIONS 

Since the respondents failed to treat and deal with their customers' funds as 

the act requires, it is concluded that their trading privileges on contract 

markets should be denied, but as their registration as futures commission 

merchants has expired, it is not necessary that it be revoked. 

ORDER 

IT IS ORDERED that all contract markets, until further notice by the 

Secretary of Agriculture, refuse all trading privileges thereon to B. Frank 

Sterling and to Harry V. Baker. 

IT IS FURTHER ORDERED that a copy hereof be sent by registered mail to each 

of the respondents and to each contract market, and that this order shall be 

effective 10 days after the date hereof. 

(SEAL) 

Done at Washington, D. C., this 14th day of December 1939. Witness my hand 

and the seal of the Department of Agriculture. 

[SEE SIGNATURE IN ORIGINAL] 

Acting Secretary of Agriculture. 

CEA DOCKET NO. 15 

NO COPY OF COMPLAINT AVAILABLE 

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