Page 1 

Commodity Futures Trading Commission 

CEA CASES 

NAME: CLAUD WILKES 

CITATION: 9 Agric. Dec. 1194 

DOCKET NUMBER: 52 

DATE: OCTOBER 11, 1950 

DOCUMENT TYPE: DECISION AND ORDER 

(No. 2578) 

In re CLAUD WILKES. CEA Doc. No. 52. Decided October 11, 1950. 

Denial of Trading Privileges -- Failure to Report Transactions in Amounts 

Beyond Specified Size or Quantity -- Willful Violation of Act

Where complaint charged that on three specified dates respondent willfully 

violated the act by failing to report transactions and market positions in 

cottonseed oil futures in amounts beyond a specified size or quantity, executed 

on the New York Produce Exchange, a contract market, as required under the act 

and rules and regulations thereunder, and respondent's answer admitted his 

failure to report, but denied that such failure was willful, it is held, that, 

in view of the circumstances disclosed in this proceeding, it would be 

unreasonable to conclude that respondent's failure to report was an oversight 

due to the pressure of other business or the lack of adequate help, but the only 

possible conclusion is that his failure to report was either deliberate and 

therefore willful, or else due to such gross negligence as to constitute 

willfullness, and, therefore, a denial of all trading privileges to respondent 

for a period of 60 days should be imposed. 

Mr. Benj. M. Holstein for complainant. Mr. H. H. Johnson, of Johnson and White, 

Lexington, Mississippi, for respondent. Mr. John J. Curry, Referee. 

Decision by Thomas J. Flavin, Judicial Officer

PRELIMINARY STATEMENT

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

C., Chapter 1) instituted by a complaint issued under section 6 (b) of the act 

(7 U. S. C. 9) on December 19, 1949, by the Secretary of Agriculture, 

hereinafter called the complainant or the Government. 

The respondent is an individual doing business in his own name and in the 

name of The Wilkes Company. The complaint, as amended at the hearing, charged 

that on three specified dates the respondent willfully failed to report 

transactions and market positions in cotton futures on the New York Cotton 

Exchange, a contract market, which 

transactions and positions were required to be reported under section 4i of the 

act (7 U. S. C. 6i) and sections 3.10, 3.11, 3.12, and 3.21 of the rules and 

regulations (17 CFR 3.10, 3.11, 3.12, 3.21). The answer filed by the respondent 

admitted the failure to report, but denied that such failure was willful. As a 

matter of affirmative defense, the answer alleged that the respondent was 

without the services of his bookkeeper and was extremely busy at the time in 

question, and that the failure to report due to oversight. It was also alleged 

that the respondent had been in reporting status for only a few days. 
Page 2 

A hearing was held in New Orleans on March 8, 1950. John J. Curry, Office of 

Hearing Examiners, Department of Agriculture, was assigned as referee and 

presided at the hearing. The respondent appeared in his own behalf. Benjamin 

M. Holstein of the Solicitor's Office appeared as counsel for the Government. 

After the hearing the Government filed suggested findings of fact, conclusions 

and order. The respondent filed a document urging that the complaint be 

dismissed for the reason that no willfulness was shown on his part. 

Ronald C. Callander, Assistant Chief of the Trading and Reports Division, 

Commodity Exchange Authority, testified for the Government that it had been 

necessary to call the respondent's attention to reporting requirements on many 

occasions prior to the dates mentioned in the complaint. Copies of letters to 

that effect addressed to Mr. Wilkes by the Commodity Exchange Authority were 

introduced in evidence (tr. pp. 15-18; Government exhibit 29). Mr. Callander 

also testified that reports covering the transactions of November 1949 specified 

in the complaint were not received until January 9, 1950, and that the 

respondent was delinquent with respect to reports covering transactions executed 

after the complaint was issued (tr. pp. 11-15). 

Mr. William Dawkins Espey, supervisor in charge of the New Orleans office of 

the Commodity Exchange Authority, testified that he had called the respondent on 

the telephone on June 6 or June 7, 1949, and had advised him of the necessity of 

filing reports on time as required by the regulations. This conversation was 

confirmed by a letter from Mr. Espey to the respondent dated June 7, 1949 (tr. 

pp. 20-24; Government Exhibit 31). 

The respondent testified that he did not realize the importance of reporting 

requirements, that he was engaged in farming and was operating a cotton gin and 

warehouse, and that he was without adequate help (tr. pp. 24-25). With respect 

to his existing delinquency, he testified that he had engaged the services of a 

certified public accountant who was supposed to file the necessary reports and 

that he (the respondent) was under the impression that this was being done (tr. 

pp. 18-19). He admitted his prior delinquencies and the receipt of the abovementioned letters and telephone call from the Commodity Exchange Authority (tr. 

pp. 26-27). 

The referee issued a report proposing findings of fact and conclusions 

substantially in line with the allegations of the complaint and proposing a 

suspension of the trading privileges of the respondent for 60 days. The 

respondent did not except to the referee's report. 

FINDINGS OF FACT

1. The respondent, Claud Wilkes, is an individual residing in Durant, 

Mississippi, and doing business in his own name or in the name of The Wilkes 

Company. 

2. The New York Cotton Exchange at all times material to these findings was a 

duly designated contract market under the Commodity Exchange Act. 

3. On November 3, 1949, as the result of purchases of 2,000 bales of July 

1950 cotton futures contracts executed on the New York Cotton Exchange for the 

account of the respondent by Merrill Lynch, Pierce, Fenner and Beane, registered 

futures commission merchants, hereinafter called Merrill Lynch, the respondent's 

net long position in July 1950 cotton futures contracts on the New York Cotton 

Exchange, as reflected on the books of Merrill Lynch, reached 6,000 bales. The 

respondent thereupon became subject to the requirement contained in section 4i 

of the act and sections 3.10, 3.11, 3.12 and 3.21 of the rules and regulations, 

that he report to the Commodity Exchange Authority not later than the following 

business day with respect to such transactions and with respect to the open 

contracts in all cotton futures then held or controlled by him on all exchanges. 

The respondent had been specifically informed and was fully aware of the 

provisions of the aforesaid sections of the act and regulations, but failed to 

submit the required report until January 9, 1950. 
Page 3 

4. On November 8 and November 9, 1949, on which dates the respondent was in 

reporting status by reason of his position in July 1950 cotton futures contracts 

as described in Finding of Fact 3, purchases of December 1949 cotton futures 

contracts and March 1950 cotton futures contracts, respectively, were executed 

on the New York Cotton Exchange for the respondent's account by Merrill Lynch. 

Under the provisions of section 4i of the act and sections 3.10, 3.11, 3.12 and 

3.21 of the rules and regulations, these transactions were required to be 

reported to the Commodity Exchange Authority not later than the following 

business day. The respondent had been specifically informed and was fully aware 

of the provisions of the aforesaid sections 

of the act and regulations, but failed to submit the required report until 

January 9, 1950. 

5. Between March 25, 1947, and August 19, 1949, the respondent received 

approximately 25 letters and one long distance telephone call from the Commodity 

Exchange Authority calling his attention to transactions and positions which he 

had failed to report, advising him of the necessity of submitting reports as 

required by the act and the regulations, and requesting that such reports be 

furnished. On four occasions the respondent was informed that continued failure 

to observe reporting requirements would result in the institution of formal 

proceedings under the act. 

CONCLUSIONS

Section 4i of the act (7 U. S. C. 6i) requires a person to file reports in 

accordance with the rules and regulations whenever such person has a long or 

short position in any commodity future equal to or in excess of the amount fixed 

for that purpose by the Secretary of Agriculture. Pursuant to this authority, 

the Secretary has fixed 5,000 bales or more as the amount which governs in the 

case of cotton futures, and has specified that such reports shall be filed not 

later than the morning of the business day following the transaction (17 CFR 

3.12, 3.21). The respondent has admitted his failure to report in accordance 

with these requirements, but denies willfulness as charged in the complaint. 

Accordingly, the only issue is whether the violations were inadvertent or 

willful. 

In view of the respondent's previous record in the matter of reporting, his 

denial of willfulness cannot be accepted. In the two years immediately prior to 

the transactions mentioned in the complaint, it was necessary to call his 

attention to reporting delinquencies no less than 26 times and to warn him on 

several occasions that his continued failure would result in action under the 

law. Although the complaint was served on December 28, 1949, reports of the 

transactions named therein were not received until January 9, 1950, following 

which the respondent again failed to report subsequent transactions and was in a 

delinquent status at the time of the hearing. Under the circumstances, it would 

be unreasonable to conclude that his failure to report was an oversight, due to 

the pressure of other business or the lack of adequate help. Mr. Wilkes cannot 

be held to have overlooked the necessity or the importance of reporting after it 

had been called to his attention on 26 separate occasions. The only possible 

conclusion is that his failure to report as charged in the complaint was either 

deliberate, and therefore willful, or else due 

to such gross negligence as to constitute willfulness. In view of such 

willfulness, the short time during which the respondent may have been in 

reporting status in connection with the transactions of November 3, 8, and 9, 

1949, cannot be considered a mitigating circumstance. 

In re A. Feldstein and Company, 5 Agric. Dec. 337 (5 A.D. 337), and In re 

Raymond G. Brown, Sr., et al., 5 Agric. Dec. 745 (5 A.D. 745), were proceedings 

similar to this proceeding. In both cases, the respondents had knowledge of 

reporting requirements and failed to report. The sanctions imposed consisted of 
Page 4 

a denial of trading privileges for periods of 90 days and 60 days, respectively. 

In view of the similarity of the facts and circumstances, a denial of trading 

privileges for a period of 60 days should be imposed in this case. 

ORDER

Beginning on the 30th day after the date of this order, all contract markets 

shall refuse all trading privileges thereon to the respondent, Claud Wilkes, for 

a period of 60 days. A copy of this decision and order shall be served on the 

respondent and on each contract market. 

(No. 2579) 

In re CLAUD WILKES. CEA Doc. No. 52. Decided October 31, 1950. 

Stay Order -- Prior Order Stayed Pending Petition for Reconsideration

Order of October 11, 1950 * stayed pending petition for reconsideration and 

shall not become effective until further order issued. 

* 9 Agric. Dec. 1194 (9 A.D. 1194), supra. -- Ed. 

 

Mr. Harry B. Kelleher, of Kelleher, Hurley & Kohlmeyer, New Orleans, Louisiana, 

for petitioner. Mr. Benj. M. Holstein for Commodity Exchange Authority. 

Decision by Thomas J. Flavin, Judicial Officer

STAY ORDER

On October 11, 1950, an order was entered in this proceeding suspending 

respondent's trading privileges for a period of 60 days. On October 30, 1950, 

respondent filed a petition to reconsider the order entered. Pending action on 

the petition for reconsideration, the order of October 11, 1950, is stayed and 

shall not become effective until a further order is entered in this proceeding. 

Copies hereof shall be served upon the parties and the contract markets under 

the act. 

LOAD-DATE: June 8, 2008 
Page 5