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Commodity Futures Trading Commission 

CEA CASES 

NAME: HOHENBERG BROS. COMPANY AND JULIEN J. HOHENBERG 

CITATION: Comm. Fut. L. Rep. (CCH) P20,271; [1975-1977 TRANSFER BINDER] 

DOCKET NUMBER: 75-4; 223 

DATE: FEBRUARY 18, 1977 

DOCUMENT TYPE: DECISION AND ORDER 

NOTE: FORMERLY CEA DOCKET # 223 

[P 20,271] Hohenberg Bros. Company and Julien J. Hohenberg. 

Commodity Futures Trading Commission. CFTC Dkt. No. 75-4. February 18, 

1977. Opinion and order dismissing complaint charging attempted manipulation in 

full text. (For Administrative Law Judge opinion, see P 20,146). 

Manipulation -- Elements of Violation -- Intention and Artificial Price. -- A 

finding of manipulation in violation of the Commodity Exchange Act requires a 

finding that the party engaged in conduct with the intention of affecting the 

market price of a commodity, which is determined by the forces of supply and 

demand, and as a result of such conduct an artificial price is created. 

See P 10,025, P 10,065, P 10,175 and P 10,310, "Liabilities -- Prohibitions" 

division. 

Attempted Manipulation -- Elements -- Intent and Overt Act. -- An attempted 

manipulation, which is a manipulation that has not succeeded, requires an intent 

to affect the market price of a commodity and some overt act in furtherance of 

that intent. 

See P 10,025, P 10,065, P 10,175 and P 10,310, "Liabilities -- Prohibitions" 

division. 

Manipulation -- Intent -- Proof -- Inferred from Objective Facts, Actions and 

Totality of Circumstances -- Credibility of Witnesses. -- Since intent is a 

determinative element of a punishable manipulation and it is a subjective factor 

requiring a determination regarding the attempted manipulator's state of mind, 

intent must of necessity be inferred from the objective facts, by a person's 

acts and considering the totality of the circumstances. Consequently, the 

credibility of witnesses is an important factor in inferring such intent. 

See P 10,025, P 10,065, P 10,175 and P 10,310, "Liabilities -- Prohibitions" 

division. 

Manipulation -- Dominant or Controlling Position -- Not Requisite Element. -- 

A dominant or controlling position in the market is not a requisite element to 

either manipulation or attempted manipulation, and is not essential to altering 

successfully the effect of the forces of supply and demand in establishing 

price. 

See P 10,025, P 10,065, P 10,175 and P 10,310, "Liabilities -- Prohibitions" 

division. 

Manipulation -- Profit Motive -- Demonstrated Capability of Realizing 

Manipulation -- Not Requisite Element. -- A profit motive or a demonstrated 

capability 

of realizing a manipulation are not necessary elements of a manipulation or 

attempted manipulation. 
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See P 10,025, P 10,065, P 10,175 and P 10,310, "Liabilities -- Prohibitions" 

division. 

Attempted Manipulation -- Manipulative Intent -- Insufficient Evidence -- 

Tendering of Notices of Delivery on First Notice Day. -- By tendering notices of 

delivery against their short positions in the December future, the respondents 

were attempting to obtain the best price for their certified cotton, which does 

not constitute, in itself, a violation of the Commodity Exchange Act. There was 

insufficient evidence of manipulative intent in the record to conclude that the 

respondents intentionally sought to depress the price of the future. In order 

to have found that they attempted to manipulate downward the price of the future 

by making such tender, it would have had to appear from the record, or be 

inferable from the totality of the circumstances surrounding the company's 

activities, that the respondents intended that their actions have such a 

depressant effect on the market, and that they took some action in furtherance 

of that manipulative intent. 

See P 10,025, P 10,065, P 10,175 and P 10,310, "Liabilities -- Prohibitions" 

division. 

Manipulation -- Standard of Proof -- Administrative Proceedings -- 

Preponderance or Weight of the Evidence -- Not "Beyond a Reasonable Doubt" -- 

Different from Standard of Judicial Review. -- At an administrative proceeding, 

the burden of proof that must be met by the Division of Enforcement is not the 

criminal burden of "beyond a reasonable doubt," but that of proving its case by 

a preponderance or weight of the evidence. This burden is different from the 

standard of judicial review (see P 11,305.20), which is generally limited to 

determining whether the evidence relied upon by the trier of the fact was of 

sufficient quality and substantiality to support the rationality of the 

judgment. The burden of proof includes not only the burden of going forward 

with the evidence, but also the burden of persuasion. 

See P 10,065 and P 11,200, "Liabilities -- Prohibitions" division. 

OPINION OF THE COMMISSION

In this proceeding under the Commodity Exchange Act, as amended (the "Act"), 

the Commodity Futures Trading Commission's n1 Division of Enforcement seeks 

review of the decision and order of an Administrative Law Judge ("ALJ") 

dismissing a complaint n2 charging respondents Hohenberg Bros. Company (the 

"Company") and Julien J. Hohenberg with attempted manipulation of the price of 

the December 1971 No. 2 cotton futures contract traded on the New York Cotton 

Exchange. n3 In our view, the record does not support a finding that the Company 

and Julien Hohenberg attempted to manipulate the price of the December 1971 

cotton future on the New York Cotton Exchange and accordingly, we affirm the 

order of the ALJ dismissing the complaint on the merits. 

n1 The Commodity Futures Trading Commission ("the CFTC") is an 

independent federal regulatory agency which began operation on April 21, 

1975, pursuant to the Commodity Futures Trading Commission Act of 1974, 

Pub. L. 93-463, 88 Stat. 1389 (October 23, 1974). Prior to the 1974 

amendments, the Commodity Exchange Act was administered by the Commodity 

Exchange Authority (the "CEA") of the Department of Agriculture. Futures 

trading was then regulated in certain specifically-enumerated agricultural 

commodities, such as cotton, which is the commodity involved in the instant 

case. The CFTC took jurisdiction of this matter from its predecessor, the 

CEA, under authority of Sections 411 and 412 of Pub. L. No. 93-463. 

n2 The complaint and notice of hearing brought by the CEA before the 

Secretary of Agriculture charged respondents with attempted manipulation of 

the December 1971 cotton future on November 23, 1971, in willful violation 

of Sections 6(b), 6(c) and 9(b) of the Commodity Exchange Act, 7 U.S.C. §§ 

9, 13b and 13(b). Prior to the amendments by the Commodity Futures Trading 

Commission Act of 1974, Section 6(b) of the Act, 7 U.S.C. § 9, provided 

that: 
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If the [Commission] has reason to believe that any person . . . has 

manipulated or attempted to manipulate the market price of any commodity . 

. . for future delivery on or subject to the rules of any contract market . 

. . [it] may serve upon such person a complaint stating its charges in that 

respect . . . [and] [upon] evidence received . . . may require all contract 

markets to refuse such person all trading privileges thereon for such 

period as may be specified in the order . . . . 

And Section 9(b) of the Act, 7 U.S.C. § 13(b), provided that: 

It shall be a felony punishable by a fine of not more than $ 10,000 or 

imprisonment for not more than five years or both . . . for any person to 

manipulate or attempt to manipulate the price of any commodity . . . for 

future delivery on or subject to the rules of any contract market . . . . 

And Section 6(c) of the Act, 7 U.S.C. § 13b, provided that: 

If any person . . . is manipulating or attempting to manipulate or has 

manipulated or attempted to manipulate the market price of any commodity . 

. . for future delivery on or subject to the rules of any contract market . 

. . the [Commission] may, upon notice and hearing . . . make and enter an 

order directing that such person shall cease and desist therefrom . . . . 

n3 The quality grade required under the No. 2 contract on the New York 

Cotton Exchange is Middling 1 1/16 inch cotton with premiums and discounts 

allowed between deliverable grades (Good Middling down through Low Middling 

White and Good Middling through Middling Light Spotted) and staples (1 1/32 

to 1 3/32 and up). The price differences for deliverable grades and 

staples above and below Middling 1 1/16 cotton are based on the average of 

the commercial differences for corresponding grades and staples quoted by 

the USDA for Greenville, South Carolina; Greenwood, Mississippi; Memphis, 

Tennessee; Dallas, Texas; and Phoenix, Arizona. 

Tenderable cotton must have a micronaire of between 3.5 and 4.9 and must 

be of United States growth. Rain-grown and nonrain-grown cotton are both 

tenderable on the No. 2 contract. The size of each contract is about 100 

bales with a total weight of 50,000 pounds (net). Exchange rules permit a 

1 percent weight variance, thus making the minimum deliverable weight 

49,500 pounds and maximum weight 50,500 pounds. 

New York Cotton Exchange Rules also provide for a No. 1 contract but the 

No. 1 contract has been inactive since the June 1969 future. 

Facts:

The Company is a cotton merchandising firm, headquartered in Memphis, 

Tennessee with more than 300 employees. The Company has offices in the United 

States and in foreign countries. Julien Hohenberg was the President and chief 

executive officer of the Company at the time the alleged violations occurred and 

subsequently became Chairman of the Board. As a cotton merchant, the Company 

purchases cotton from farmers and ginners, classifies the cotton into uniform 

lots, and sells the cotton to textile mills in the United States and a number of 

foreign countries. 

This case concerns attempted manipulation of a futures contract. As an aid 

in understanding the Company's position in the market at all relevant times, 

Appendix A shows, on various relevant dates, the Company's December 1971 futures 

positions; its percent of the open interest in the December 1971 future; the 

closing price of the December 1971 and March 1972 futures; the Company's net 

futures positions for all contract months; its net commodity position; n4 and 

the difference between its net commodity position and its short position. 

n4 The Company's net commodity position includes current inventory plus 

commitments to purchase cotton at fixed prices less contracts to sell 

cotton at fixed prices. See Appendix A. 
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On May 14, 1971, the Company had 343,000 bales of cotton composed of actual 

stocks of 152,400 bales of cotton plus commitments to purchase at fixed prices 

(forward contracts) an estimated 190,600 bales of cotton. n5 As an offset 

against its inventory and forward contracts, the Company had contracted to sell 

154,900 bales of cotton in the future at fixed prices. Thus, the net amount of 

the Company's inventory and forward contracts amounted to 188,100 bales of 

cotton on May 14. (See Appendix A -- Net Commodity Position). 

n5 A large majority of the unfilled fixed price purchase commitments 

included "crop acreage contracts" which were contracts entered into with 

farmers for acres expected to be planted. The Company did not hedge in the 

futures market against the "crop contracts." 

Its net futures position on that date was short 564 contracts or 56,400 

bales. n6 Subsequently, on May 27, 1971, the Company 

received notice that it was a successful bidder on 102,615 bales of cotton which 

had been sold by the Commodity Credit Corporation under the government price 

support program. n7 Consequently, by May 28, 1971, the Company's net position in 

actuals had increased from 188,100 bales to 294,100 bales. 

n6 There are essentially two types of positions that may be taken in the 

futures market. A "long" position in the market is established by 

purchasing a standardized quantity and quality of a commodity for future 

delivery in a particular month. A "short" position is established by 

selling the commodity for delivery in a specified month in the future. 

n7 Under the government price support program for cotton, the Commodity 

Credit Corporation is authorized to make non-recourse loans to farmers at a 

specified amount per bale of cotton and take the cotton as security. 7 

U.S.C. § 1340(9). The Commodity Credit Corporation thus often acquired 

large amounts of cotton from farmers who failed to redeem their cotton when 

the price of cotton did not rise above the loan figure and then disposed of 

the cotton. 

During the period May 4 through November 23, 1971, the Company's principal 

short hedge was in the December 1971 No. 2 cotton futures contract traded on the 

New York Cotton Exchange. From late May through early June, the price of the 

December 1971 futures contract declined, falling from 33.67 cents a pound on May 

24 to 29.33 cents a pound on June 3. As a result of the declining cotton prices 

and its large inventory, the Company initiated an aggressive sales campaign for 

its cotton and by June 11, sold 92,000 bales of cotton, including 16,000 bales 

obtained from the Commodity Credit Corporation. From October 1, 1971 to 

November 22, 1971, the Company increased its short position in the December 

future so as to hedge its receipt of large amounts of cotton under previouslymade contracts and commitments with farmers. Increases in the Company's hedging 

position generally corresponded to increases in its inventory and forward 

contracts position during this period. 

When the Company settled its accounts with the Commodity Credit Corporation, 

it was able, at practically no extra expense, n8 to combine the processes of 

reweighing and reclassifying the cotton so that 65,000 bales of the cotton were 

also certified n9 for delivery on futures contracts. n10 This cotton was 

certified between July and September 1971. At that time, supplies of higher 

grades of cotton -- that is, good middling cotton through middling cotton and in 

staple lengths of 1 1/16" to 1 3/32" and up -- were abundant and therefore 

proving difficult to sell profitably. The lower quality cotton -- that is, 

middling down through low middling in shorter staple lengths of 1 1/32" -- was 

selling very well because supplies of lower quality cotton were not as abundant 

as supplies of higher grade cotton. A large portion of the cotton obtained from 

the Commodity Credit Corporation was in the difficult-to-sell higher quality 

grades. As a result, during the summer months of 1971, the value of the cotton 
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obtained from the Commodity Credit Corporation declined. The price of the 

December future also fell due to increased potential supplies of cotton then in 

the fields. As a result of the abundant supplies of higher grade cotton and the 

difficulties encountered in selling the higher grades, by October 1971 the 

Company was left with approximately 48,000 bales of certified cotton in these 

higher grades. n11 

n8 Under the terms of purchase, the cotton obtained from the Commodity 

Credit Corporation had to be reclassed by the U.S. Department of 

Agriculture Board of Cotton examiners and be reweighed by the appropriate 

warehouse for final settlement with the Commodity Credit Corporation. The 

delivery requirement of the New York Cotton Exchange also required 

reclassing and reweighing. 

n9 Certified cotton refers to cotton which has been inspected, weighed, 

and sampled under New York Cotton Exchange supervision, and which has been 

determined deliverable on futures contracts traded on the New York Cotton 

Exchange upon classification, review, and micronaire test under United 

States Department of Agriculture regulations. 

n10 While the Company ordered 72,000 bales of cotton to be certified, 

only 65,000 bales obtained from the Commodity Credit Corporation qualified 

and during the months of July, August and September, were "certified for 

delivery." Continued efforts were made by the Company to merchandize the 

cotton. Rule 3.11(1) of the New York Cotton Exchange (designed to ensure 

that the stock of certified cotton turns over without unduly aging) imposes 

a penalty, at the rate of a specified number of pounds per bale a month, on 

cotton that has been certified for more than six months. Consequently, 

December was the last futures contract month in which the Company could 

tender its certified cotton without penalty. 

n11 It was stipulated and the record reflects that throughout the period 

from May through December 1971, quotations for spot market cotton were 

lower than the price of the December 1971 cotton future. 

It is uncontroverted that the Company established and maintained a large 

short futures position in the December 1971 cotton future. The ALJ found n12 

and the evidence showed, as alleged in the complaint, that the Company's short 

positions at the beginning of trading on the dates set forth below were as 

follows: 

May 5, 1971 . . . . short 376 contracts (6.6 percent of the short open 

interest); 

June 9, 1971 . . . . short 914 contracts (9.8 percent of the short open 

interest); 

Oct. 21, 1971 . . . . short 735 contracts (13.9 percent of the short open 

interest); n13 and 

Nov. 23, 1971 (1st notice day) . . . . short 936 contracts (46.3 percent of 

the short open interest). 

n12 CCH COMM. FUT. L. REP. P 20,146 (March 2, 1976) at p. 20,946. 

n13 While the record generally supports the ALJ's findings as to the 

Company's short positions, on October 21, 1971, the Company was actually 

short 738 contracts and not 735 contracts as found by the ALJ. 

The Division of Enforcement has not contended that maintenance of a large 

short futures position in and of itself constitutes an attempted manipulation in 

violation of the Act. The complaint before the Secretary of Agriculture did, 

however, contend that respondents acted "for the purpose and with the intent" of 

artificially depressing the price of the December 1971 cotton future on and 

after November 23, 1971. We are asked by the Division of Enforcement to infer 

that intent from a telephone call made by Mr. Hohenberg to Plains Cotton 
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Cooperative Association ("Plains"), n14 the Company's subsequent tender n15 of 

357 transferable notices of delivery of spot cotton in satisfaction of the 

Company's short interest and from the totality of the facts and circumstances 

surrounding respondent's trading activity in the December futures contract. 

n14 Plains was a grower cooperative principally engaged in marketing the 

cotton of its members, who were located in Texas and Oklahoma. 

n15 A tender or notice of delivery is written notice delivered through 

the clearinghouse by the seller of a futures contract that he intends to 

deliver the physical commodity in satisfaction of the futures contract. 

On November 22, 1971, the day before first notice day n16 of the December 

1971 cotton future, Julien Hohenberg heard that Plains, which held a large, long 

position in the December 1971 cotton futures contract, n17 was intending to 

accept delivery. Mr. Hohenberg subsequently telephoned Henry C. Patton, Sales 

Manager of Plains, and in the course of the conversation with Mr. Patton, 

informed him that he intended to tender cotton in satisfaction of the Company's 

short futures position. n18 He also stated that some of the cotton to be 

tendered would be penalty cotton, n19 and was of grades and staples not in great 

demand by his Company's customers. From this conversation, the Plains officials 

concluded 

that Mr. Hohenberg would probably tender cotton the following day. The Plains 

officials also inferred that Mr. Hohenberg would have preferred that Plains not 

"stop" the cotton (take delivery) if tendered. The Company, however, after 

confirming Plains' long position in the market and intention to take delivery, 

did not alter its decision to tender. 

n16 First notice day is the first day on which notices of intention to 

deliver actual commodities against futures market positions can be 

tendered. 

n17 Plains had not been known as a major futures market participant and 

was unknown in the Memphis area as a trader in the type of cotton that made 

up most of the certified stocks that the Company intended to tender. The 

cotton marketed by Plains for its members was of a shorter staple length 

than Memphis cotton. 

n18 Dan W. Davis, General Manager and Executive Vice-President of 

Plains, testified that he had listened in on the conversation. Rudi E. 

Scheidt, who was the Company's Executive Vice President, also testified 

that he heard Mr. Hohenberg's end of the conversation. There was 

substantial agreement as to the substance of the conversation. 

n19 Penalty cotton is cotton remaining under certification for a period 

exceeding six months. The deliverer of the cotton incurs certain "weight" 

penalties per bale of delivered "over-age" cotton as prescribed by the New 

York Cotton Exchange Rule 3.11(1). See note 10 supra.

On first notice day, November 23, 1971, the Company tendered 357 transferable 

notices of delivery of spot cotton in satisfaction of that much of its 936 open 

short December futures contracts. n20 Plains, which had a long position in the 

December futures contract, promptly commenced stopping Hohenberg's 357 notices 

shortly after the opening of trading at 10:30 A.M. on that date, and by noon, 

all of the Company's notices had been stopped -- that is, accepted for delivery. 

On November 30, 1971, the Company tendered an additional 105 transferable 

notices of delivery and on December 1, 1975, it tendered another 25 notices of 

its short December futures contracts. These were also stopped. n21 Thus, 

between November 23 and December 1, 1971, the Company tendered 48,700 bales of 

certified cotton in satisfaction of 487 of its short December futures contracts. 

n22 This constituted its remaining inventory of certified cotton obtained from 

the Commodity Credit Corporation. Its remaining short December futures 
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contracts were subsequently rolled over -- that is, transferred -- to the March 

futures contract. 

n20 On November 19, 1971, the Company had 163,100 bales of raw cotton on 

hand, or the equivalent of 1,631 contracts. The Company also had unfilled 

fixed-price purchase commitments for 162,000 bales of cotton. It had 

unfilled fixed-price sale commitments for 175,600 bales and unfixed-price 

call sales for 2,900 bales so that its net commodity position amounted to 

146,600 bales. See Appendix A. However, on that date, only approximately 

48,000 bales were certified -- the equivalent of 480 contracts. On 

November 22, its short position in the December futures contract and total 

net short position amounted to 936 contracts or 93,600 bales so on the 

latter date it was less than 60 percent hedged. See Appendix A. 

n21 Plains took delivery on approximately 700 contracts or 70,000 bales 

of cotton tendered and retendered against December 1971 short contracts. 

n22 The weekly report entitled "Weekly Statement of Positions in Spot 

Cotton, Cotton 'On Call,' and Certified Stocks," required to be filed with 

the CEA under the Commodity Exchange Act, showed that on November 19 the 

Company had approximately 48,000 bales of certified cotton. The report, 

dated November 26, indicated that the Company had approximately 12,800 

bales of certified cotton. Since the Company tendered 35,700 bales on 

November 23, it appears that an additional 700 bales were certified by the 

Company sometime between November 19 and December 1, 1971, when it tendered 

notices of delivery for 2,500 bales. 

Summary of the ALJ's Findings and Conclusions:

In determining that the evidence did not support a finding of attempted 

manipulation, the ALJ generally accepted the credibility of respondents' 

witnesses. In particular, the ALJ: accepted respondents' reasons for certifying 

the cotton obtained from the Commodity Credit Corporation and the Company's 

position as a hedger in the market; n23 rejected the profit motivation advanced 

by the Division of Enforcement, concluding that the Company had no interest in 

the type of financial advantage which could result from a shoft-term fluctuation 

in the futures market; accepted the findings of the expert witnesses, with the 

exception of the CEA's investigator, that the "Company's decision to tender 

cotton in the circumstances was prudent and sound"; n24 declined to draw an 

inference that respondents had overlooked the possibility that their notices 

would be stopped; and consequently would not infer that respondents intended to 

manipulate the market. 

n23 The ALJ found no evidence to indicate that the Company's position 

had changed from that of a cotton merchant to a speculator on November 23. 

n24 See note 11 supra.

The ALJ thus concluded that the Division of Enforcement had failed to 

establish a motive for formulating the illegal intent which the ALJ held to be 

crucial to a finding of attempted manipulation. The ALJ also concluded that: 

absent a demonstrated profit motive for an intent to manipulate, and absent a 

demonstrated capability of realizing a manipulation, it cannot be concluded that 

[Julien J. Hohenberg and the Company] intended to manipulate the market from the 

actions taken by [the Company] on first notice day and the facts presented in 

evidence. CCH COMM. FUT. L. REP. P 20,146 (March 2, 1976) at p. 20,952. 

Finding that the charge in the complaint had not been proven, the ALJ 

dismissed the complaint on the merits. This appeal followed. 

Issues:

Although the Division of Enforcement has challenged a number of the ALJ's 

findings of fact and conclusions of law on this appeal, the fundamental issue 

before the Commission is whether, on the record, it can properly be found that 
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respondents attempted to manipulate the price of the December 1971 cotton 

futures contract on the New York Cotton Exchange. We will also consider a 

second issue: whether the ALJ erroneously applied the criminal standard of proof 

of "beyond a reasonable doubt." 

The Division of Enforcement's Position:

The essence of the Division of Enforcement's case is that the "inferences 

fairly drawn from respondents' tenders, when considered with the entire and 

total factual situation surrounding their tenders, [lead] to the conclusion that 

respondents intentionally acted and traded in a manner calculated to cause the 

price of the December cotton future to be depressed" to an artificial level and 

thereby attempted to manipulate the price of a commodity for future delivery in 

willful violation of the Commodity Exchange Act. 

The attempted manipulation was alleged to have occurred on November 23, 1971, 

the first notice day for the December 1971 cotton futures contract. The 

Division of Enforcement asserts that the requisite intent to manipulate the 

price of the futures contract is evidenced by the following: 

The Company's manner of trading in the December future evidenced an intention 

to manipulate. The size of the Company's first notice day tender, n25 according 

to the 

common perception of the trade, could generally have had a depressant effect on 

futures prices. The Company maintained a large short position in the December 

future which consisted of 936 contracts on November 22, 1971. This amounted to 

approximately 46% of the. open interest on that date. The Company also owned 

approximately 48,000 bales of certified cotton. The Company maintained its 

short position in the December future beyond the time when all other large short 

hedgers had already liquidated or shifted their hedge positions to a more 

distant future and on November 22, 1972, the day prior to first notice day, 

respondents added to their short position by selling an additional 21 contracts 

in the December future. The Company liquidated that portion of its short 

position not satisfied by deliveries only after it had tendered a large number 

of notices on first notice day, thus allowing it to maximize the benefit from 

any decline in the price of the December futures contract precipitated by the 

large tender. n26 

n25 The Division of Enforcement has asked the Commission to infer an 

expectation by respondents that the tender would result in an artificially 

low price of the future and to infer further from that expectation an 

intention by respondents to depress the price of the futures contract to an 

artificially low level. 

n26 Large tenders, particularly when notices of delivery are not stopped 

and are allowed to pass, can have a depressing effect on the price of an 

expiring futures contract. However, any depressant effect the Company's 

large tender of notices might have had apparently was dissipated by the 

fact that Plains stopped the notices and took delivery of 70,000 bales of 

cotton. Subsequently, the price of the December futures contract increased 

.82 cents. See Appendix A. 

The Company's alleged motivation to depress the price of the cotton future in 

order to obtain a financial gain in its futures position has also been advanced 

as evidence of respondents' intention to manipulate the December future. The 

alleged motive for its trading activity was that the Company would have 

benefitted financially from a temporary depression in the price of the December 

1971 cotton future since by successfully depressing the December cotton future, 

the Company would have been in a position to realize a financial gain of $ 2,895 

for each point the futures price was depressed. n27 
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n27 The aim of a short manipulation is to depress the price of the 

future and is effected by the threat of making substantial deliveries or 

actually making large deliveries early in the delivery period or by a 

combination of both. The essence of a short manipulation is either to 

deliver or effectively threaten to deliver a greater quantity of the 

commodity than a cash market can readily absorb, causing "panic" among the 

holders of long positions, particularly where "[the] deliveries fall into 

weak, unsuspecting hands who must not only redeliver but must sell long 

positions as well . . .", thus forcing them to liquidate their long 

positions at increasingly lower prices under threats of delivery. See

Hieronymus, Economics of futures Trading, at 309 (1971). 

Finally, the phone call to Plains on November 22 is proffered to show that 

respondents would have preferred that Plains not take delivery of the cotton 

which the Company was preparing to tender and as evidence of their intent to 

manipulate the December future. The Division of Enforcement would have the 

Commission infer from Mr. Hohenberg's reference to penalty cotton and the 

composition of the cotton that he was attempting to dissuade Plains from taking 

delivery of the cotton. 

The Division of Enforcement maintains that up to the day prior to first 

notice day, when Mr. Hohenberg called Plains, respondents were unaware that 

there might be substantial longs in the market. n28 It is urged that respondents 

knew that tender of notices for delivery of 35,700 bales of cotton on first 

notice day, if allowed to circulate, would have the effect of depressing the 

price of the December futures contract relative to the price of the March 

futures contract. 

n28 Respondents' knowledge of the longs in the market and their capacity 

to stand for deliveries is a critical factor in determining whether an 

attempt to manipulate the futures price occurred, since where holders of 

substantial long positions are ready to stop delivery of notices, the price 

depressant effect of large deliveries will generally be muted. 

In summary, the Commission is asked to infer manipulative intent from the 

Company's alleged profit motive, its large tender on first notice day, its 

manner of trading in the December future, and by Mr. Hohenberg's telephone call 

to Plains. 

The Division of Enforcement contends, contrary to the conclusions of the ALJ, 

that the evidence in this proceeding establishes by the preponderance of the 

evidence, that the Company and Julien Hohenberg intentionally acted and traded 

in a manner calculated to cause the price of the December 1971 cotton futures 

contract to be artificial and thus attempted to manipulate the price of a 

commodity in violation of the Act. 

The Company's Position:

In response to the Division of Enforcement's charges, respondents maintain 

that the tender of 35,700 bales of cotton for delivery against December futures 

contracts was for sound business reasons. n29 The Company had been unable to 

sell a substantial part of the cotton obtained from the Commodity Credit 

Corporation. The Company did not initially liquidate its short position in the 

December future nor switch its December short position forward to the next 

futures month (March 1972), because it reasonably had expected that, at some 

time before first notice day, the difference between the price of the December 

future and the price of the March future would reach full carrying charges, n30 

thereby permitting its short December futures to be economically rolled over. 

Consequently, the Company's large December short position was carried into the 

delivery period. However, according to the evidence presented by respondents 

which the ALJ accepted, the difference between the December and March prices did 

not reach full carrying charges prior to November 23, thereby precluding the 

Company from switching its December futures forward without additional cost. n31 

When it became apparent, in respondents' view, that the short December futures 

could not be economically switched forward, the decision to tender the certified 
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cotton obtained from the Commodity Credit Corporation was made, inasmuch as 

delivery on the futures markets presented the best available price for the 

cotton. n32 On November 23 and succeeding trading days, the Company switched its 

short futures in excess of its certified stocks from December to March even 

though the difference in the prices of 

the two was substantially less than the carrying charge. 

n29 Respondents concede, however, that an intent to manipulate may coexist with sound business practices and, in that sense, "an uneconomic act" 

is not a necessary element of manipulation. 

n30 Carrying charges consist of the cost of storing a physical commodity 

over a period of time and include insurance, storage, and interest on 

investment as well as other incidental costs. Full carrying charges are 

attained when the price of the next futures month is such that a futures 

contract may be switched forward without additional expense. 

n31 The spread between December and March futures prices was 

consistently above 90 points after October 15 and reached 105 points on 

November 12. The ALJ heard testimony from four witnesses as to carrying 

charges. Three of the witnesses testified that the carrying charges for 

the 92 days between the first delivery day for the December future, 

December 1, 1971, and the first delivery day for the March future, March 1, 

1972, were at least 120 points (1.20 cents a pound of cotton at an arrived 

price of 32 cents a pound). The Company's calculation of carrying charges 

was 124 points plus 36 points to cover the average over-age penalties on 

the 357 contracts tendered on November 23, 1971, while the CEA's 

investigator recited carrying charges from 90-105 points. However, the 

figures proffered by the CEA investigator were apparently obtained from 

unnamed sources and were not accorded much credibility by the ALJ. See 

Appendix A -- closing prices of December 1971 and March 1972 futures. 

n32 See note 11 supra.

The Company's tender of notices against its 357 contracts amounted to 

slightly less than 18% of the total open interest in the December future on 

November 22, the day before first notice day. n33 The Company also withheld 

13,000 additional bales or 130 contracts against which it could have initially 

tendered notices of delivery in order to continue attempts to sell them 

commercially. 

n33 At the close of trading on November 22, and consequently at the 

opening of trading on November 23, 2,025 December 1971 futures contracts 

were open. 

The evidence of record indicates that by Friday, November 19, 1971, the 

Company had reason to believe that there were long positions in the market able 

and willing to take delivery of cotton that might be tendered. This judgment 

was deduced from the size of the open interest, its failure to diminish as first 

notice day approached, and the reported certified stocks which were quite large. 

n34 The telephone call to Plains simply confirmed to the Company's officials 

that Plains was one of several long positions that they thought must be in the 

market. The decision to tender cotton was not altered since it had been made 

with knowledge of the likelihood or at least the possibility that the notices 

would be fairly promptly stopped. Notwithstanding the existence of a large free 

supply of cotton, n35 in light of the fact that the Company's short position 

exceeded its certified stocks of cotton and considering the number of notices 

stopped by Plains, n36 there is little reason to doubt that when Mr. Hohenberg 

called Plains' officials, there was reason for his concern that if Plains, which 

was an unknown quantity in the marketplace, were long as reported and stood for 

delivery, the Company could be squeezed. n37 
Page 11 

n34 The open interest on November 19 amounted to 2,277 contracts 

(227,700 bales), and the reported available certified stock amounted to 

83,229 bales. 

n35 On November 15, 1971, the total free supply of cotton amounted to 

approximately 7.5 million bales. On November 19, spot sales amounted to 

112,289 bales. However, only certified cotton is available for delivery on 

a futures contract and on November 19, certified cotton available for 

delivery amounted to 83,229 bales. 

n36 See note 21 supra.

n37 A squeeze generally occurs when those who are short cannot 

repurchase their contracts, except at a price substantially higher than the 

value of those contracts in relation to the rest of the market. Mr. 

Hohenberg testified that the fear of a squeeze, though not very reasonable 

in retrospect, was genuine at the time. 

Manipulation:

While neither manipulation nor attempted manipulation is defined by the 

Commodity Exchange Act, the terms have been discussed in a number of cases 

arising under the Commodity Exchange Act. n38 Cases involving charges of 

attempted manipulation under Sections 6(b), 6(c) and 9(b), 7 U.S.C. §§ 9, 13b 

and 13(b), generally also included charges of manipulation, n39 and have 

involved manipulation by longs n40 rather than a short-sided manipulation as has 

been alleged in the instant case. Consequently, the allegations of an attempted 

short manipulation appear to present a case of first impression to this 

Commission. While the courts have not had occasion to define or address the 

elements of an attempted short manipulation, manipulation has been defined 

generally as conduct intentionally engaged in resulting in an artificial price, 

i.e., a price that does not reflect the basic forces of supply and demand. n41 

n38 See generally Cargill, Inc. v. Hardin, 452 F.2d 1154, 1163 (8th Cir. 

1971), cert. denied, 406 U.S. 932 (1972); Volkart Bros., Inc. v. Freeman,

311 F.2d 52, 57, 58 (5th Cir. 1962); Great Western Food Distributors, Inc. 

v. Brannan, 201 F.2d 476 (7th Cir.), cert. denied 345 U.S. 997 (1953). 

n39 The litigated cases to date have all involved allegations of actual 

manipulation in addition to attempted manipulation with the exception of 

Moore v. Brannan, 191 F.2d 775 (D.C. Cir.) cert. denied 342 U.S. 860 

(1951), which involved a pure attempted manipulation by a long. However, 

since in that case the respondent offered no evidence in his defense, 

neither the Judicial Officer nor the court had occasion to discuss the 

elements of attempted manipulation. 

n40 In the classic squeeze or corner, a long buys and holds a large 

proportion of contracts outstanding in a future and gets possession of all 

or a significant part of the supplies of the commodity available for 

delivery on futures contracts. The long stands for delivery, and the price 

mounts up as the shorts, unable to deliver, bid to buy in their contracts. 

See, e.g., Cargill, Inc. v. Hardin supra; G.H. Miller & Co. v. United 

States, 260 F.2d 286 (7th Cir. 1958), cert. denied, 359 U.S. 907. 

n41 See Cargill, Inc. v. Hardin, supra, 452 F.2d at 1163. The court also 

stated at 1158: 

In order for the futures market to perform its functions effectively, 

prices must reflect as nearly as possible market factors of supply and 

demand. Manipulation of prices by means not reflecting basic supply and 

demand factors creates conditions which prevent the futures market from 

performing its basic economic function and hence diminishes its utility to 

those members of the trade and general public who rely on its basic 

purposes. 
Page 12 

See also General Foods Corp. v. Brannan, 170 F.2d 220, 231 (7th Cir. 

1948). 

A finding of manipulation in violation of the Act requires a finding that the 

party engaged in conduct with the intention of affecting the market price of a 

commodity (as determined by the forces of supply and demand) and as a result of 

such conduct or course of action an artificial price was created. 

Attempted Manipulation:

An attempted manipulation, on the other hand, is simply a manipulation that 

has not succeeded -- that is, the conduct engaged in has failed to create an 

artificial price. An attempted manipulation requires only an intent to affect 

the market price of the commodity and some overt act in furtherance of that 

intent. 

Intent:

As recognized by the court in Great Western Food Distributors, supra 201 F.2d 

at 479, the intent of the parties is a determinative element of a punishable 

manipulation. Intent is a subjective factor and since it is impossible to 

discover an attempted manipulator's state of mind, intent must of necessity be 

inferred from the objective facts and may, of course, be inferred by a person's 

actions and the totality of the circumstances. 

It is important to note that in a case such as the case at bar, where we are 

asked to infer an intent to manipulate the price of a futures contract from the 

facts and circumstances, the credibility of the witnesses is an important 

factor. The court observed in Great Western Food Distributors, supra, that the 

credibility and demeanor of the witnesses is "[often] the 'most telling part' of 

the evidence." 

We discern no difference in the intent required to accomplish a manipulation 

and that required by an attempted manipulation, which is simply the performance 

of an act or conduct which was intended to effect an artificial price. n42 

n42 In Volkart Bros., Inc. v. Freeman, 311 F.2d 52 (5th Cir. 1962), the 

court set aside an order of the Judicial Officer of the Department of 

Agriculture which had found petitioners guilty of manipulating and 

attempting to manipulate the price of cotton futures. The court accepted 

the definition of manipulation offered by Arthur R. Marsh, former President 

of the New York Cotton Exchange, in testimony before a subcommittee of the 

Committee on Agriculture and Forestry, indicating that "there must be a 

purpose to create prices not responsive to the forces of supply and demand; 

the conduct must be 'calculated to produce a price distortion.'" 311 F.2d 

58. Mr. Marsh had defined manipulation as: 

'any and every operation or transaction or practice . . . calculated to 

produce a price distortion of any kind in any market either in itself or in 

relation to other markets. If a firm is engaged in manipulation, it will 

be found using devices by which the prices of contracts for some one month 

in some one market may be higher than they would be if only the forces of 

supply and demand were operative. . . . Any and every operation, 

transaction [or] device, employed to produce these abnormalities of price 

relationship in the futures markets, is manipulation.' (Hearings on Senate 

Resolution 142 Before the Subcommittee on Agriculture and Forestry, 70th 

Cong., 1st Sess., at 201-202.) 

In advancing its own interpretation of manipulation, the court stated at 

311 F.2d 58 that "the term 'manipulate' means more than charging of what 

some may consider to be unreasonably high prices." While Volkart involved a 

squeeze by a long purchaser, the court, at 59, was emphatic that "it must 

appear . . . that they intentionally brought about the squeeze by planned 

action." This is consistent with the position of the court in Great Western 

Food Distributors supra, 201 F.2d at 479, which had previously held that 

"the intent of the parties during their trading was a determinative element 

of a punishable corner." 
Page 13 

Capacity or Dominant Position Not Required:

A dominant or controlling position in the market is not a requisite element 

to either manipulation or attempted manipulation and is not essential to 

altering successfully the forces of supply and demand. The court in Cargill, 

supra, 452 F.2d at 1163, noted "that one of the most common manipulative 

devices, [is] the floating of false rumors, which [can] affect futures prices . 

. . ." 

Profit Motive and Manipulative Intent:

While affirming the ALJ's order dismissing the complaint on the merits and 

generally accepting the ALJ's findings of fact, particularly where questions of 

credibility are involved, we do not agree with the ALJ that a "profit motive" or 

a "demonstrated capability of realizing a manipulation" are necessary elements 

of a manipulation or an attempted manipulation. The court in Cargill, supra, at 

1163, found that a profit motive is not an essential requirement to 

manipulation, and we agree. n43 The court stated that "the question of whether 

an alleged manipulator has made a profit is largely irrelevant, for the economic 

harm done by manipulation is just as great whether there has been a profit or a 

loss in the operation." Cargill, supra, at 1163. 

n43 See however, Volkart Bros., Inc. v. Freeman, 311 F.2d 52, 59 (5th 

Cir. 1962), where the court held that a showing that petitioner had 

profited from a squeeze was necessary to sustain the order of the Judicial 

Officer. 

Although not requisite to a finding of attempted manipulation, the financial 

motive advanced for respondents' alleged attempt to manipulate downward the 

price of the December future is dubious at best since the Company was less than 

60% hedged and its overall position was net long. n44 The Company was a hedger 

and not a speculator, and the value of its futures account in itself was not 

material to it. In that sense, the Company did not stand to realize a financial 

gain from a drop in futures prices or suffer a financial loss from an increase 

in futures prices. That is not to say, however, that a large trader who is 

short in the futures market could not profit from a short manipulation by 

creating artificially low prices through large deliveries while not seriously 

impairing the price of the commodity in the spot market. A sudden "bear raid" 

would not necessarily affect spot prices for any great length of time unless the 

deliverable supply also represented a large percentage of the spot market. 

n44 See Appendix A. 

While the Company's activities leading up to and following first notice day 

were apparently consonant with prudent business practices, that in itself is not 

sufficient to refute the allegation of attempted manipulation. In order to find 

that respondents attempted to manipulate downward the price of the December 1971 

cotton futures contract by the Company's tender of notices of delivery on first 

notice day, it must appear from the record, or be inferable from the totality of 

the circumstances surrounding the Company's activities, that respondents 

intended their actions to have a depressant effect on the market and that they 

took some action in furtherance of that manipulative intent. 

Crucial to determining whether respondents intended to depress the futures 

price with their tenders of notice of delivery is whether they believed there 

were sufficient "strong hands" in the marketplace who would stand for delivery. 

The Company's tender of notices of delivery on first notice day was large in 

light of previous tenders by a single account on the No. 2 cotton contract on 

the New York Cotton Exchange, but nevertheless amounted to less than 18% of the 

total open interest. n45 It is well recognized in the cotton trade that if 

notices of delivery are issued and allowed to circulate, it is likely that the 

futures price will go down. n46 However, there is generally no way of 

determining in advance whether notices will in fact circulate. The evidence 

reflects that at least by November 19, and possibly even earlier, a judgment had 
Page 14 

been made by respondents regarding the long traders who held positions in what 

was considered to be a large open interest in the December future. That 

judgment, based on the size of the open interest on November 19, and the 

reported available certified stocks, was that there were trade longs in the 

market willing and able to take delivery of long cotton that might be tendered. 

The record below does not indicate that respondents reconsidered the decision to 

tender after the phone call to Plains or that the tender was made without full 

knowledge of the likelihood or at least the possibility that the notices would 

be fairly promptly stopped. In this regard, it is not apparent from the record 

of the proceedings that the Company at the time it decided to tender its notices 

of delivery thought it would "fall into weak, unsuspecting hands." 

n45 Respondents acknowledged that on November 23, 1971, they tendered 

more cotton than any previous single account had tendered. While the 

magnitude of a single tender is of some significance, its importance in 

terms of effect on the market is dependent on the size of the open interest 

and the ability and willingness of the longs to take delivery. 

n46 See note 27 supra.

Even though respondents' activities may have involved a "profit motive," 

absent a finding of manipulative intent, trading with the purpose of obtaining 

the best price for one's cotton does not constitute, in itself, a violation of 

the Commodity Exchange Act. It is clear that respondents intended to obtain the 

best price available for their stocks of certified cotton by tendering notices 

of delivery against their short position in the December future. But, it is not 

clear nor inferable from the record before us, considering the Company's trading 

activities, their large short position in the December future and Mr. 

Hohenberg's telephone call to Plains, that respondents intended their conduct to 

depress artificially the price of the December 1971 cotton future to a level not 

reflecting the basic forces of supply and demand. In sum, we find insufficient 

evidence of manipulative intent in the record to conclude that respondents 

intentionally sought to depress the price of the December 1971 cotton future. 

Standard of Proof:

The Division of Enforcement also has questioned the standard of proof applied 

by the ALJ in reaching his decision. It is asserted that the ALJ erroneously 

applied the standard of proof of "beyond a reasonable doubt," which is 

applicable to criminal proceedings, when he stated that he must consider whether 

or not respondents' "intent was so clearly exposed by the Company's actions as 

to leave no reasonable doubt of the existence of such intent as to the motives 

for its actions." n47 [emphasis supplied]. The Division of Enforcement 

maintains that the burden of proof on the complainant is that of proving its 

case by the weight of the evidence as provided in Section 6(b) of the Act, 7 

U.S.C. § 9. We do not agree with the Division of Enforcement's contention that 

the ALJ actually imposed a standard of proof found in criminal cases, and in any 

event, we have independently reviewed the record and determined that the 

evidence does not support a finding of attempted manipulation as alleged in the 

complaint. 

n47 CCH COMM. FUT. L. REP. P 20,146 (March 2, 1976) at p. 20,952. 

Section 10.84 of the Commission's Rules of Practice n48 authorizes the ALJ to 

make an initial decision based on the record in the proceedings "in conformity 

with the requirements of the Administrative Procedure Act ["APA"], 5 U.S.C. § 

557." Since the ALJ is in a position to observe the demeanor of the witnesses, 

the weight to be given to his findings reaches its maximum when these findings 

are based on credibility of witnesses. In weighing the evidence, the ALJ should 

reach his decision based upon "reliable, probative and substantial evidence" as 

required by § 7c of the Administrative Procedure Act. n49 
Page 15 

n48 17 C.F.R. 10.84 (1976). 

n49 While the Supreme Court in Woodby v. Immigration and Naturalization 

Service, 385 U.S. 276 (1966), held the appropriate standard in deportation 

proceedings to be "clear, unequivocal and convincing evidence," the Court 

stressed the extreme deprivation of the sanction involved amounting to 

banishment and also the fact that Congress had not specified the degree of 

proof required in deportation proceedings. Although civil sanctions now 

imposed under Sections 6(b) and 8a(3) of the Commodity Exchange Act, as 

amended, 7 U.S.C. §§ 9 and 12, may result in severe economic penalties 

including revocation of registration and a civil penalty of not more than $ 

100,000 for each violation of the Act, we do not feel this type of sanction 

reaches the level of severity found in a deportation proceeding nor that 

found in criminal proceedings where the standard of proof is "beyond a 

reasonable doubt." 

It should be noted, however, that the standard of judicial review on appeal 

of a Commission Order, as set forth in Section 6(b) of the Act, 7 U.S.C. § 9, 

n50 differs from the burden of proof required for the Division of Enforcement to 

prove its case n51 before an ALJ or the Commission. Thus, at an administrative 

proceeding, the burden of proof to be met by the Division of Enforcement is that 

of proving its case by a preponderance or weight of the evidence. 

n50 "[The] findings of the Commission as to the facts, if supported by 

the weight of the evidence, shall be . . . conclusive" as to a reviewing 

court. 

n51 In Woodby v. Immigration and Naturalization Service, supra, the 

Court distinguished the scope of judicial review from the burden of proof 

with which it is sometimes confused. The Court indicated that "judicial 

review is generally limited to ascertaining whether the evidence relied 

upon by the trier of fact was of sufficient quality and substantiality to 

support the rationality of the judgment." 385 U.S. at 282. Burden of proof, 

on the other hand, includes not only the burden of going forward with the 

evidence but also the burden of persuasion. As provided for in Section 

7(c) of the APA, "the proponent of a rule or order has the burden of 

proof." 5 U.S.C. § 556(d). 

In summary, the Commission, in its review of the record, has concluded that 

the evidence does not support a finding of attempted manipulation. 

Consequently, the Commission has determined to affirm the order of the ALJ 

dismissing the complaint on the merits. 

By the Commission (Chairman BAGLEY, Vice-Chairman RAINBOLT, and Commissioners 

SEEVERS and MARTIN). Commissioner DUNN not participating. 

APPENDIX A 

HOHENBERG: DECEMBER 1971 FUTURES POSITIONS, DECEMBER '71 AND MARCH '72 

CLOSING FUTURES PRICES, NET FUTURES POSITION, NET COMMODITY POSITION, OVERALL 

POSITION AND PERCENT OF OPEN INTEREST IN DECEMBER FUTURES 

May 4 - December 31, 1971 

(all figures in 100's of bales) 

L=Long S=Short 

DATE DEC. PER- CLOSING CLOSING NET NET DIFFE-

(1971) '71 CENT PRICE OF PRICE OF FUTURES n1 COMMODITY RENCE 

FUTURES OF OPEN DEC. '71 MARCH '72 POSITION POSITION n2 

INTEREST FUTURES FUTURES FOR ALL DEC. '71 CONTRACT 

FUTURES MONTHS 

5/4 S376 6.6 30.47 30.92-.97 S381 - 
Page 16 

DATE DEC. PER- CLOSING CLOSING NET NET DIFFE-

(1971) '71 CENT PRICE OF PRICE OF FUTURES n1 COMMODITY RENCE 

 FUTURES OF OPEN DEC. '71 MARCH '72 POSITION POSITION n2 INTEREST FUTURES FUTURES FOR ALL 

 DEC. '71 CONTRACT 

 FUTURES MONTHS 

5/14 S508 7.4 a 31.45-.46 31.85 S564 L1881 L1317

5/28 S766 6.5 b 31.30-.48 31.85-32.10 S928 L2941 L2013

6/8 S914 9.8 29.63-.67 30.18 S1097 - - 

6/11 S880 9.1 c 30.47-.52 31.12-.15 S1107 L2126 L1019

6/25 S800 9.6 d 30.10-.12 30.63 S1063 L2072 L1009

7/9 S762 - 31.95-32.05 32.60 S1020 L1980 L960

7/16 S769 9.4 e 32.36-.41 33.04 S1055 L2051 * L996

7/30 S805 10.3 f 31.34-.35 32.08-.12 S1044 L1882 L838

8/13 S791 11.5 g 32.52-.56 33.35-.38 S1024 L1733 * L709

8/27 S773 12.6 h 31.62-.65 32.50-.51 S970 L1571 * L601

9/3 S764 - 31.32-.40 32.18 S957 L1566 * L609

9/17 S780 12.5 i 31.23-.24 32.04-.05 S870 L1235 * L365

10/1 S815 13.3 j 32.21-.23 33.14-.17 S833 L1276 * L443

n1 At varying times from May 4, 1971, the Company also had positions in 

July and October '71 futures; March, May, July, October, and December '72 

futures; and March '73 futures. 

* Includes net unfixed-price cotton "on call." 

a As of May 15. 

b As of May 31. 

c As of June 15. 

d As of June 30. 

e As of July 15. 

f As of July 31. 

g As of August 15. 

h As of August 31. 

i As of September 15. 

j As of September 30. 

n2 Net Commodity Position includes current inventory plus commitments to 

purchase cotton at fixed prices less contracts to sell cotton at fixed 

prices. 

 

See original document-page 9 

DATE DEC. PER- CLOSING CLOSING NET NET DIF- 

(1971) '71 CENT PRICE OF PRICE OF FUTURES n1 COMMODITY FERENCE

FUTURES OF OPEN DEC. '71 MARCH '72 POSITION POSITION n2 INTEREST FUTURES FUTURES FOR ALL DEC. '71 CONTRACT FUTURES MONTHS 

10/15 S795 14.4 31.97-.99 32.88-.90 S784 L1290 * L506

10/21 S738 13.9 31.75-.77 32.60 S678 - 10/22 S780 15.5 - - S722 L1253 * L531

10/29 S936 19.4 31.97-32.01 32.88 S869 L1341 * L472

11/5 S987 23.0 31.85-.88 32.82-.83 S916 L1437 * L521

11/12 S973 29.2 31.12 32.16-.18 S936 L1533 * L597

11/19 S915 40.3 31.15-.16 32.10 S893 L1466 * L573

11/22 S936 46.3 31.14-.16 32.15-.16 S936 - - 11/23 S655 k - 31.95-32.00 32.70-.72 S863 - - 11/26 S190 l - - - S509 L919 * L919

12/3 S14 m - 33.40 33.67-.70 S210 L834 * L624
Page 17 

DATE DEC. PER- CLOSING CLOSING NET NET DIF- 

(1971) '71 CENT PRICE OF PRICE OF FUTURES n1 COMMODITY FERENCE

 FUTURES OF OPEN DEC. '71 MARCH '72 POSITION POSITION n2 INTEREST FUTURES FUTURES FOR ALL 

 DEC. '71 CONTRACT 

 FUTURES MONTHS 

12/9 L26 - 33.25 34.44-.45 S103 - 

12/10 L26 - - - S83 L1133 * L1050

12/17 L19 - - 36.15 S24 L1162 * L1138

12/23 - - - 36.60-.65 S49 

12/31 n - - - 37.20-.22 L39 L1054 * L1093

k Includes 35,700 bales of which notice of tender was given that day. 

l Excludes such 35,700 bales to make futures position comparable with 

net spot position in which the 35,700 bales are not included. 

m Excludes 13,000 bales of which notice of tender was given on November 

30, 1971 to make futures position comparable with net spot position in 

which the 13,000 bales are not included. 

n Price quote is as of December 30, 1971. 

FINAL ORDER

The Division of Enforcement has appealed from the decision and order of an 

Administrative Law Judge dismissing a complaint against respondents Hohenberg 

Bros. Company and Julien J. Hohenberg, which charged them with attempted 

manipulation of the price of the December 1971 cotton futures contract on the 

New York Cotton Exchange in violation of Sections 6(b), 6(c) and 9(b) of the 

Commodity Exchange Act, 7 U.S.C. §§ 9, 13 and 13(b), as in effect in 1971. 

The Commission, having reviewed the record and briefs, and for the reasons 

stated in its Opinion dated February 18, 1977, hereby affirms the order of the 

Administrative Law Judge dismissing the complaint on the merits. 

Accordingly, IT IS ORDERED that the charges in the complaint not having been 

proven, the complaint is dismissed on the merits. 

By the Commission (Chairman BAGLEY, Vice-Chairman RAINBOLT and Commissioners 

SEEVERS and MARTIN). Commissioner DUNN not participating. 

 

 

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