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Commodity Futures Trading Commission 

CEA CASES 

NAME: SECRETARY OF AGRICULTURE V. GEORGE P. HARBISON 

DOCKET NUMBER: 30 

DATE: DECEMBER 29, 1941 

DOCUMENT TYPE: DECISION AND ORDER 

UNITED STATES OF AMERICA 

BEFORE THE SECRETARY OF AGRICULTURE 

COMMODITY EXCHANGE ADMINISTRATION 

CE-A Docket No. 30 

Secretary of Agriculture, Complainant v. George P. Harbison, Respondent 

Proceedings, Findings of Fact, Conclusions, and Order 

PROCEEDINGS 

On June 18, 1941, pursuant to the provisions of the Commodity Exchange Act, 

as amended (7 U.S.C. 1940 ed. 1). the Under Secretary of Agriculture issued a 

complaint against the respondent, George P. Harbison, of Duluth, Minnesota. It 

was alleged that respondent, a registered floor broker and futures commission 

merchant, and a clearing member of the Duluth Board of Trade, had taken the 

other side of a customer's orders for Duluth wheat futures contracts in 38 

instances in March 1941 without the customer's prior consent, which contracts 

could be used for hedging, or for determining the price basis of, interstate 

transactions in wheat. Respondent was given 15 days to answer the complaint, 

and a hearing was set for July 10 in Duluth. 

A copy of the complaint was served by registered mail upon the respondent on 

June 23, with a referee's letter continuing the hearing to July 25. Respondent 

filed an answer denying that he had taken the trades willfully and knowingly and 

without prior consent, that the trades could be used for hedging or determining 

the price, and that he had violated the act. 

The hearing was held in Duluth on July 25 before Jack W. Bain, the referee. 

Charles W. Bucy, Office of the Solicitor, Department of Agriculture, appeared 

for the Government, and John D. Jenswold, of the firm of Jenswold & Dahle, 

Duluth, for the respondent. Six witnesses testified, and exhibits were 

introduced. 

From the evidence, it seems that M. A. Sauter has been manager of the Duluth 

office of the Farmers' Union Grain Terminal Association since its organization 

about three years ago. He executes the Association's orders for Duluth wheat 

futures, but has arranged with respondent to receive and execute the orders and 

confirm the trades when he, Sauter, is out of town or otherwise unavailable, for 

which respondent receives brokerage. Under this arrangement, respondent 

executed a number of orders for the Association in March 1941. Respondent, for 

his personal account, became the seller with respect to 21 orders to buy, 

involving 51,000 bushels, and became the buyer with respect to 17 orders to 

sell, involving 34,000 bushels. Respondent's name, or "Harb," an abbreviation 

for it, appeared on the trading cards which he made and turned in to the 

Association, as the clearing member on the other side of each of these 38 

trades, and in one other instance wherein respondent made the trade for another 

customer. Respondent's itemized bill for brokerage on trades for 222,000 

bushels, at 25 cents per 1,000, executed for the Association in March, included 

the 38 trades he had made with himself. The bill was paid. For some years 
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respondent had been trading for the Association as he did in March 1941, without 

criticism from Sauter, but Sauter had asked him a number of times to keep his 

name off of the Association's cards. Respondent's reputation is good, and in 

his nearly 30 years on the exchange his acts have not before been questioned by 

the exchange. He still trades for the Association. The Association's futures 

trades are hedges. 

Only five or six of the more than 20 brokers on the Duluth exchange trade for 

themselves as well as execute orders for others. Of these five or six, 

respondent is probably the largest trader for himself. The Duluth contract is 

for durum wheat, and the market for that has been narrow in recent years. There 

are times when a Duluth futures order cannot be executed promptly, and it may 

have to wait for 30 minutes. The contract can be used for hedging wheat 

transactions in interstate commerce. 

No substantial dispute appears regarding the facts outlined above. The 

testimony of the witnesses on the question of prior consent will be summarized. 

Mr. Sauter testified that all of respondent's dealings with the Association 

were through him. Except for two trades, probably in January or February, he 

did not give respondent consent to take the other side. Possibly, in instances 

which he does not remember, when he was busy, he may have told respondent to go 

ahead on other trades when asked, but nothing like 38 times in one month. When 

he saw respondent's name on Association cards, he knew that meant respondent was 

the clearing member on the other side of the trade, but could not tell from the 

card that the trade was for respondent's own account. 

From the general nature of respondent's trading, he assumed, but did not know, 

that respondent took some trades for his own account, and that brokerage bills 

included charges for at least two trades respondent had taken. Before the 

investigation in this case, he did not know respondent's name on the cards meant 

that the trades were respondent's own. He would not authorize payment of 

brokerage on a trade he knew respondent had taken, and when he approved the 

payment for March brokerage, he did not know it contained brokerage on such 

trades. He would not necessarily have consented to respondent's taking the 38 

March trades, if respondent had asked consent. In the two trades to which 

consent had been given there were extenuating circumstances. He told 

respondent, a number of times, that his name should not appear on Association 

cards, as he could not offset orders. He may have told him, in this connection, 

to get another name, in accordance with a Duluth practice of substituting, on 

trading cards, names of other brokers who had made a trade at the same price. 

The practice amounts to matching buying and selling orders. 

Ely Salyards, president of the Duluth Board of Trade, testified that he had 

heard Sauter, about 20 to 25 times a year, give his consent to respondent to 

take half of an Association trade, Salyards to take the other half. About as 

often, he had heard Sauter tell respondent to follow the practice of getting 

another name on his cards. He concluded that Sauter approved the trades, but 

wanted another name to show on the cards. 

W. B. Joyce, a member of the exchange since 1914, testified that, a dozen or 

more times a year, when the market had hit a dead spot, he had heard respondent 

tell Sauter that he could clean up an Association order by taking half and 

letting the witness take half. Sauter never refused, but always told respondent 

to fill the order. 

Mr. Harbison testified that he got consent from Sauter to take specific 

trades almost once a week from 1938 on through March 1941, when he could not 

execute the order and would tell Sauter he would take it. Sauter would tell him 

to go ahead, but to try to get another name. He knew he should have consent, as 

a matter of common honesty, but had not read the Commodity Exchange Act, and did 

not know it required consent until May 1941. He thought he had Sauter's consent 

to take trades at the posted quotations. He thought that the Association wanted 

the orders executed, and that if he did not execute them, someone else would get 
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the business. To render the service he thought his customer wanted, he took 

trades which he could not otherwise execute promptly, without asking anyone. 

Since he learned of the provisions of the act, in May 1941, he has not indulged 

in the practice. 

After the close of the hearing, respondent filed a brief and suggested 

findings. He stated that specific, express consent is not required, but that 

consent may be implied from prior dealings; that he had implied consent; that 

good faith is a defense because there is no violation unless the act was done 

willfully and knowingly; that the testimony regarding interstate commerce is 

insufficient to confer jurisdiction; and that, if there is a violation, it is 

only technical 

and warrants no more disciplinary action than a reprimand. 

The referee, in his report, proposed the findings of fact contained herein, 

and an order revoking respondent's registrations as floor broker and futures 

commission merchant. Respondent excepted to the report and requested oral 

argument, but waived his exceptions and request if an order should issue 

suspending for 90 days, instead of revoking, his registrations. The Government 

did not oppose such suspension. 

FINDINGS OF FACT 

1. George P. Harbison, the respondent, of Duluth, Minnesota, is, and was 

during March 1941, a clearing member of the Duluth Board of Trade, a contract 

market. He registered with the Secretary of Agriculture as a floor broker and, 

in the name of Harbison Grain Company, a sole proprietorship owned and operated 

by him, as a futures commission merchant, for the years 1940 and 1941, and 

neither of his registrations has heretofore been suspended or revoked. 

2. During March 1941, respondent, as floor broker, executed orders for the 

purchase and sale of wheat for future delivery on the Duluth Board of Trade for 

Farmers Union Grain Terminal Association, his customer, the resulting contracts 

involving 222,000 bushels, for which he collected brokerage from the customer at 

the rate of 25 cents per 1,000 bushels, or $ 55.50. 

3. Of the orders mentioned in Finding 2, respondent for his own account 

became the seller with respect to 21 orders to buy, involving 51,000 bushels, 

and the buyer with respect to 17 orders to sell, involving 34,000 bushels. 

4. Respondent occasionally asked and received the consent of the Farmers 

Union Grain Terminal Association to take, for his own account, the other side of 

its orders for Duluth wheat futures, but he did not ask nor receive, and did not 

have, such consent with regard to any of the orders mentioned in Finding 3. 

5. Respondent knew that he should have consent before taking a customer's 

trade, knew that he had not received consent as to the 38 orders mentioned in 

Finding 3, and was fully aware of the nature and consequences of his acts in 

executing those orders. 

6. The futures contracts mentioned in Finding 2 could be used for hedging 

transactions in wheat in interstate commerce, and actually were used as hedges. 

CONCLUSIONS 

The record shows that respondent intentionally and voluntarily, or wilfully 

and knowingly, took his customer's trades without prior consent. His having 

obtained consent in some specific instances does not imply consent in other 

instances, and his having taken trades over a period of years is not sufficient 

to nullify the requirements of the statute. For these violations of Section 

4b(D) of the Commodity Exchange Act, his registrations as a floor broker and as 

a futures commission merchant should be suspended for 90 days. 

ORDER 
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IT IS ORDERED that the registration of the respondent, George P. Harbison, as 

a floor broker for the year 1941, and his registration as a futures commission 

merchant for the year 1941, the latter in the name of Harbison Grain Company, 

be, and they are hereby, suspended for a period of 90 days, beginning on the 

effective date of this order. 

IT IS FURTHER ORDERED that a copy hereof be served on the respondent, and 

upon each contract market, by registered mail or in persons, and that this order 

shall become effective on December 31, 1941. 

(SEAL) 

Done at Washington, D.C., this 29th day of December 1941. Witness my hand 

and the seal of the Department of Agriculture. 

(S) Grover B. Hill 

Assistant Secretary of Agriculture 

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