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Commodity Futures Trading Commission 

CEA CASES 

NAME: PENNSYLVANIA CO-OPERATIVE POTATO GROWERS, INC., AND OWEN L. BARKLEY 

CITATION: 21 Agric. Dec. 429 

DOCKET NUMBER: 103 

DATE: MAY 23, 1962 

DOCUMENT TYPE: DECISION AND ORDER 

AGRICULTURE DECISIONS

BEFORE THE SECRETARY OF AGRICULTURE

UNITED STATES DEPARTMENT OF AGRICULTURE

(No. 7746) 

In re PENNSYLVANIA CO-OPERATIVE POTATO GROWERS, INC., AND OWEN L. BARKLEY. CEA 

Docket No. 103. Decided May 23, 1962. 

Customers' Funds -- Suspension of Registration -- Denial of Trading 

Privileges -- Consent Order

The registration of Pennsylvania Co-operative Potato Growers, Inc., as a 

futures commission merchant is suspended for 90 days. All contract markets are 

ordered to refuse all trading privileges to both respondents for specified 

periods. 

Mr. Donald A. Campbell, for complainant. Mr. David Putney, of Harrisburg, 

Pennsylvania, for respondents. 

Decision by Thomas J. Flavin, Judicial Officer

PRELIMINARY STATEMENT

This is an administrative proceeding, under the Commodity Exchange Act (7 

U.S.C. § 1 et seq.), instituted by a complaint and notice of hearing issued 

under § 6(b) of the Act (7 U.S.C. § 9) on September 13, 1961. 

The complaint charges that the respondent Pennsylvania Co-operative Potato 

Growers, Inc., is a futures commission merchant which carried accounts of 

customers who traded in commodity futures on contract markets and that the acts 

and transactions involved in the case were initiated and carried out by or under 

the direction of the respondent Owen L. Barkley in his capacity as general 

manager of the corporation. 

It is alleged in the complaint that during the period October 14 through 

November 14, 1960, the respondent Barkley caused the making of purchases and 

sales of egg futures on the Chicago Mercantile Exchange for his own use and 

benefit and placed such trades in the customers' omnibus account of the 

respondent corporation carried with E. F. Hutton & Company, another futures 

commission merchant, thereby commingling his personal positions and financial 

results with those of customers. It is also alleged that in connection with 

such purchases and sales of egg futures, the respondents failed to keep adequate 

records. 

The complaint charges that during the period November 2 through November 23, 

1960, the respondent corporation's records showed that it had an excess of funds 

belonging to customers in a segregated account whereas, as a result of losses 

incurred by the respondent Barkley in connection with the egg futures referred 

to in the preceding paragraph and the commingling of such transactions with 
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customers' transactions, the total amount of segregated funds belonging to 

customers was insufficient in amounts ranging from approximately $ 2,174 to 

approximately $ 13,684. 

The complaint charges that during the period February 1 through April 24, 

1961, the respondent Barkley caused the making of transactions in commodity 

futures for the account of the respondent corporation and placed such 

transactions in the customers' omnibus account of the respondent corporation 

with E. F. Hutton & Company, thereby commingling the respondent corporation's 

open contract positions and financial results with those of its customers, and 

that the respondents failed to prepare and keep a record showing the account for 

which the said transactions were executed, and the date, price, quantity, 

market, commodity, and future. 

It is alleged in the complaint that from February 27, 1961, through March 28, 

1961, the segregation record of the respondent corporation showed an excess of 

funds belonging to customers in segregation whereas, as a result of the losses 

of the respondent corporation incurred in connection with the transactions for 

the corporation referred to in the preceding paragraph, the respondent 

corporation had insufficient funds of customers in segregation in amounts 

ranging from approximately $ 32 up to approximately $ 16,000. 

It is alleged that by reason of the acts and omissions described above, the 

respondent Barkley and the respondent corporation "failed to treat and deal with 

customers' funds as belonging to such customers, failed to segregate and account 

separately for such funds, commingled such funds with funds of the respondent 

corporation, used such funds to margin and guarantee the trades and secure and 

extend the credit of persons other than those for whom the same were held, and 

failed to prepare and maintain a true and accurate computation and record as a 

basis for such segregation and accounting, in knowing and wilful violation of 

section 4d(2) of the Commodity Exchange Act (7 U.S.C. 6d(2)) and sections 1.20, 

1.21, 1.22, and 1.32 of the regulations (17 CFR 1.20, 1.21, 1.22, 1.32)." The 

complaint also 

alleges that by reason of the acts and omissions described above, the respondent 

Barkley and the respondent corporation "failed to keep the books and records 

pertaining to futures transactions in the form and manner required by the 

Secretary of Agriculture, in knowing and wilful violation of section 4g of the 

Commodity Exchange Act (7 U.S.C. § 6g), and section 1.35 of the regulations (17 

CFR 1.35)." 

The complaint charges in paragraph IX that between March 1 and March 6, 1961, 

the respondent Barkley caused the making of purchases of potato futures for the 

account of the respondent corporation, and placed such purchases in the 

customers' omnibus account of the respondent corporation with E. F. Hutton & 

Company. It is alleged that after the contracts resulting from such purchases 

showed a loss, the respondent Barkley informed representatives of the estate of 

one Hugh McPherson, deceased president of Maple Lawn Farms, Inc., which 

corporation had a commodity futures trading account with the respondent 

corporation, that the said purchases had been ordered by the said Hugh 

McPherson, and that the representatives of the estate then ordered the aforesaid 

contracts to be sold. It is alleged that the net loss resulting from such 

potato futures was charged to the Maple Lawn Farms, Inc., account and that the 

respondent Barkley destroyed certain records pertaining to such account, altered 

other records of the respondent corporation, and made entries in the Maple Lawn 

Farms, Inc., account which purported to show that the said purchases had been 

made for the Maple Lawn Farms, Inc., account. The complaint charges that by 

reason of the acts and omissions described in paragraph IX of the complaint, the 

respondent Barkley and the respondent corporation, "in connection with an order 

to make and the making of futures contracts on behalf of a customer, cheated or 

defrauded or attempted to cheat or defraud such customer, made a false report to 

such customer, entered a false record for such customer with respect to such 

transaction, and deceived or attempted to deceive such customer with respect to 
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the execution of such contract, in knowing and wilful violation of section 4b of 

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

No hearing has been held with respect to this proceeding. On May 16, 1962, 

the respondents filed a stipulation and waiver under § 0.4(b) of the rules of 

practice (17 CFR § 0.4(b)) in which they admit the facts hereinafter set forth, 

waive hearing on the charges, and consent to the entry of the order contained 

herein. 

FINDINGS OF FACT

1. The respondent Pennsylvania Co-operative Potato Growers, Inc., is a 

Pennsylvania corporation with its principal office and place of business at 5235 

North Front Street, Harrisburg, Pennsylvania. The said corporation was at all 

times material to this complaint registered as a futures commission merchant 

under the Commodity Exchange Act. At all such times up to about May 7, 1961, 

the said corporation had membership privileges on the New York Mercantile 

Exchange. 

2. The New York Mercantile Exchange, the Chicago Mercantile Exchange, and the 

Chicago Board of Trade are now and were at all times material to this complaint 

duly designated contract markets under the Commodity Exchange Act. 

3. The respondent Owen L. Barkley, an individual whose address is 5235 North 

Front Street, Harrisburg, Pennsylvania, is now and was at all times material to 

this complaint the general manager of the respondent Pennsylvania Co-operative 

Potato Growers, Inc. At all times material to this complaint the respondent 

Owen L. Barkley was a member of the New York Mercantile Exchange. The acts and 

transactions hereinafter described were initiated and carried out by or under 

the direction of the respondent Owen L. Barkley in his capacity as general 

manager of the respondent corporation and such acts and transactions were at all 

times subject to his control and management. 

4. At the times hereinafter stated, the respondent Pennsylvania Co-operative 

Potato Growers, Inc., in the regular course of its business, carried accounts of 

customers who traded in commodity futures on contract markets subject to the 

provisions of the Commodity Exchange Act and regulations. In connection 

therewith, the said respondent had to its credit with a bank or other depository 

sums of money in varying amounts, held in segregated accounts, representing 

deposits of margin by and trading profits accruing to such customers. During 

the same periods, the respondent Owen L. Barkley traded in commodity futures for 

his personal use and benefit or for the house account of the respondent 

corporation, as hereinafter more particularly described. 

5. Between October 14 and November 14, 1960, both inclusive, the respondent 

Owen L. Barkley caused the making of purchases and sales of egg futures on the 

Chicago Mercantile Exchange for his own use and benefit and placed such trades 

in the customers' omnibus account of the respondent corporation carried with E. 

F. Hutton & Company, another registered 

futures commission merchant, by reason of which the open contract positions and 

financial results of such trades were commingled with the open contract 

positions and financial results of the transactions of the customers of the 

respondent corporation. In connection with the aforesaid purchases and sales 

for the use and benefit of the respondent Owen L. Barkley, the respondents 

failed to prepare and keep, or cause the preparation and keeping of, a record 

showing the account for which the said transactions were executed, and the date, 

price, quantity, market, commodity, and future. 

6. During the period between November 2 and November 23, 1960, the 

segregation record of the respondent corporation showed an excess of funds in 

segregation ranging from approximately $ 129 to approximately $ 7,000, that is, 

such segregation record indicated that the total amount of customers' funds in 

segregation exceeded, by the aforesaid sums, the amount of money necessary to 
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pay all credits and equities due to such customers. In truth and in fact, as 

the result of losses incurred by the respondent Owen L. Barkley in connection 

with the transactions in egg futures executed for his own use and benefit and 

the commingling of such transactions with those of the respondent corporation's 

customers, as described in the paragraph numbered five hereof, the said 

corporation was undersegregated on fifteen business days between November 2 and 

November 23, 1960, in amounts ranging from approximately $ 2,174 to 

approximately $ 13,684, that is, the total amount of segregated funds was 

insufficient, by the aforesaid sums, to pay all credits and equities due to such 

customers. 

7. During the period February 1 through April 24, 1961, the respondent Owen 

L. Barkley caused the making of transactions in commodity futures on the New 

York Mercantile Exchange and the Chicago Board of Trade for the account of the 

respondent corporation and placed such transactions in the customers' omnibus 

account of the said corporation with the aforesaid E. F. Hutton & Company, by 

reason of which the open contract positions and financial results of such 

transactions were commingled with the open contract positions and financial 

results of the transactions of the customers' of the respondent corporation. In 

connection with the aforesaid transactions for the account of the respondent 

corporation, the respondents failed to prepare and keep, or cause the 

preparation and keeping of, a record showing the account for 

which the said transactions were executed, and the date, price, quantity, 

market, commodity, and future. 

8. From February 27, 1961, through March 28, 1961, the segregation record of 

the respondent corporation showed an excess of funds in segregation ranging from 

approximately $ 296 to approximately $ 5,400, whereas, in truth and in fact, by 

reason of losses incurred in connection with the transactions described in the 

paragraph numbered seven hereof and the commingling thereof with those of the 

respondent corporation's customers, the said corporation was undersegregated on 

sixteen business days within the said period in amounts ranging from 

approximately $ 32 up to approximately $ 16,000. 

CONCLUSIONS

It is provided in § 4d of the Commodity Exchange Act as follows (7 U.S.C. § 

6d): 

It shall be unlawful for any person to engage as futures commission merchant 

in soliciting orders or accepting orders for the purchase or sale of any 

commodity for future delivery, or involving any contracts of sale of any 

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

unless -- 

* * * * 

(2) such person shall, whether a member or nonmember of a contract market, 

treat and deal with all money, securities, and property received by such person 

to margin, guarantee, or secure the trades or contracts of any customer of such 

person, or accruing to such customer as the result of such trades or contracts, 

as belonging to such customer. Such money, securities, and property shall be 

separately accounted for and shall not be commingled with the funds of such 

commission merchant or be used to margin or guarantee the trades or contracts, 

or to secure or extend the credit, of any customer or person other than the one 

for whom the same are held: Provided, however, That such money, securities, and 

property of the customers of such futures commission merchant may, for 

convenience, be commingled and deposited in the same account or accounts with 

any bank or trust company or with the clearing house organization of such 

contract market, and that such share thereof as in the normal course of business 

shall be necessary to margin, guartee, 
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secure, transfer, adjust, or settle the contracts or trades of such customers, 

or resulting market positions, with the clearing-house organization of such 

contract market or with any member of such contract market, may be withdrawn and 

applied to such purposes, including the payment of commissions, brokerage, 

interest, taxes, storage, and other charges, lawfully accruing in connection 

with such contracts and trade * * *. 

The regulations issued by the Secretary contain specific provisions with 

respect to the segregation of and accounting for customers' funds (17 CFR § 

1.20), the care of money and equities accruing to customers (17 CFR § 1.21), the 

use of money, securities, or property of customers (17 CFR § 1.22), and the 

compilation and record to be kept relating to the segregated account (17 CFR § 

1.32). 

The facts described in Findings of Fact one through eight hereof demonstrate 

that the respondents violated § 4d(2) of the Commodity Exchange Act and the 

regulations referred to in the preceding paragraph (17 CFR §§ 1.20, 1.21, 1.22, 

1.32). It is provided in § 6 (b) of the Commodity Exchange Act that if any 

person violates any of the provisions of the Act or any of the rules and 

regulations made pursuant to its requirements, the Secretary "may require all 

contract markets to refuse such person all trading privileges thereon for such 

period as may be specified in the order, and, if such person is registered as 

futures commission merchant * * * may suspend, for a period not to exceed six 

months, or revoke, the registration of such person" (7 U.S.C. § 9). 

In addition, section 4g of the Commodity Exchange Act provides that if any 

person registered as a futures commission merchant "shall fail or refuse to keep 

the books and records pertaining to * * * [futures transactions of such person, 

or the transactions of the customers thereof] in the form and manner required by 

the Secretary of Agriculture, * * * the registration of such person may be 

suspended or revoked after notice and hearing * * *" (7 U.S.C. § 6g). Section 

1.35 of the Secretary's regulations (17 CFR § 1.35) requires each futures 

commission merchant and each member of a contract market to keep "full, 

complete, and systematic records of all commodity futures transactions and cash 

commodity transactions, made by or through him, on or subject to the rules of a 

board of trade." The facts described in Findings of Fact five and seven hereof 

demonstrate 

that the respondents failed to keep the books and records pertaining to futures 

transactions in the form and manner required by the Secretary, and that they 

violated § 4g of the Act (7 U.S.C. § 6g) and § 1.35 of the regulations (17 CFR § 

1.35). 

With respect to the allegations in paragraph IX of the complaint, relating to 

the Maple Lawn Farms, Inc., account, the respondents admit that during the 

relevant period the respondent Pennsylvania Co-operative Potato Growers, Inc., 

was registered as a futures commission merchant under the Commodity Exchange 

Act, and that the respondent Barkley was a member of the New York Mercantile 

Exchange. The facts admitted by the respondents with respect to the allegations 

in paragraph IX of the complaint are sufficient to subject each of the 

respondents to the jurisdiction of the Secretary of Agriculture with respect to 

the allegations contained therein. 

The complainant states that the administrative officials of the Commodity 

Exchange Authority have carefully considered the stipulation and waiver, and the 

terms of the suggested order, and that they believe that the proposed sanction 

based on the record as a whole is adequate and that the prompt entry, without 

further proceedings, of the order to which the respondents have consented will 

constitute a satisfactory disposition of this case as against the said 

respondents, serve the public interest, and effectuate the purposes of the Act. 

The complainant, therefore, recommends that the stipulation and waiver submitted 

by the respondents be accepted and that the proposed order be issued. It is so 

concluded. 
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ORDER

Effective June 25, 1962, (1) the registration of the Pennsylvania Cooperative Potato Growers, Inc., as a futures commission merchant is suspended 

for a period of ninety (90) days, and (2) all contract markets shall refuse all 

trading privileges to Pennsylvania Co-operative Potato Growers, Inc., for a 

period of ninety (90) days and to Owen L. Barkley for a period of one year, such 

refusal to apply to all trading done and positions held by them directly or 

indirectly. 

A copy of this Decision and Order shall be served upon each of the parties 

and upon each contract market. 

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