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Commodity Futures Trading Commission 

CEA CASES 

NAME: MILROSE FOODS COMPANY, MILTON E. ROSENBERG AND RUTH ROSENBERG 

CITATION: 14 Agric. Dec. 1037 

DOCKET NUMBER: 67 

DATE: DECEMBER 14, 1955 

DOCUMENT TYPE: DECISION AND ORDER 

AGRICULTURE DECISIONS

BEFORE THE SECRETARY OF AGRICULTURE

UNITED STATES DEPARTMENT OF AGRICULTURE

(No. 4459) 

In re MILROSE FOODS COMPANY, MILTON E. ROSENBERG AND RUTH ROSENBERG. CEA Docket 

No. 67. Decided December 14, 1955. 

Suspension of Trading Privileges -- Futures Trading in Excess of Limit -- 

False Reports

Where the respondents sold 15 carlots each of January egg futures on two 

different days and held net short positions on such days of 65 carlots and 80 

carlots, respectively, only 10 carlots and 6 carlots of which, respectively, 

represented hedges, and where the respondents submitted reports to the Commodity 

Exchange Authority which showed no sales on such days and reported their 

position in such future as 50 carlots, and in order to compensate for such 

omitted sales arbitrarily adjusted a report for a subsequent day by showing 57 

carlots sold whereas only 27 had actually been sold, held, the respondents 

exceeded the maximum position limit of 50 carlots, and since their books and 

records correctly reflected their transactions and positions, the discrepancies 

in the reports were not due to carelessness, negligence, or mistake but to 

intentional falsification, and respondent's trading privileges are denied for a 

period of thirty days. 

Dismissal -- Inactive Partner of Respondent

Where it appears a respondent partner was not an active member of the firm 

and did not participate in any of the transactions involved, the complaint is 

dismissed as to that partner. 

Mr. Benj. M. Holstein for Commodity Exchange Authority. Mr. William C. Hurtt,

of Pittsburgh, Pennsylvania, for respondents. Mr. John Curry, Referee. 

Decision by Thomas J. Flavin, Judicial Officer

PRELIMINARY STATEMENT

This is a quasi-judicial proceeding under Section 6 (b) of the Commodity 

Exchange Act (7 U.S.C. Chapter 1) instituted by a complaint issued by the 

Assistant Secretary of Agriculture on March 29, 1955. The respondents are 

Milrose Foods Company and two partners in the firm, Milton E. Rosenberg and Ruth 

Rosenberg, his wife. Respondent Milton E. Rosenberg manages and controls the 

business of the firm. 

The complaint charges that the respondents traded in egg futures on the 

Chicago Mercantile Exchange in quantities in excess of permissible limits in 

wilful violation of section 4a of the act (7 U.S.C. 6a) and the order of the 

Commodity Exchange Commission establishing limits on position and trading in 
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eggs for future delivery (17 CFR, 1953 Supp., 150.5), and that the respondents 

submitted false reports to the Commodity Exchange Authority in wilful violation 

of section 4i of the act (7 U.S.C. 6i) and sections 5.10, 5.11, 5.12, and 5.21 

of the rules and regulations (17 CFR 5.10, 5.11, 5.12, 5.21). 

In a letter addressed to the Hearing Clerk on April 15, 1955, the respondents 

admitted some of the material allegations of the complaint, denied others, and 

remained silent with respect to the balance of the allegations. Respondents 

specifically denied that they had submitted false reports or that any of the 

violations were wilful. A hearing was requested. 

John J. Curry, Office of Hearing Examiners, United States Department of 

Agriculture, was assigned as refreree in the proceeding and presided at the 

hearing which was held in Pittsburgh, Pennsylvania, on May 5, 1955. At the 

hearing, Milton E. Rosenberg appeared on behalf of himself and the other 

respondents. Benjamin M. Holstein, Office of the General Counsel, United States 

Department of Agriculture, appeared as counsel for the complainant. After the 

hearing, the parties filed suggested findings of fact, conclusions and orders 

and briefs. 

The referee issued a report recommending that respondents Milrose and Milton 

E. Rosenberg be found to have violated the act as charged in the complaint but 

that, pursuant to complainant's suggestion, the complaint be dismissed as to 

Ruth Rosenberg since she did not appear to be an active member of the firm and 

did not participate in any of the transactions involved. The referee 

recommended also that the contract markets be ordered to refuse trading 

priviliges to Milrose and Milton E. Rosenberg for a period of 15 days. The 

respondents filed exceptions to the report and the complainant also objected to 

the proposed sanction contending that the refusal of trading privileges should 

be for a 30-day period. Oral argument upon the exceptions was held before the 

Judicial Officer in Washington, D. C., on November 4, 1955. In the posthearing 

procedures, the respondents were represented by William C. Hurtt, Pittsburgh, 

Pennsylvania. 

FINDINGS OF FACT

1. Respondent Milrose Foods Company is a partnership with offices at 16th and 

Smallman Streets, Pittsburgh, Pennsylvania. The said partnership is in the egg 

merchandising business and trades in eggs for future delivery on or subject to 

the rules of contract markets. At all times material to these findings, the 

said partnership enjoyed membership privileges on the Chicago Mercantile 

Exchange, a duly designated contract market under the Commodity Exchange Act. 

2. Respondents Milton E. Rosenberg and Ruth Rosenberg are members of the 

respondent partnership. Respondent Milton E. Rosenberg manages and controls the 

business of the firm and was responsible for the transactions hereinafter 

described. Respondent Ruth Rosenberg was not an active member of the firm and 

did not participate in any of such transactions. 

3. On December 23, 1954, respondent Milrose had a net short position of 50 

carlots of January 1955 egg futures on the Chicago Mercantile Exchange. On that 

date and while holding the said position, respondent Milrose sold 15 carlots of 

January 1955 egg futures on the Chicago Mercantile Exchange thereby increasing 

its short position in such future to 65 carlots. Ten carlots of the said 

position represented hedging. On December 24, 1954, respondent Milrose sold an 

additional 15 carlots of January 1955 egg futures on the Chicago Mercantile 

Exchange, thereby increasing its short position in such future to 80 carlots. 

Six carlots of the said position represented hedging. 

4. On December 23, 24, 29, and 31, 1954, respondent Milrose held open 

contracts in January 1955 egg futures on the Chicago Mercantile Exchange equal 

to or in excess of 25 carlots. Accordingly, Milrose was required to report to 

the Commodity Exchange Authority with respect to all transactions executed and 

all open contract positions in egg futures held by it on the said dates, as 

provided in section 4i of the Commodity Exchange Act (7 U.S.C. 6i), and sections 
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5.10, 5.11, 5.12, and 5.21 of the rules and regulations thereunder (17 CFR 5.10 

5.11, 5.12, 5.21). 

5. On January 14, 1955, the Commodity Exchange Authority received from 

respondent Milrose reports purporting to show its transactions and open contract 

positions in egg futures on December 23, 24, 29, and 31, 1954. 

a. The report for December 23, 1954, showed that respondent Milrose had made 

no purchases or sales of January 1955 egg futures on that date and held a short 

open contract position of 50 carlots. In fact, as shown by Finding of Fact 3, 

respondent Milrose had sold 15 carlots and held a short position of 65 carlots 

in such future on that date. 

b. The report for December 24, 1954, showed that respondent Milrose had made 

no purchases or sales of January 1955 egg futures on that date and held a short 

open contract position of 50 carlots. In fact, as shown by Finding of Fact 3, 

respondent Milrose had sold 15 carlots and held a short position of 80 carlots 

in such future on that date. 

c. The report for December 29, 1954, showed that respondent Milrose held a 

short open contract position of 50 carlots in January 1955 egg futures on that 

date. In fact, the said respondent held a short position of 80 carlots in such 

future on that date. 

d. The report for December 31, 1954, showed that respondent Milrose had sold 

57 carlots of January 1955 egg futures on that date. In fact, the said 

respondent had sold 27 carlots of such futures on that date. 

6. All transactions in Jaunary 1955 egg futures executed for the account of 

Milrose on December 23, 24, 29, and 31, 1954, and all positions in such future 

held by the respondent firm on the said dates were reflected in its books and 

records. The reports filed by Milrose did not reflect the positions shown on 

its books and records. 

7. On or about January 11, 1955, respondent Milton E. Rosenberg directed 

William C. Heyl, an employee of Milrose, to prepare the reports described in 

Finding of Fact 5, and Heyl prepared each of the reports at that time. In 

preparing such reports, Heyl did not refer to the books and records of Milrose 

but merely copied certain figures as to the firm's short position in January 

1955 egg futures from a prior report which Milrose had submitted to the 

Commodity Exchange Authority. In order to balance the discrepancy due to the 

omission from the December 23 and 24 reports of the 30 carlots sold on those 

dates, Heyl, in preparing the report for December 31, added 30 carlots of 

January 

1955 egg futures to the quantity of such futures actually sold on that date, as 

decribed in Finding of Fact 5d. 

8. At the time of the transactions described in Findings of Fact 3 and 5, 

respondent Milton E. Rosenberg was aware of the requirements with respect to 

maximum speculative limits and with respect to the necessity for reporting 

positions equal to or in excess of 25 carlots in a single egg future. 

9. On December 27, 1954, the Commodity Exchange Authority informed respondent 

Milton E. Rosenberg by letter that the firm had not reported its trading of 

December 23, that a report covering its trading of December 24 was not correct, 

and requested that the necessary reports and corrections be transmitted. 

Respondent Milton E. Rosenberg, acknowledged this letter, explained that he was 

then on vacation, and stated that all required reports would be submitted by 

January 12, 1955. On January 14, 1955, the Commodity Exchange Authority 

received the reports described in Finding of Fact 5. On February 1, 1955, the 

Commodity Exchange Authority informed respondent Milrose by letter of the 

discrepancies between the said reports and the firm's trading, and requested an 

explanation or further information. Respondent Milton E. Rosenberg replied to 
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this letter on February 8, 1955, stating that the information which the 

Commodity Exchange Authority had with respect to the firm's trading was correct; 

that the violations were due to confusion, ignorance, negligence, and mistake; 

and that there was no intent or design to conceal anything. On February 25, 

1955, the Commodity Exchange Authority sent another letter to respondent Milrose 

concerning these violations and received a reply thereto. None of the letters 

from respondent Milton E. Rosenberg to the Commodity Exchange Authority with 

respect to these violations contained any mention of hedging transactions other 

than those mentioned in Finding of Fact 3. 

10. On March 8, 1955, Arthur R. Grosstephan of the Commodity Exchange 

Authority interviewed respondent Milton E. Rosenberg and informed him that the 

Commodity Exchange Authority was contemplating recommending the issuance of a 

complaint with respect to these violations, and Grosstephan discussed with 

Rosenberg the procedure which is followed after the issuance of a complaint. 

CONCLUSIONS

I

Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) provides as follows: 

". . . it shall be unlawful for any person -- * * * 

"(B) directly or indirectly to buy or sell, or agree to buy or sell, under 

contracts of sale of such commodity for future delivery on or subject to the 

rules of any contract market, any amount of such commodity that shall result in 

giving such person a net long or net short position at any one time in or with 

respect to any such commodity in excess of any trading limit fixed by the 

commission for net long or net short position in such order for or with respect 

to such commodity. 

"(3) No order issued under . . . this section shall apply to transactions 

which are shown to be bona fide hedging transactions . . . ." 

The order of the Commodity Exchange Commission establishing limits on 

position and daily trading in egg futures (17 CFR, 1953 Supp., 150.5) provides 

as follows: 

"§ 150.5. Limits on position and daily trading in eggs for future delivery.

The following limits on the amount of trading under contracts of sale of eggs 

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

be done by any person, are hereby proclaimed and fixed, to be in full force and 

effect on and after October 1, 1951. 

"(a) Position limit. The limit on the maximum net long or net short position 

which any person may hold or control in eggs on or subject to the rules of any 

one contract market is 150 carlots in any one future or in all futures combined; 

Provided, That no person may hold or control a net long or net short position in 

excess of . . . (4) 50 carlots in the January egg future. * * * 

"(C) Bona Fide Hedging. The foregoing limits upon position and daily trading 

shall not be construed to apply to bona fide hedging transactions . . ." 

After the sale of December 23, 1954, Milrose held a short position of 65 

carlots in January 1955 egg futures, ten carlots 

of which may be accepted as representing hedges. On that date, therefore, the 

respondent firm had exceeded the limit by five carlots. On December 24, 1954, 

Milrose sold an additional 15 carlots of January 1955 egg futures which 

increased its short position in such future to 80 carlots. Only six carlots of 

this position represented hedging and, therefore, Milrose exceeded the limit by 

24 carlots. 

During this proceeding, the respondents seemingly took the position that 

because Milrose handled 30 carlots of cash eggs a month, 30 carlots of its 
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futures position should be considered hedging and thus the trading limit would 

not have been exceeded. Milrose's report for December 23 showed 10 carlots as 

hedges and while its report for December 24 showed no hedges, six carlots were 

credited to Milrose as hedges because a subsequent report by Milrose showed six 

carlots of cash eggs in its inventory on that day. Milrose, then, has been 

given credit for all hedging operations claimed by it and all futures sales 

which appeared to be hedging operations. The attempt now to classify additional 

futures sales as hedging is belated and ineffective. Moreover, the mere fact 

that Milrose handled 30 carlots over the period of a month would not entitle it 

to claim 30 carlots of futures sales as hedges under the act on any particular 

day since it would be necessary for Milrose to have 30 carlots in inventory, or 

contracts to buy 30 carlots at fixed prices, at one time. See In re Corn 

Products Refining Co., 13 Agric. Dec. 1117 (13 A.D. 1117) (1954). Therefore, 

the respondents' intimation that the maximum trading limit was not exceeded is 

without merit. 

II

As shown by Finding of Fact 4, Milrose was in reporting status on December 

23, 24, 29, and 31, 1955, because it held open contracts in January 1955 egg 

futures on the Chicago Mercantile Exchange equal to or in excess of 25 carlots. 

The reports submitted to the Commodity Exchange Authority by respondent Milrose 

covering its activities on December 23 and December 24 failed to show that the 

firm had sold any January 1955 egg futures on those dates and represented its 

position in that future to be less than it actually was. The report for 

December 29 also misrepresented the firm's position, and the report for December 

31 showed 57 carlots of January futures sold instead of 27. 

III

The respondents do not dispute the fact that the firm traded and held 

positions in excess of the permitted limits on the dates in question. Nor do 

they dispute the fact that the reports which the firm submitted failed to show 

such trades and misrepresented such positions and other positions and trades. 

They insist however that the violations were not wilful but were due to 

confusion, ignorance, unintentional mistake, etc. The gist of respondents' 

argument that the violations were unintentional is that respondent Milton E. 

Rosenberg conducted trades while on vacation in Florida, that he was busy with 

his additional duties of acting as associate broker for Heifer-King & 

Associates, and that on his return to the Pittsburgh office he carelessly 

allowed an employee to file the required reports without checking by him. 

Respondent Rosenberg had been trading in commodity futures for 23 years. He 

stated at the hearing that he had been specifically informed about the trading 

limit and reporting requirements under the act and that he knew what they were 

prior to the trades in question. He testified that he kept records of the 

trades made from Florida and that he was in constant communication with his 

office in Pittsburgh. He examined his firm's records on his return to 

Pittsburgh and found that they included the transactions which he had made from 

Florida. At the time the reports were prepared, the firm's books and records 

reflected all the transactions executed and positions held on the dates in 

question. Mere reference to the books was all that was necessary to establish 

the true situation and permit the submission of correct reports. 

Finally, all these reports were prepared at the same time, and the employee 

who prepared them admitted that he arbitrarily adjusted the report for December 

31 to compensate for the sales omitted from the reports for December 23 and 

December 24. This cannot be explained as carelessness, negligence, or mistake. 

It was intentional misrepresentation of the facts. Too, the false reports were 

submitted after specific request from the Commodity Exchange Authority for 

correct and complete reports. Under the circumstances then, it is not a 

meritorious defense either legal n1 or otherwise to claim that the employee who 

prepared the reports did not clear them through Rosenberg. Rosenberg was put on 

particular notice as to the necessity for filing these reports and that they 

should be correct. 
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n1 See section 2(a) of the act (7 U.S.C. 1952 ed § 4). 

In the light of the foregoing, it is concluded that the recommendation of the 

complainant as to the sanction should be adopted, namely that the contract 

markets should be ordered to refuse trading privileges to respondent Milrose and 

respondent Milton E. Rosenberg for a period of 30 days. 

ORDER

Effective February 1, 1956, all contract markets shall refuse all trading 

privileges to respondents Milrose Foods Company and Milton E. Rosenberg for a 

period of thirty (30) days, such refusal to apply to all trading done and 

positions held directly by the said Milrose Foods Company or Milton E. 

Rosenberg, and to all trading done and positions held indirectly through persons 

owned or controlled by them, or either of them, or otherwise. 

The proceeding is dismissed as against Ruth Rosenberg. 

A copy of this decision and order shall be served upon the parties by 

registered mail or in person and upon each contract market. 

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