Release: #4230-99 (CFTC Docket #99-6)    

      For Release: January 13, 1999    

**CFTC FILES ADMINISTRATIVE COMPLAINT AGAINST FARMERS COOPERATIVE      COMPANY AND THREE EMPLOYEES CHARGING VIOLATIONS OF THE COMMODITY EXCHANGE      ACT AND REGULATIONS**

      WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced      today the filing of a five-count administrative complaint naming **Farmers Cooperative Company** (Farmers Co-op), a cooperative grain      elevator located in Farnhamville, Iowa, and three elevator employees, **Richard Houge**, **John McPherson,** and **Larry Peterson**.    

The complaint, filed January 12,      1999, charges that Farmers Co-op, aided and abetted by Houge and      Peterson, violated Section 4(a) of the Commodity Exchange Act (CEA) by      offering and entering into "hedge-to-arrive" (HTA) grain      contracts which constituted contracts for the purchase and sale of a      commodity for future delivery, but which were not conducted on a      designated contract market. According to the complaint, Farmers Co-op      permitted farmers to buy back their HTA contracts at any time before      delivery was required under the contract and thereby extinguish their      delivery obligations by means other than the actual delivery of grain.    

      In addition, the complaint charges that Farmers Co-op, aided and abetted      by Houge and Peterson, violated Section 4c(b) of the CEA and Commission      regulations 32.2 and 33.3(b) by offering and entering into illegal      off-exchange agricultural options contracts. The off-exchange      agricultural options contracts obligated the farmers to sell grain to the      co-op by a specified date at a fixed price if the co-op exercised the      options. Farmers Co-op also permitted producers to buy back their      options, thereby extinguishing the producers' obligations under the      options.    

      The complaint also charges that Farmers Co-op, aided and abetted by      Houge, McPherson and Peterson, operated as an unregistered futures      commission merchant in violation of section 4d(1) of the CEA by extending      credit to farmers for the purpose of placing and maintaining      farmers' orders to buy and sell exchange-traded put and call      options, and certain exchange-traded futures contracts.    

      Finally, the complaint charges that Farmers Co-op, aided and abetted by      the three employees, failed to provide risk disclosure statements and      monthly profit and loss statements to the farmers who were allowed to buy      and sell the exchange-traded futures and options contracts, in violation      of CFTC regulations 1.33(a) and 1.55.    

      A public hearing has been ordered to determine if the charges in the      complaint are true, and, if so, what sanctions, if any, are appropriate      and in the public interest. Possible sanctions include an order directing      the respondents to cease and desist from violating the CEA and Commission      regulations, civil monetary penalties of not more than the higher of      $100,000 or triple the monetary gain for each violation, and restitution      to farmers where appropriate.    

      CFTC Commissioner Barbara P. Holum dissented.    

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