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Therefore, in November 1932, we called the auditor to Washington and asked for all information assembled up to that time. He arrived here on November 29, 1932.
The CHAIRMAN. Will you suspend for just a minute?
(After informal discussion the chairman retired and Mr. Fulmer was designated to preside.)
Mr. FULMER. You may proceed, Doctor.
Dr. DUVEL. After we went over that information it still could not be harmonized or checked. About the middle of 1933, I think it was in July, the data at hand was laid before the solicitor of the Department, who agreed that the regulations under the Grain Futures Act had been violated. Immediately thereafter he undertook to secure a special attorney to handle these matters because the legal work in the Department was so heavy that this case could not be handled by the regular staff.
In the latter part of October 1933 we secured the services of Mr. Leo F. Tierney, of Iowa, to handle some of these cases, and he has been working on them ever since.
And when he got into this case he found there were still further discrepancies. Mr. Tierney was then called away, or was assigned to take charge of another case at St. Paul, a matter involving grain standards, which was foreign to this. In February he held at Cleveland, Ohio, a hearing in the Ettinger and Brand case. In the meantime, however, the Department was completing, under Mr. Tierney's direction, the data involving Mr. Cutten's transactions. The Ettinger and Brand hearing involved a somewhat similar case.
Mr. Tierney went direct to Chicago from Cleveland and he has been there practically ever since, and we have been pushing him and have been urging him to get this work completed without delay. But the last record necessary was secured on March 13, 1934, after which he proceeded to draw up the complaint, which happened to come at this time.
If this hearing had been carried out as originally scheduled it would have been over a day prior to this release on April 11. Had we undertaken to hold up the complaint, and released it 30 days from now, or after Congress had adjourned, what would this committee, or any committee of Congress, have to say as to why we withheld this information? You would be justified in holding that the filing of the complaint was delayed in order to avoid the information being disclosed to the committee.
Mr. BOILEAU. May I ask a question?
Mr. BOILEAU. And did you not have enough information at that time to begin your proceedings against Mr. Cutten?
Dr. DUVEL. No.
Mr. Boileau. Did you not have sufficient information to justify you in proceeding against Mr. Cutten?
Dr. DUVEL. We did not have. The information we had did not check; that is why we sent the man to Chicago.
Mr. BOILEAU. You might not have had a complete case of all the transactions, but did you not have enough to cover a complete transaction? In other words, was not the information you had at that time sufficient for you to proceed against him on one of the charges?
Dr. DUVEL. We did not think so; no.
Mr. BOILEAU. Just a moment, that I may complete. This information that you got on March 13 was essential before you could proceed in the case, was it?
Dr. DUVEL. That was very important.
Mr. BOILEAU. So that was the first time you got a sufficient amount of information together to know whether he was violating the law, and also sufficient evidence upon which to base a complaint?
Dr. DUVEL. We did not have sufficient information until we brought together whatever evidence was available to make the complaint.
Mr. BOILEAU. Well, as I understand, there were 43 different violations charged against this man over a period of years, something like that, was there not?
Dr. DUVEL. I think it was 43.
Mr. BOILEAU. Was not each one of those a separate and distinct violation on his part?
Dr. DUVEL. Well, they all hooked together, more or less.
Mr. BOILEAU. Well, each one of them was a separate and distinct offense, was it not?
Dr. DUVEL. I presume that they were.
Mr. BOILEAU. Could not the Government have taken either one of these offenses, or these complaints that you knew of, at an earlier date?
Dr. DUVEL. Of course, I think you understand the policy of the Department at the present time is not to proceed against any person unless we have complete information. That is the attitude of the Government, at least, of the Department; it tries not to embarrass people until it has the facts. It is not trying to fine or send people to jail but is trying to arrive at what is just, and we wanted to be sure that these different accounts all hooked together in one case.
Mr. BOILEAU. It seems to me that you would not have had to wait until you had 43 of them, Dr. Duvel, or have waited until that many had occurred before you could have proceeded. And my questions are not asked in any way for the purpose of embarrassing you or the administration; but if violators find that the Government is going to be lax, well, of course, it is logical that they will not take it seriously. And when we see that one man has 43 different charges against him and has not been brought to task, it seems that something is wrong in the Government's execution of the law. I would just like to know why some action could not be taken more quickly.
Mr. Doxer. Over a period of how long a time did this investigation continue; what period was covered?
Dr. DUVEL. It covered a period of 2 years. Mr. Doxey. The first violation had not been barred by the statute of limitations before you got the facts on the last one, had it?
Dr. DUVEL. No.
Dr. DUVEL. As I say, for the sake of economy, we cut off in 1931. What has been happening since 1931 I do not know.
Mr. Doxey. Pardon me; I did not mean to interrupt you.
Mr. BOILEAU. I would like to have you explain just a little further why it is that this procedure did not start on some of the earlier offenses. Why did you have to wait until you piled up 43 offenses before getting evidence to start prosecution?
Dr. DUVEL. As I say, it was a question of compiling all the information that we had; and the first time it was all in or, rather, when we thought it was complete was in the latter part of November 1932; that is when our auditor came on
Mr. BOILEAU (interposing). Why was it necessary that you should complete all of the 43 charges before taking any action? Why should you complete the evidence in 43 charges and hold up the matter until the 13th of March before filing the complaint?
Dr. DUVEL. It just happened that we developed the 43 cases as we got into them. That's merely the form in which Mr. Tierney drew the complaint.
Mr. BOILEAU. Did you not have some of them together? That is quite a large number. Why was it necessary for you to wait before you started prosecution on some of them?
Dr. DUVEL. In our judgment, we did not have sufficient evidence.
Mr. BOILEAU. Let me ask you this further question, and I think I will be through.
Dr. DUVEL. Yes.
Mr. BOILEAU. Apparently the Department piles up 43 charges before it takes action in a case of this kind; and I was wondering whether or not there were any other cases that have been investigated by the Department, involving other violations on the part of other individuals, that you have not prosecuted? In
other words, has the Department now some cases under investigation of violations where you have not started proceedings against the individual for violating provisions of the Grain Futures Act, and are still pending?
Dr. DUVEL. We have you mean that are now under investigation-of course, the Ettinger and Brand has been disposed of. We have others.
Mr. BOILEAU. Yes. Dr. DUVEL. We have some other cases. Mr. BOILEAU. You have quite a number of them? Dr. DUVEL. No; there are not so many of them. Mr. BOILEAU. Are there any violations of the Grain Futures Act or any of the Federal regulations issued pursuant to that law
Dr. DUVEL (interposing). Not any considerable number... Mr. BOILEAU. What I am trying to determine is whether or not the Commission down here, the Grain Futures Administration, or any other agency regulating the marketing of wheat has found any violators of the Grain Futures Act or has adjudicated any cases or determined any cases or settled any cases. In other words, have there been any suspensions or any fines imposed under the Grain Futures Act, or have you simply called them in where you found them violating the law, gave them some warning, and told them that they were violating the law
Dr. DUVEL. Of course, we have had a good many cases which we have handled with the business-conduct committee.
Mr. BOILEAU. Have there been any cases where there has been a suspension?
Dr. DUVEL. Of course, you understand under the Grain Futures Act our authority is limited to getting this information; we are limited as to the penalty and, of course, as to the action that we take in the case.
Mr. BOILEAU. You say there are some cases that you have presented to the business-conduct committee?
Dr. DUVEL. Yes.
Mr. BOILEAU. How many instances have there been in which you have made complaint and started proceedings, in which you have worked with the businessconduct committee, that have resulted in members being suspended?
Dr. DUVEL. I should say there were five or seven; I do not remember.
Dr. DUVEL. Yes, there have been investigations, of course, and we have cooperated with the business-conduct committee. Mr. BOILEAU. In a period of 10 years you have had five cases
Dr. DUVEL. The board of trade has suspended several. I do not have the definite figure in mind.
Mr. BOILEAU. How many investigations have you people caused to be made by the business-conduct committee?
Dr. DUVEL. By the business-conduct committee?
Mr. BOILEAU. Can you tell me how many of that number have been found free from blame by the business-conduct committee?
Dr. Duvel. Well, it has been our practice to work along with the businessconduct committee and to avoid taking any action wherever we could until they had opportunity to correct the complaint
Mr. BOILEAU (interposing). Well, are there very many cases now pending before the business-conduct committee or before your Department that you believe you could successfully start proceedings against when the evidence is complete?
Dr. DUVEL. No; there are not a great number.
Mr. BOILEAU. Could you give me approximately the number where the facts are not complete?
Dr. Duvel. Well, we have two or three other cases that we are working on now, but I do not feel justified in discussing them at this time.
Mr. BOILEAU. I did not ask that. I only asked for the number of cases, whether or not there were quite a number of violations that have not been brought to light. It occurs to me that frequently some of these violators are permitted to go along, after they are discovered, and are not brought out for a considerab e period of time, and some of these individuals may feel like taking a chance, thinking they would not be aprehended or stopped by the Government.
Dr. DUVEL. I might give you some light on that situation in a case that we have had before the Commission, that was disposed of not so very long ago.
That was a case, however, which originated a good many years ago and involves section 4 (b) of the present bill as it relates to cheating and defrauding of customers, which is made a criminal offense under this bill. It has been argued before this committee that section 4 (b) is not necessary because such offenses are covered by exchange rules. However, I would like to review that case.
Mr. DoXEY. Was there a final adjudiction in that particular case to which you refer; and if so, what was the penalty?
Dr. DuVEL. The case to which I now refer?
Dr. DUVEL. I will read you what the Commission had to say about it. This was a question where it was contended that the brokers had taken customers' orders into their own account. This is found in the statement of facts:
“As to the charge of manipulation the evidence indicates that respondent”
I will omit the names, as I think that is not material here“while acting as pit brokers for their principals, were entrusted with certain orders for the purchase and sale of wheat for future delivery on and subject to the rules of the Chicago Board of Trade for the account of customers of such principals; that instead of executing these orders by bona fide purchase and sale transactions with other members of the Chicago Board of Trade, as they were required to do under the board of trade rules, they took these orders into their own personal accounts on the books of the third respondent, at prices determined and fixed by themselves; that these prices were fixed and determined so that, with possibly one exception, they were within the range of prices in effect sometime during the period that the orders were in their possession for execution."
Mr. Doxey (interposing). What was the penalty meted out to them?
“While practices of the character here involved may be detrimental to customers and may even amount to fraud, we, nevertheless, find difficulty in adopting the view that these constituted manipulations of the market price of grain within the meaning of the Grain Futures Act. These practices may constitute serious evils affecting the economical marketing of grain in a way to burden interstate commerce. They may be matters which ought to be remedied by legislation.”
That represents the findings of the Commission. Inasmuch as one of the defendants in that case previously admitted his part in the irregularities, we expected to settle that case without the necessity of an extensive hearing. However, we had to take 1,700 pages of testimony before that case was finally settled, and it was drawn out for 2 or 3 years.
It is only fair to say, in the meantime he was suspended by the board of trade.
That action was brought by the Government solely in the interest of the institution with the belief that it would strengthen the hands of the board in cleaning its own house of similar practices. We expected their support, at least hoped to receive it, because we had other cases like it. But from the time that case was filed until it was settled, and perhaps up to this time, we have been condemned for the action. In fact, the defendants, three of them, were defended in part by an attorney who is a member of the board and who operates in the pit practically every day; whereas this case should have been used to strengthen the hands of the exchange in cleaning its own house of practices of this kind, and that was the sole purpose for which the action was brought. Because there is no penalty under the present act for such unfair practices we are recommending the provision as embodied in section 4 (b) of the bill. It has been contended that this section is not necessary, that the exchanges can take care of violations of this character, but it is my sincere belief that it is needed. However, I hope that it never will be necessary to invoke it.
I want to illustrate further with a case which involved a broker handling joblot orders aggregating 32,000 bushels where the broker failed to execute any of the orders, as he was supposed to do, but took them into his own account at a profit of $160.
Mr. ToBEY. May I ask a question?
Mr. TOBEY. You say that you did not have enough information to proceed until recently against this man Cutten, and yet the Department has had information, found information on the records of many different accounts of 495,000 bushels each when the legal limit was 500,000 bushels, and upon your investigation you found that they were under one account. Now, why is it not possible for the Government to act on that information? Why could not the Department, when it first found that information, have taken steps to prosecute the violator instead of waiting until they had built up 30 or 40 cases?
You say that you did not have enough information and that you wanted to find out the facts, and yet you had this evidence of these transactions involving 495,000 bushels, manifestly a subterfuge. Why is it the Government could not have taken that information and proceeded with that evidence? That is just the reason why the American people have lost confidence in the enforcement of these regulations by the Government.
Now, let me ask you another question. You say Tierney was called away on another job. Why did you not put on a dozen men instead of one man, and get that information speedily so that you could start your proceeding?
Dr. DUVEL. Of course, we are operating, or undertaking to operate, with a limited appropriation.
Mr. TOBEY. You could have gone out and produced the evidence, or you could have recommended to Congress that you needed additional appropriations. If you knew you had a case the Secretary could have secured authority to prosecute with administration backing. The American people want to know why the Department is not enforcing these regulations; that is why they are disgusted with it, disgusted with the lack of ability on the part of the Government, in just the kind of a situation that has been exhibited here today.
Now, if the Secretary of Agriculture, under the Grain Futures Act, did not have adequate authority or did not have enough men, you could have come before the Congress and asked for additional authority, or ask for a law with sufficient teeth in it to put a stop to these practices. Have you ever made any demand for such a law?
Dr. DUVEL. I have been asking for that since 1925.
Mr. TOBEY. You have been coming to other Congresses; but this is a new Congress.
Dr. Duvel. And that request still stands; that demand still stands.
Mr. TOBEY. And if you do not have enough funds to employ additional help to check up on these violations, why do you not make a demand for it?
Dr. DUVEL. Well, as I said a while ago, this matter was put in the hands of our solicitor, and he has had a number of other things to handle, and he had to get a special attorney to handle the case.
Mr. TOBEY. Government inefficiency, I understand.
Mr. Doxey. Have you ever requested, or has your Department ever requested additional appropriations to handle cases of this kind?
Dr. DUVEL. I do not know that it has. Mr. Doxey. Or told us that your appropriation was not sufficient to carry out the enforcement of the provisions of this act?
Mr. Tobey. Why could not the Department have taken action 2 years ago to bring this case to light instead of waiting until now?
Dr. ĎUVEL. Of course, if we had known then, 2 years ago, what we know now, action could have been taken.
Mr. Doxey. What action did you take?
Dr. Duvel. The only action we could take under the present law is to refer it to the solicitor, file the complaint, and demand that the trader show cause why he should not be denied the privilege of trading.
Mr. TOBEY. Is not the present law, the Grain Futures Act, sufficiently strong to enable you to take action without all this delay to put a stop to a lot of this manipulation?
Dr. DUVEL. That is the very reason why we are here now making the same recommendation that we made in 1925, asking for some authority to put a limit on these large speculative lines.
Mr. TOBEY. But you have given us instances of 495,000; no business house would take that length of time to make the investigation; they would go out and have that information in a short time. Mr. Cutten, if he wished the facts about a competitor, would have secured them in a week's time.
Dr. Duvel. But they are not guilty; they are not violating our law; they must report transactions involving 500,000 bushels and over.
Mr. TOBEY. But you could have gone into the books and gotten that information, with additional help, could you not, to see that they were trading in excess of 500,000 bushels?
Dr. DUVEL. Of course, we could not put a large force on that one case.
Mr. TOBEY. It just seems to me that a Government department, on which we are spending hundreds of millions of dollars, could operate more quickly and efficiently, and that is why thousands of the taxpayers of this country are disgusted with its delays.
Dr. Duvel. I can only ask you to suspend judgment until we find out what is involved in this case.