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PARNES v. HEINOLD COMMODITIES
April 20, 1982
ALBERT PARNES, PLAINTIFF,
HEINOLD COMMODITIES, INC., DEFENDANT.
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Albert Parnes ("Parnes") and his sister Rosalyn Christensen
("Christensen") sued Heinold Commodities, Inc. ("Heinold") in
five counts, all arising out of an alleged scheme by Heinold
(through two of its agents) to defraud plaintiffs. Before
trial Heinold moved for judgment on the pleadings as to Count
V of the Second Amended Complaint ("Complaint"), grounded on
the Racketeer Influenced and Corrupt Organization Act
("RICO"*fn1), 18 U.S.C. § 1961-68 (all citations to Title 18
in this opinion will read simply "Section ___"). For the
reasons summarized in this Court's pre-trial oral ruling and
now expanded in this memorandum opinion and order, Heinold's
motion was granted and Count V was dismissed.
Heinold is a major commodities brokerage firm.*fn3 In March
1978 two Heinold-employed brokers, Pat Keever ("Keever") and
Larry Costello ("Costello"), solicited Parnes to open a
commodities trading account with Heinold. Parnes did so. In
June 1978, at the advice and insistence of Keever and Costello
that investing more money would bring greater profits, Parnes
opened another account with his own funds, this one in
Christensen's name. Because Christensen had given Parnes
authority to trade her account, Keever and Costello limited
their direct contact to Parnes.
Throughout the trading period Keever and Costello made
numerous fraudulent misstatements to Parnes. Those
misrepresentations included statements that:
(1) Trading for the accounts was part of a
prudent commodities investment policy suitable
for plaintiffs' investment objectives.
(2) Heinold's trading methods were consistent
with plaintiffs' prudent investment goals and
were in plaintiffs' best interest.
(3) Keever and Costello had great expertise in
(4) Keever and Costello would watch closely
over plaintiffs' accounts. Because of such
supervision plaintiffs suffered little or no risk
(5) No unauthorized trading would take place in
either account. Parnes would be consulted before
In September 1978 Parnes learned from Costello that Keever
had misrepresented to Parnes the extent of the losses in
plaintiffs' accounts as well as the current positions held in
both accounts. Costello promised to stop the prior course of
conduct and sent Parnes a letter to that effect.
Despite Costello's promise Heinold (through Costello)
continued to engage in unauthorized and otherwise fraudulent
trading in the Christensen account. That was done with
knowledge that such use of the Christensen account would
conceal the unauthorized trading from Parnes (confirmations of
the trades were sent to Christensen because the account was in
As a result of the activities described in this section of
this opinion, plaintiffs ...
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