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Gimbel v. Commodity Futures Trading Commission

decided: April 10, 1989; As Amended June 13, 1989*fn*.

STUART N. GIMBEL, PETITIONER,
v.
COMMODITY FUTURES TRADING COMMISSION, RESPONDENT



On Petitions for Review of Orders of the Commodity Futures Trading Commission.

Wood, Jr., and Flaum, Circuit Judges, and Fairchild, Senior Circuit Judge.

Author: Flaum

AMENDED OPINION

FLAUM, Circuit Judge

Stuart Gimbel petitions for review of a final order of the Commodity Futures Trading Commission ("Commission"). The Commission, after determining that Gimbel had committed several violations of the Commodity Exchange Act ("Act"), imposed a civil monetary penalty of $115,000, denied petitioner's application for registration as a floor broker at the Chicago Mercantile Exchange and permanently barred him from trading on any contract market. On appeal, Gimbel challenges both the Commission's liability determinations and its imposition of sanctions without a separate hearing. For the reasons stated below, we affirm the Commission's liability determinations and imposition of non-monetary sanctions but reverse its imposition of a civil monetary penalty.

I.

Over the past twenty years, Stuart Gimbel has been one of the largest and most successful commodities traders at the Chicago Mercantile Exchange ("Exchange"). In early 1980, Gimbel, in a series of transactions, invested heavily in lumber futures contracts. This investment, however, ultimately proved to be unsuccessful due to a precipitous drop in the lumber market in April, 1980.

The sharp reversal in the lumber market prompted an investigation by the Chicago Mercantile Exchange. Based on this investigation, the Exchange charged Gimbel and several others with various abuses in connection with the trading of lumber futures in early 1980. Gimbel eventually entered a plea of nolo contendere to these charges, accepting a fifteen month suspension of trading privileges and a $150,000 fine as a penalty.

Petitioner's problems, however, were not yet over. In 1984, the Commission's Division of Enforcement ("Division") filed a complaint against Gimbel containing additional allegations of misconduct stemming from the 1980 transactions in lumber futures. The complaint alleged inter alia that Gimbel engaged in a single "wash sale" in February, 1980, thereby violating section 4c(a)(A) of the Act, failed to disclose the extent of his investments in lumber futures in required reports to the Commission in violation of section 6(b) of the Act, obtained reportable futures positions without filing the required reports in violation of section 4(i) of the Act, and violated a prior cease and desist order of the Secretary of Agriculture.

The charges against Gimbel were evaluated by an administrative law judge ("ALJ") who conducted eight days of hearings over a four-month period in late 1984 and early 1985. At the hearing, the Division, over petitioner's objection, introduced evidence of Gimbel's extensive history of trading abuses in support of its request for a permanent trading ban. In contrast, Gimbel introduced no evidence in mitigation of possible sanctions.

In January, 1986, the ALJ entered an order finding Gimbel liable on all counts. As punishment, the ALJ permanently barred petitioner from trading on any contract market and denied his application for registration as a floor broker at the Exchange. The ALJ, however, did not impose any monetary penalty.

Upon receiving the ALJ's decision, petitioner's counsel filed a motion seeking a separate hearing on the issue of sanctions which was denied by the Assistant Chief of the Commission's Opinions Section. Gimbel then appealed the ALJ's decision to the Commission and the Division cross-appealed the ALJ's refusal to impose a monetary penalty. The Commission affirmed the ALJ's liability determinations and imposition of non-monetary sanctions and also assessed a $115,000 civil monetary penalty. Gimbel appeals from this decision.

II.

Gimbel initially challenges the ALJ's liability determinations on a variety of grounds. First, Gimbel claims that the ALJ was biased. In support of this assertion, petitioner refers us to several places in the record ...


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