As I have previously written, the Bernie Madoff scandal ten years ago was the worst financial scandal in American history. It involved more money than the OptionSellers/INT FCStone scandal of 2018. Several of books have been written about it. One is ”Madoff, the Wizard of Lies ”.

Poor Bernie Madoff is serving a 145 year sentence in jail. His crimes fell under the jurisdiction of the SEC, which is much tougher than the CFTC. It doesn't appear that the CFTC plans to do anything at all about the INT FCStone scandal.

The Madoff scandal dwarfs the OptionSellers/INT FCStone scandal in terms of the amount of money. The Madoff scandal involved billions of dollars while the OptionSellers/INT IF stone scandal involved only a few hundred million dollars. Unfortunately, it is impossible to determine exactly how much because the CFTC will not disclose it. I have filed some FOIA requests but the only thing I have gotten back is an acknowledgement of my requests. Perhaps they do not know or don't want to admit it.

I told one Commissioner that I was writing a book on this scandal. As a young Senate General Counsel and Staff Director I drafted the Commodity Futures Trading Commission Act of 1974. When I went into the private practice my first client was the Chicago Board of Trade. I represented them until they were merged into the CME, and then represented other clients, ending with the Futures Industry Association until John Damgard retired. Along the way I did pro bono work as a member of the Coalition for Futures Reform.

The most surprising thing I have read recently is this story that most of the Madoff money has been clawed back. Click on the Bloomberg article below to read it.


Michael R. McLeod

I was delighted to see that a new article with the above title was published in the Washington Post. I am not impartial on the subject of my fellow Georgian, Jimmy Carter, the peanut farmer from Plains, Georgia .

As a young lawyer who worked on the staff of Senator Herman Talmadge and the Senate Agriculture Committee I did the farm policy for Jimmy Carter in his 1976 winning campaign. I organized the first ”Farm Breakfast” at the Democratic Convention in New York where he was officially nominated. I helped select his Secretary of Agriculture, Congressman Bob Bergland of Minnesota. I called to ask if Bergland were interested. I talked to his wife, who said he was out on the farm hauling gravel. He then called back to say he was interested.

Four years later, I worked hard in his losing campaign. My friend, chicken magnate Don Tyson, and I flew around trying to get President Carter re-elected. Don Tyson was even then a multimillionaire, and his Tyson Foods Company is now the largest meat processing company in the world.

As this article indicates President Carter was always a good and decent man. He kept his promise never to lye to the American people. I am happy to see his stature increase with time. It is higher than it has ever been now that we have had two years of Donald Trump.

Michael R. McLeod

Derivatives Clearing Organizations. That is exactly what INT FCStone is. Although INT FCStone had been fined $1.5 million and the firm lost $127 million of its own money in 2008 and 2009, the CFTC has done nothing in this current case, as I reported on a previous blog post on this website.

Rather than clean up its act, INT FCStone doubled  down and billed the innocent investors when OptionSellers went broke in November 2018. Although I have made some FOIA requests to the CFTC, I have been unable to get a response that quantifies the investor losses in this latest debacle.

However, this June 28, 2019 press release offers some hope.

” CFTC Extends Public Comment Period for Proposal to Amend Derivatives Clearing Organization Regulations

Washington, DC — The Commodity Futures Trading Commission (CFTC) announced today that it is extending to September 13 the comment period for the proposed rulemaking to amend certain regulations that apply to derivatives clearing organizations under Part 39 of the CFTC’s regulations.

The proposed amendments would, among other things, address certain risk management and reporting obligations, clarify the meaning of certain provisions, simplify processes for registration and reporting, and codify existing staff relief and guidance.  The original comment period for the proposed rulemaking was to expire on July 15.

Notice of the extension will be published in the Federal Register shortly.  All comments will be posted on the CFTC’s website. ”

I have filed some FOIA requests to the CFTC to find out if the Agency has quantified the losses, but I have received no response except to acknowledge my request.

The only offer of real help came from the Federal Bureau of Investigation. On October 14, 2018 I received a letter from Laura Riso, Victim Specialist of the FBI, DOJ. It said that she understood that I was the victim of a financial crime. It is incredible to me that the FBI is doing the job of the CFTC.

I hope that other investors who have lost in this debacle will contact their members of Congress, especially their Senators, and ask for Congressional oversight.

I was disturbed when I heard in the Democratic debates that Joe Biden was accused of being a segregationist because he worked with Southern Senators. One was Jim Eastland of Mississippi and the other was Herman Talmadge of Georgia. As I remember Senator Biden tried hard to get along with everyone to get things done.

Eastland was a congenial old guy who liked to invite other Senators to have a drink of scotch with him in the evening. Among those was Senator Ted Kennedy, who also had a taste for scotch.

Senator Talmadge was the guy who made it possible for me to work my way through law school by giving me my patronage job on the Capitol Police force. When I graduated, I was given a job in his office.

If he was a segregationist it was because he grew up in the South. In the 1954 Supreme Court case of Brown v. Board of Education, the Supreme Court struck down the doctrine of separate but equal. My graduation from Dixie High School in 1958 was the last class that was not integrated.

Soon after I began working in Talmadge’s office he hired Curtis Atkinson as his first black professional staff person. His main job was to build bridges to the black community around Atlanta. I was his best friend on the Talmadge staff. He and his wife Melvis even attended a wedding celebration for my first wife (now deceased).
When he and his wife came to Washington, they would stay in one of my townhouses in Alexandria, VA.

The fact that Joe Biden served for eight years as the Vice President with Barack Obama, our only black President, should insulate him such attacks

Michael R. McLeod

The Shad Johnson accord was adopted by then SEC Chairman John Shad and then CFTC Chairman Phillip Johnson to define the jurisdictional boundaries of the SEC and the CFTC. I had worked with Johnson, who was previously  counsel to the Chicago Board of Trade, in drafting the law that created the CFTC in 1974. This made the CFTC  the sole regulator of the futures industry.

As new financial instruments were created, it was necessary to amend this accord, and a new accord was adopted as a part of the Commodity Futures Modernization Act of 2000. I did pro bonowork on this statute as a member of the Coalition for Futures Reform.

I have previously written in this space that the CFTC  should do its job to repair the damage done in the OptionSellers/INT FCStone debacle. However, the agency needs the blessings of Congress. So far, no one in Congress has even held hearings on this problem .

Michael R. McLeod