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The clearing firm INTL FCStone took great care to insulate itself from lawsuits that could be brought by investors. The following disclaimer accompanied every statement that was emailed to investors.

“It is understood and agreed that all futures and/or option transactions made by INTL FCStone Financial Inc (“FCM”) for your account are either hedges or contemplate actual delivery and receipt of the property and payment therefore, and all property sold for your account is sold upon the representation that you have the same in your possession actually or potentially. These transactions are made and subject to Federal and State laws.”

When one considers that INT FCStone had been subject to severe sanctions by the CFTC for its conduct since 2008, it is understandable that they would try to insulate themselves from more sanctions and legal actions.

The problem they have with this legal posturing is that it flies in the face of everything that OptionSellers has ever told its investors. In both their book “The Complete Guide to Option Selling” and their frequent newsletters and communications with their investors it was clear that none of the conditions of INT FCStone were ever met.

It was always abundantly clear that transactions made by  OptionSellers were not hedges and none of them “contemplated actual delivery and receipt of the property and payment therefor”. OptionSellers only sold and never bought options. If someone from INT FCStone denies this in a court of law, they will be committing perjury.

Since victims of this theft have the support of the victim specialist of the FBI, Department of Justice the case against INT FCStone is even stronger.

Michael R. McLeod

I was amazed and appalled yesterday to watch the bitterly partisan hearing of the House Oversight and Reform  Committee. It was a daylong grilling of Michael Cohen, President Trump’s personal lawyer and fixer for ten years.

When I was the young general counsel and staff director of the Senate Agriculture Committee I watched the 1973 spectacle of the Watergate Committee. The hearings were held in the Senate Caucus Room, which is adjacent to the offices of the Senate Agriculture Committee. In fact, our committee hearing room was used as a holding room for witnesses and their attorneys. 

The Watergate Committee was composed  of 7 members, which in included 4 members of the Democratic Majority and 3 members of the Republican Minority. A kindly old “country lawyer” from North Carolina named Sam Ervin was the Chairman and a nice young Senator from Tennessee named Howard Baker was the Ranking Republican. My boss Herman Talmadge was a Democratic. member of the committee.

All members of the members of the committee were civil and nonpartisan in these public hearings. I was a friend of the young counsel for  John Dean.  His name was Bob McCandless. Both he and my friend JD Williams were were proteges of Senator Bob Kerr of Oklahoma. Also, both worked in the losing Presidential campaign of Hubert Humphrey, to whom I dedicated my  book, “The Death of Civility and Common Sense”.

John Dean had been the White House  Counsel of President Nixon, who was later supposed to be Nixon’s fall guy. He later wrote some books, the first of which was “Blind Ambition”. It was made into a popular movie. The literary career Bob Woodward was made, because he and Carl Bernstein were the young Washington Post reporters who reported the Watergate break-in . Woodward recently released his latest book which is a New York Time s Bestseller “Fear: Trump in the White House”.  I have read it and would recommend it.

My point is that the Watergate hearings were  civil and nonpartisan, while this is the most bitterly partisan hearing I have ever witnessed. Some Republican members have repeatedly attacked Michael Cohen, who was Donald Trump’s personal lawyer and fixer for ten years. These attacks by Republican supporters of President Trump are unlike anything I have ever seen.

Of course, Michael Cohen had nothing to lose at this point because he has already pleaded guilty to charges and will spend the next few years in jail. Despite the rabid attacks of the most partisan members of the House Oversight Committee,  Cohen refused to promise that he will not write books like John Dean did. He pointed out that he still needs to support his family.

I predict that things will only get worst as we get closer to the 2020 Presidential and Congressional elections.

Michael R. McLeod

When former Congressman John Dingell died on February 7 it brought to mind the differences between the Securities and Exchange Commission (SEC) and the Commodity Futures Exchange CommIssion (CFTC). The first was founded in 1934 and the second was founded in 1974.

Joseph Kennedy, father of John F Kennedy and the Kennedy clan,  was  appointed by President Franklin Delano Roosevelt to chair the new independent agency. From all accounts he assembled a top notch team of lawyers and did a terrific job.

Forty years latter I had a key role in creating the CFTC as the young general counsel of the Senate Agriuculture Committee under Chairman Talmadge. With the able assistance of the  young chief economist of the Chicago  of Trade Richard Sandor  I drafted the legislation to establish the CFTC.

Talmadge was a person who believed in getting things done quickly. He moved the legislation through Committee and the full Senate in record time. Even more Important, he kept the old Texan Bob Poage  fully informed from the beginning.  The House Agriuculture Committee reported the  bill, and it soon passed the full House.

By that time Chairman Dingell had gotten concerned. He had long been Chairman of the the Energy and Commerce Committee, which was the oversight committee for the SEC. He sent his people to lobby us, but it was too late. The legislation had passed both Houses in slightly different forms and the staff was working out the few differences. I remember this clearly because a lawyer from the House Committee was screaming at the representatives of the SEC.

There has always been a feeling among people who were regulated that the SEC was much tougher than the CFTC. In the Bernie Madoff scandal 10 years ago the Madoff was sentenced to 150 years in jail. As I pointed out in a previous blog there were at least 11 high profile celebrities who Madoff stole millions from.

We do yet know how much money was stolen in the OPTIONSELLERS/INT FCStone case, but I hope that the CFTC  and the oversight committees in Congress can find out. Only a court of law can determine if anyone will go to jail

Michael R. McLeod

The investors in OptionSellers, where all trades were cleared by INT FCtone, should file a complaint with the Commodity Futures Trading Commission, the Federal regulator of these transactions. It is important that the responsible regulator is able to quantify the total amount of the losses involved in this scandal so that they can take steps to ensure that it does not happen again.

Click this link to file a complaint

Recently an attorney representing plaintiffs who lost money in the OptionSellers/INT FCStone case told me that it was wrong to compare this case to the Bernie Madoff case where so many investors lost hundreds of millions millions of dollars.

My response is that the Madoff case included a list of 11 celebrities. It included such stars as Steven Spielberg, Kevin Bacon, Zsa Zsa Gabor and Jeffrey Katzenberg, as well as government officials as Eliot Spitzer.

Until the CFTC and Federal Courts deal with all the complaints we will not know how much money investors lost in the OptionSellers/INT FCStone case but it is substantial.

Suggested reading is “The Wizard of Lies: The Death of Trust” by Diana B. Henriqes.

Michael R. McLeod