Kansas City, MO – December 16, 2008 – Gary Hanman, former Chief Executive Officer of the Dairy Farmers of America, Inc. (DFA), has been penalized alongside his former Chief Financial Officer, Gerald Boswill, for attempting to manipulate the Class III milk futures contract and exceeding speculative position limits. The U.S. Commodity Futures Trading Commission (CFTC) announced today that DFA, Hanman, and Boswill will collectively pay a $12 million civil monetary penalty.
The CFTC’s investigation revealed that from May 21 through June 23, 2004, DFA, under the direction of Hanman and Boswill, attempted to manipulate the price of Chicago Mercantile Exchange’s (CME) June, July, and August 2004 Class III milk futures contracts. This was allegedly achieved through purchases of block cheddar cheese on the CME Cheese Spot Call market, exploiting the known relationship between cheese prices and milk futures pricing.
Furthermore, the order found that DFA exceeded the CME’s speculative position limits on several days in 2004, violating the Commodity Exchange Act. The actions were intended to artificially influence the market price of Class III milk futures.
In addition to Hanman and Boswill, Frank Otis, former President and CEO of a DFA subsidiary, and Glenn Millar, former Executive Vice President of the same subsidiary, were also implicated. They will each pay $150,000 for aiding and abetting DFA’s violation of speculative position limits. They allegedly directed trading of Class III milk futures through an internal sub-account designated for the subsidiary.
As part of the settlement, Hanman and Boswill are barred from trading futures for five years. DFA itself is prohibited from engaging in speculative trading for two years. The cooperative will also be required to retain a monitor to oversee its trading practices, implement a comprehensive compliance and ethics program, and fully cooperate with future CFTC investigations.
Hanman and Boswill both reside in Platte City and Weatherby Lake, Missouri, respectively. Otis is a resident of Ambler, Pennsylvania, and Millar is located in Las Vegas, Nevada. The Dairy Farmers of America is based in Kansas City, Missouri.
Source: CFTC.gov
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