by Alan McArthur
The penalty is $12 million for attempting to manipulate milk futures, and two Platte County residents are involved.
The U.S. Commodity Futures Trading Commission (CFTC) fined the Dairy Farmers of America (DFA), Gary Hanman, who lives just south of the city limits of Platte City and is the former chief executive officer of DFA, and Gerald Bos, former chief financial officer of DFA and current mayor of Weatherby Lake.
The DFA, Hanman and Bos collectively have been ordered to pay $12 million in a settlement with the CFTC.
Also Frank Otis, former president and CEO of a DFA subsidiary, will pay a $60,000 fine and Glenn Millar, former executive vice president of the subsidiary, will pay a $90,000 fine.
In a phone conversation with The Landmark, Bos said he was “not at liberty to discuss the case.” A call seeking comment from Hanman had not been returned at deadline.
In a news release, Stephen Obie, acting director of enforcement for CFTC, said, “Today's enforcement action punishes those responsible for DFA's manipulative scheme with a $12 million civil penalty and a trading ban, and ensures future compliance with federal commodities laws through the imposition of a monitor. Given the severity of the past misconduct, we are pleased that DFA has committed to reform its trading practices.”
“Settling this matter will allow us to focus wholly on serving our members and moving the cooperative forward,” said Rick Smith, president and CEO of DFA, in a news release. “The transactions addressed by the settlement took place over a one-month period more than four years ago. We have fully cooperated with the CFTC's investigation and wanted to put this matter behind us.”
According to the findings, between May 21 and June 23, 2004, the DFA, Hanman and Bos tried to manipulate the price of the Chicago Mercantile Exchange's (CME) June, July and August 2004 Class III milk futures. This was attempted through purchasing block cheddar cheese through the CME Cheese Spot Call market.
The report states that the price of cheese directly affects the price of milk and the relationship is well known.
According to the report, DFA purchased more than 12.9 million pounds of cheddar block cheese at $1.80 per pound, or nearly $23.26 million worth of cheese.
The report states, “DFA officers and employees engaged in the foregoing conduct… with the intent to affect the price of the June, July, and August Class III milk futures contracts to minimize DFA's losses as it liquidated its long speculative futures contract positions.”
The findings by the CFTC also bar Hanman and Bos from trading futures for five years. DFA is barred from engaging in speculative trading for two years. DFA must also retain a monitor to ensure purchases of cheese are made only for business purposes. The company must also implement a compliance and ethics program.
The DFA headquarters is located in Kansas City, Mo. in Platte County along Interstate 29. According to the DFA website, there are more than 18,000 dairy farm members in the DFA. In 2006 the DFA had sales of $11.1 billion.