Drexel Charged in Futures Manipulation

Drexel Burnham Lambert Inc. and a Boca Raton, Fla., investor were charged by the Commodity Futures Trading Commission on Thursday with aiding and abetting an attempt to manipulate orange juice futures prices in September, 1984.

The CFTC said the administrative complaint charged Drexel Burnham with helping a customer, Louis Abrams, in a bid to push up the price of the September, 1984, frozen concentrated orange juice futures contract on the New York Cotton Exchange.

The commission said they cornered the market by purchasing more than 90% of the available futures contracts for that month. Abrams was warned to desist at the time but continued despite warnings from the commission, the complaint said.

It also charges various violations of record-keeping and reporting requirements.

The New York-based brokerage house and Abrams collectively face civil penalties of up to $1.2 million--$100,000 for each of 12 counts in the complaint, the CFTC said.

The complaint names Theodore Butler, a former account executive in Drexel’s Miami office. And it said Richard Bermont, co-manager of the office, failed to properly supervise the account.

The firm, in a statement read by spokesman Evan Cooper, said it had no control over Abrams’ account and, “We do not believe these charges are warranted.”

What Case Means

He added: “At the time, we promptly and fully informed the CFTC staff of all details and, in fact, Drexel Burnham provided active assistance to both the commission and cotton exchange.”

Cooper declined to answer questions.

Dennis Klejna, a spokesman for the CFTC, said it has been rare for the agency to go after an investment firm for the action of its clients.

“With this case we’re saying a commodity broker can be prosecuted for aiding and abetting the unlawful conduct of a customer,” he said.

The CFTC said that Abrams, despite warnings that his trading might cause disorderly liquidation of the futures contract, had a position constituting 72% and 90% of all open interest in the contract during the last two days of trading.

The brokerage firm, according to the CFTC, “did not divulge the existence of (its financing agreement with Abrams) to the commission until the last full day of trading . . . and did not inform the cotton exchange until after the . . . future expired.”

The agency also charged that Butler conducted transactions in three customer accounts without the permission of the clients.

In addition to the fine, the CFTC could prohibit Drexel Burnham, Butler, Bermont and Abrams from trading on futures exchanges.