Chicago Traders Seem to Defy FBI’s Flashy Perception

In their search for fraud in Chicago’s futures markets, the FBI went hunting for the high-living, flamboyant commodity trader of legend--and seems to have found its targets leading quiet, workaday lives.

So say other traders and defense lawyers, who contend that most of the brokers and traders caught up in the early stage of the probe live modestly. And while the investigation has led in a few instances to some very wealthy and influential traders, most are pretty small fish in the tumultuous commodity markets.

The FBI may have expected something else, judging from what is known so far about the way its agents played their undercover roles in the two-year probe. Richard Carlson, a “mole” in the Chicago Board of Trade’s soybean pit, flashed a Rolex watch, drove a BMW and worked out at downtown Chicago’s fashionable East Bank Club.

Working-Class Backgrounds

David Vogel, the fictitious name of an FBI agent who circulated at the Chicago Mercantile Exchange, hinted at secret wealth. He told traders he owned a company, traders said.

But rather than looking on these imposters as peers, many of the traders and brokers may have thought the FBI agents came from a far more luxurious world than their own. Defense lawyers who have been retained to represent some of these traders describe clients who head straight for their suburban homes after work.

One lawyer said all of his six clients are from working-class backgrounds and got into the business as a route to a better life. “If they weren’t working in the trading pits, they’d be slinging hot dogs,” he said, adding: “I haven’t seen a coke-snorting guy in a fur coat walk through my door yet.”

He said several of the clients did drink with the moles and worked out with them at the East Bank Club, a downtown health club that has many traders as members. He said their average income was a little more than $100,000 a year, with the least wealthy earning $75,000.

The number of low-level brokers and traders involved in the investigation suggests that the authorities are trying to build their case from the ground up, hoping the less-important figures will lead them to more important ones.

Most defense lawyers claimed that their clients were involved in small trades with the FBI moles that amounted to only a few thousand dollars and relatively minor infractions. But one lawyer described a kickback scheme in which a trader paid $10,000 in cash to one of the moles in exchange for arranging a fraudulent trade.

There clearly are some traders who fit the high-rolling, high-living image the FBI seemed to have. Some pull down salaries of more than $1 million dollars, party into the night and accumulate fancy cars, clothes and jewelry.

In the early 1980s, federal agents raided the floor of the Board of Trade looking for cocaine amid a scandal over use of the drug at the exchange.

But the brokers and traders whose identities have surfaced in connection with this investigation to date don’t seem to fit the stereotype.

Perhaps the most prominent figures involved so far are two brokers who customarily stand next to each other in the Merc’s yen futures pit, John M. Baker Jr. and David H. Horberg. Both are among the biggest brokers in the currency pits, a trader said.

Baker, a tall, thin man in his mid-50s, runs a family trading firm that employs his three sons. Among his regular clients are such big firms as Merrill Lynch & Co., Kidder, Peabody & Co. and Chicago Corp.

Anything but a fashionable dresser, Baker has been known to show up at work in plaid polyester pants, a polka-dot shirt and white socks, to the amusement of some of his peers. He is known in the pit as a character, other traders said, but is quiet and doesn’t often fraternize with the younger traders and brokers in the pit.

‘Parents’ Generation’

After work, he heads for his contemporary-style home in the upper-middle-class suburb of LaGrange, west of Chicago.

“It’s like he’s from our parents’ generation,” said a trader in his early 30s, which is about the average age in the pit. “Instead of horsing around, when you see this guy, you want to say, ‘Hello, Mr. Baker, how are you?’ ”

But while he didn’t run with the pit’s younger group, traders believe that he may have gone to breakfast occasionally with the young FBI agent who went by the name of David Vogel.

Baker, who received a subpoena last week, declined comment on the investigation through his attorney, Thomas P. Sullivan, a former U.S. attorney in Chicago.

Receipt of a subpoena doesn’t necessarily mean that the government believes the trader has done anything wrong. The government might be simply seeking information about wrongdoing.

No one has yet been indicted in the case.

Authorities are believed to be investigating the activities of Horberg, sources close to the investigation said. Horberg is also a middle-aged family man, with children in their 20s, and is a former member of an important committee in the pit. He was once the biggest trader there, other traders said.

His current clients also include major New York investment firms and banks, the traders said. Horberg is also known around the floor as a “nice guy,” said another trader, noting that Horberg helped a young woman who worked for him as a clerk to get a trading seat.

Horberg’s clearing firm, Dellsher Investment Co.--which is owned by the Merc’s executive committee chairman, Leo Malamed--broke off its relationship with Horberg on Monday, according to a source close to the exchange.

Preferred Triathlon

Horberg, who did not trade in the pit Monday, could not be reached at home for comment.

Another man who stood near Baker in the pit, Brian Sledz, also received a subpoena last week. Sledz, a tall, clean-cut man in his late 20s who likes preppy clothes, has worked the pits only a couple of years.

Again defying the stereotype, he is not an avid party-goer but spends much of his free time on his sport of preference, the triathlon. Sledz’s Chevy Blazer carries a vanity plate, “Try Ath.”

Sledz was another who went to breakfast with FBI agent “Vogel.”

“When we heard that he went along, we couldn’t believe it,” said another trader in the pit.

Subpoenas have gone out to two brokers in the Board of Trade’s soybean pit, Martin J. Dempsey and John N. Eggum.

Dempsey is a big, broad-shouldered man in his mid-40s, with a ruddy complexion and manners that suggest working-class roots, other traders say. He had been a Merc member for 25 years last Wednesday, when he when he sold his seat for $415,000.

But they say he tended to be on the fringe when the pit action got hot. He bought and sold futures contracts for others, and one trader speculated that he may have had a rather modest income by pit standards.

“He was the kind of guy who always had a kind of befuddled look in a wild market,” said one soy pit trader. “I wouldn’t have been surprised if somebody had told me he had gone to work as a salesman or something.”

A trading seat was also sold last Wednesday by Eggum, a 10-year member who often stood near Dempsey in the pits. Eggum, a small man in his mid-30s, lives in an imposing brick home in a wealthy section of suburban Oak Park, about a block from architect Frank Lloyd Wright’s longtime home.

Eggum’s home appears to be a Wright-designed house.

But other traders in the soy pits said they doubted Eggum made more than a modest living as a commodity trader. Eggum spent a lot of time “scalping”--rapidly trading small numbers of contracts to try to eke out narrow profits.

Miriam F. Miquelon, an attorney who represents Eggum, declined to comment on the investigation. She said Eggum had sold his seat because it was rapidly losing value when word of the investigation leaked out.

While boisterous camaraderie is common among traders, Eggum seemed to keep to himself. “He was the kind of guy you could miss altogether,” said one trader.

Times staff writers Larry Green and Douglas Frantz in Chicago contributed to this story.