THE NEW YORK COMMODITIES PROBE : Silver Futures Scandal Was CFTC’s Biggest Case

The commodities trading raid Thursday was the most excitement to hit the New York Commodities Exchange since the Hunt brothers of Dallas allegedly schemed to corner the silver market in 1979-80 in a wild episode that led to the crash of silver prices.

It was the biggest market-manipulation case ever filed by the Commodity Futures Trading Commission, the federal body behind Thursday’s raids. The CFTC is still pressing a complaint against Nelson Bunker Hunt and W. Herbert Hunt nine years later.

The agency alleged that the two flamboyant scions of Texas oil wildcatter H. L. Hunt maintained bullion and futures positions that played a significant role in driving up the price of silver before the collapse.

While amassing 63 million ounces of silver bullion, it said, they established huge long positions in silver futures contracts. Such contracts are agreements to buy the metal at a later date.

The Hunts denied any illegality. Shortly after the crash, testifying before Senate and House committees, they accused the commodity exchanges of causing the plunge in silver prices to less than $11 an ounce from more than $50.

However, in a major verdict last summer, a jury found that the two, and their brother Lamar, had illegally tried to corner the silver market.

Several Legal Delays

If the CFTC prevails in its own administrative complaint, filed Feb. 28, 1985, the two Hunts and several co-defendants could be barred from commodities trading and fined $100,000 for each trading violation.

However, the CFTC case has been stalled by legal delays. The most recent was a stay issued last December by the federal bankruptcy judge in Dallas who presides over the Chapter 11 bankruptcy proceedings filed by the two brothers.

The Hunts, who lost an estimated $1 billion of their fortune in the 1980 silver market crash, sought protection of the bankruptcy court last September to avoid having to post a $225-million bond required for appealing a federal damage award against them a month earlier.

The commission is appealing the judge’s ruling, contending it exceeded the court’s authority.

Meanwhile, the tangle of damage suits stemming from investor losses in the silver market collapse have yielded some major results.

The biggest development was the verdict last August by a New York jury, which found that the Hunts violated civil fraud, commodities and antitrust laws. They also found that Nelson, 62, and W. Herbert, 59, violated civil racketeering laws. Only Lamar, 56, who owns the Kansas City Chiefs football team, was cleared of racketeering allegations.

That jury ordered the three brothers to pay more than $130 million in damages to Minpeco SA, a commodities company owned by the government of Peru.

IRS Files Claims

Lamar Hunt later agreed to pay $17 million to Minpeco, and on April 14 Minpeco and two other leading creditors of Nelson and W. Herbert Hunt filed a reorganization plan in which the personal assets of the two would be liquidated to repay more than $2 billion in debts.

Joining Minpeco in presenting the plan to bankruptcy court were the Internal Revenue Service, which claims $1 billion in back taxes from the two Hunts, and Hanover Trust Co. The Hunts filed their own reorganization plan a week earlier.

Separately, in a settlement reached just a month ago, several brokerage houses agreed to pay about $45 million to settle two class-action suits filed in 1981 and 1982 in behalf of individuals who invested during the silver speculation that preceded the 1980 crash.

At the same time, defendant Lamar Hunt agreed to pay another $2.75 million to the settlement fund. Earlier, another defendant, Banque Populaire Suisse, agreed to pay $9.5 million in the case.