THE CHICAGO COMMODITIES SCANDAL : Indictments Set Off Shock Waves at the Futures Exchanges

For six years, Sam Cali seemed to be living the kind of classic Chicago success story that makes the commodities traders of LaSalle Street swell with pride.

From a blue-collar, North Side background, 38-year-old Cali had worked his way up from a clerk’s job to become one of the most influential traders in the Japanese yen futures pit of the Chicago Mercantile Exchange. He had moved his wife and two young children from his old Italian-American neighborhood to the prosperous suburb of Palatine and to a future of unlimited promise.

But with his indictment Wednesday on racketeering and other charges, Cali “may be looking at a future running a hot dog stand,” says his attorney, Thomas A. Durkin. “This is no joke. This man built a life in the pits, and now he may have to just walk away from it.”

‘Racketeering Enterprise’

The Justice Department’s announcement of indictments in its commodity fraud case has sent shock waves through the city’s commodities markets, and nowhere more so than the Mercantile Exchange’s yen trading pit. Twenty-one of the 46 traders who were indicted earned their living in this small, octagonal amphitheater, trying to outguess the gyrations of one of the world’s most volatile currencies. That group of 21 traders represents about one-third of the regular traders in the yen pit.

According to the government, the group acted as a “racketeering enterprise” and systematically enriched its members at the expense of the individuals and big corporate clients who funnel millions of dollars through traders each day. Their alleged crimes were uncovered by an FBI “mole” who worked alongside them under the pseudonym of Peter Vogel.

“With all those indictments in that small pit, you can bet the place was shaken,” said James A. McGurk, attorney for another defendant, Brian Sledz.

In his years in the pit, Cali had become a member of the prestigious pit committee, a group set up to resolve disputes among the members. Until earlier this year, he was a member of ABS Partners, an influential group of brokers, and a broker-trader for such heavyweight clients as the Wall Street firm of Bear, Stearns & Co.

But Cali’s life began to unravel last Jan. 19, when government investigators took Cali to a small apartment near the exchange, confronted him with their accusations and asked that he help them uncover other crimes.

Could Lose Assets

He faces racketeering and racketeering conspiracy charges, 41 counts of mail and wire fraud and 58 counts of violating the Commodities Exchange Act. The exchange has brought disciplinary charges against him as well.

As part of the racketeering charge, the government is trying to seize his assets, including his net income from September, 1987, to January, 1989, and his home. “He was devastated by this, but he’s going to fight it all the way,” Durkin said.

Perhaps the most important trader named in the indictments was John M. Baker Jr., 50, a garishly dressed former salesman who is reported to have earned more than $1 million a year.

On Tuesday, Baker was “visibly staggered” on the trading floor when he learned that a close friend, trader Daniel Parz, had agreed to assist the government in its investigation, said a source. As his longtime fellow workers could see, “it was a very emotional moment,” the source said.

On Wednesday, Baker was indicted on charges of racketeering and racketeering conspiracy, 20 counts of mail and wire fraud, and 25 commodities trading violations.

As a salesman, Baker peddled encyclopedias, auto lubricants and hair-care products before trying his hand at futures trading. He wears loud clothes, such as floral-print jackets and polka dot shirts, to attract the attention of others in the pit.

And he is known to have a fondness for jokes. Even this week, the telephone answering machine at Baker’s LaGrange home answers with a goofy tape recording that ends with the refrain, “Remember--This Bud’s for you!”

But, “he’s not laughing now,” said another Merc trader. A lawyer for Baker said Baker denies any guilt.

The indictments may carry heavy penalties even for the yen pit traders who have cooperated with authorities.

Trader Brian Sledz, 29, reported to have netted $1 million last year, signed a consent agreement with the Commodity Futures Trading Commission to settle its charges and is understood to be cooperating with the prosecutors’ future investigation. Yet Sledz still faces one count of wire fraud, a charge of commodity trading violations and may never be allowed to return to the pits, said attorney McGurk.

Moreover, Sledz is fighting for permission to sell his exchange seat, worth about $350,000. He is considering starting work as a construction contractor, possibly with his brother, James Sledz, who was a trader in the pit and was also indicted.

“Here’s a guy who had mastered this trade, and he’s been devastated,” said McGurk.

Times staff writer Larry Green in Chicago contributed to this article.

THE EXCHANGES, THE CHARGES

Chicago Mercantile Exchange

Yen

One yen contract = 12.5 million yen

Average daily volume (1989 year to date): 32,808 contracts

Total volume for 1988: 6,433,132

Traders/brokers charged: 21

Charges: Mail and wire fraud, Commodity Exchange Act violations, Securities Exchange Act violations, RICO and RICO conspiracy charges.

Swiss Franc

One Swiss franc contract = 125,000 Swiss francs

Average daily volume (1989 year to date): 25,190 contracts

Total volume for 1988: 5,283,406

Traders/brokers charged: 3

Charges: Mail and wire fraud, Commodity Exchange Act violations, prearranged trading, racketeering conspiracy.

Chicago Board of Trade

Treasury Bonds

One T-bond contract = $100,000 in long-term Treasury bonds

(No average daily volume figure for 1989 year to date available.)

Total volume for 1988: 70,307,872

Traders/brokers charged: 3

Charges: Racketeering conspiracy, mail and wire fraud, Commodity Exchange Act violations, prearranged trading

Soybeans

One soybean contract = 5,000 bushels of No. 2 yellow soybeans

(No average daily volume figure for 1989 year to date available.)

Total volume for 1988: 12,497,096

Traders/brokers charged: 19

Charges: Mail and wire fraud, Commodity Exchange Act violations, lying to a federal agency, RICO and RICO conspiracy, filing false tax returns, conspiracy to defraud the IRS, prearranged trading

Los Angeles Times