Tapes From the Pits Aired at Trading Trial : Commodities: The evidence is hard to hear due to screaming on the Chicago exchange floor. This is the first trial in a broad investigation.
Did you ever try to eavesdrop on a private conversation in the Great Western Forum--in the middle of a Laker fast break? That’s roughly the dilemma that jurors were faced with on Friday in the fraud and racketeering trial of three Chicago commodities traders--currency broker Robert Mosky and traders David Zatz and Danny Scheck.
In the first trial to result from the federal government’s dramatic undercover investigation of widespread fraud among brokers and traders on Chicago’s two big commodities futures exchanges, the prosecution is relying heavily on tape recordings of allegedly illegal trading activity.
But the conversations, taped by an undercover FBI agent posing as a trader and played for the first time in open court on Friday, are almost unintelligible to the untrained ear.
All of the conversations took place in the midst of the chaotic trading activity in the Chicago Mercantile Exchange’s Swiss franc pit, making it extremely difficult to hear the quiet conversations in which the government charges that a small group of brokers schemed to bilk their customers out of profits.
Transcripts of the tapes--the first of 130 expected to be played in this trial, which opened last week--were provided to jurors and the public. But U.S. District Judge Ann Williams admonished jurors not to rely on the transcripts if they couldn’t understand the audio tapes.
Still, those portions of the brief tapes that were discernible provided a rare public glimpse into the arcane world and complex jargon of commodities trading. They also made it clear that quiet side deals among traders, away from the hectic shouting and hand signals of the legal “open-outcry” system in the commodities markets, were fairly routine.
The tape recordings were introduced as Randall Jannett--the first of the undercover FBI agents to testify--took the stand to detail his double life posing as a crooked trader and to explain the context of the taped conversations.
Jannett, 35, an 11-year veteran of the FBI who has an accounting background, is the government’s star witness in the first case, because he was the agent posted to undercover duty in the Swiss franc pit. He said he and another FBI agent, Dietrich Volk, founded Dolphin Trading Co., a front for their undercover operation, and then purchased exchange seats in May, 1987.
Jannett, using the alias of Randy Jackson, was brought to Chicago from another posting to begin his undercover work. He used government funds to pay $325,000 for his seat on the International Monetary Market within the Merc, while Volk, posing as trader Peter Vogel, bought his seat for $330,000, so the agents could begin their probes of the Swiss franc and Japanese yen pits.
Jannett and Volk told other traders on the exchange that they were newcomers to Chicago who were investing funds from their rich “uncle,” in this case, Uncle Sam. Often, they operated as “local traders,” who traded on the exchange for their own accounts, but frequently they claimed that they were making trades for customers of Dolphin Trading as well. Jannett, who went undercover for 10 months in 1988 in the Swiss franc pit, began to get close to a small group of traders and brokers, led by Mosky, almost as soon as he arrived. Mosky, Zatz, Scheck and a handful of other traders including two who plan to testify against them--Mark Fuhrman and William Walsh--all traded back and forth among themselves, according to Jannett’s testimony and the taped conversations.
They did so, Jannett said, frequently after the close of official trading, or quietly away from the public open-outcry system of the market, in order to make deals in which they would alter the times and prices of trades for customers in order to benefit themselves.
Jannett, who will continue his testimony next week, charged that they would also price customer trades above or below the prevailing market price and then trade the orders back and forth among themselves as part of their efforts to skim profits.
During Jannett’s testimony Friday, the courtroom was filled with brokers and traders from the Merc, many of whom appeared to remember the FBI agent from his undercover life as Randy Jackson, the commodities trader. Indeed, the mood among traders remains one of deep anger. Many see the investigation as an attack on their way of life.
Mosky, who continues to trade on the Merc for his own account, but not for customers, reportedly blew up at prosecutors on Thursday. According to a report in the Chicago Tribune, he grabbed Assistant U.S. Atty. James Fleissner and, while the jury was out of the courtroom, said, “I hope you appreciate what you are doing to me and my family.”
