Agent’s Tapes Key in Commodities Case

Was it quiet, fraudulent scheming, or just side-chatter among traders involved in one of the world’s most hectic occupations?

That question, which has been at the heart of the case from the beginning, still confronted jurors as closing arguments began Wednesday in the first trial stemming from the highly publicized federal probe into corruption on Chicago’s two big commodities exchanges.

After listening to weeks of testimony and dozens of tape-recorded conversations between an undercover FBI agent and traders and brokers in the Swiss franc pit of the Chicago Mercantile Exchange, jurors in U.S. District Court here could begin deliberations in the fraud and racketeering case as early as Friday.

The government’s case against broker Robert Mosky and traders David Zatz and Daniel Scheck has hinged largely on the testimony of a single FBI agent, Randall Jannett, and the tape recordings that he made on the floor of the Merc while he posed as a crooked trader in 1988. The prosecution also relied on testimony about illegal trades conducted by Mosky and the others from two traders, Mark Fuhrman and William Walsh, who have already agreed to plead guilty to fraud charges stemming from the investigation.

Jannett testified that it was routine for Mosky and the others to make quiet, non-competitive trades among themselves, bilking their customers out of profits, and then use the complexities and confusion of the hectic trading activity around them to hide their crimes.

“There is a shadow world down there (on the floor of the exchange) of brokers and traders who for years have relied on the fact that people didn’t understand what was going on,” Assistant U.S. Atty. Daniel Gillogly said Wednesday in the prosecution’s closing argument. “There was a scheme to defraud in place down there that was very much entrenched and very much systemic.

“Everybody knew how it worked,” he added. “In prearranged trade after prearranged trade, there was a pattern of racketeering.”

But the defense, which began its closing arguments Wednesday afternoon and will continue them today, argues that Jannett, as a newcomer to the arcane commodities world, “was a bungling idiot” as a trader on the exchange floor. Jannett mistakenly believed, the defense asserted, that simple double-checking of earlier trades among brokers and traders represented illegal side deals.

“I said he was a bungling trader, but I also think he bungled his job as an FBI agent, because I think he bungled this investigation,” said Alan Blumenthal, attorney for Zatz.

The defense called only one witness of its own, an expert on commodities trading, and none of the defendants testified on their own behalf. The defense thus relied heavily on intense and detailed cross-examination of Jannett.

The audiotapes of the trading activity recorded by Jannett don’t really resolve the issue of whether the traders are talking about double-checking earlier deals or are bilking their customers. Amid the fast and furious trading going on around them, the traders and brokers are heard speaking in a jargon all their own, often leaving what they have just said up to interpretation.