Accord Ends Big Commodity Fraud Case
One of the largest commodity fraud cases in U.S. history ended in federal court Monday, with the founders of International Trading Group Ltd. agreeing to settle with customers and the Commodity Futures Trading Commission.
U.S. District Judge Ronald S. W. Lew approved a settlement offered by brothers David C. and Bruce R. Beare, principals of ITG.
The deal calls for any remaining assets of ITG to be distributed to customers. It is evident, however, that what’s left of the bankrupt brokerage is nowhere near the $400 million that clients lost.
Since they neither admitted nor denied guilt, the settlement allows the Beares to keep their personal assets. David Beare reportedly lives in a 30-room mansion with an artificial lake in Portola Valley in Northern California.
ITG was founded in Michigan but moved to San Mateo in the early 1980s. Although it grew to be one of the nation’s largest sellers of commodities options, 85% of its customers lost money on the high-risk investments, according to the federal complaint.
The CFTC alleged that ITG, which relied heavily on telephone sales, misrepresented the risks involved and used high-pressure tactics to coerce customers into increasing their investments. The complaint also criticized ITG for charging a 40% commission on each transaction.
Between 1984 and 1989, ITG’s estimated 49,000 customers lost $428 million, while the firm earned $283 million in commissions, according to the CFTC lawsuit.
Of the millions collected by ITG, only about $4 million remains, said Marvin A. Miller, a Chicago lawyer representing investors. Bruce Beare’s lawyer said the amount may be closer to $10 million.
Frederick C. Wyle, the court-appointed receiver, declined to comment on the assets he controls. However, during the hearing, Wyle told Judge Lew that only three of the 23 businesses controlled by the Beares are still operating. Wyle said Gemological Research Corp., which makes software for the jewelry industry, is losing $100,000 a month.
Bruce Beare, who had a 20% interest in ITG’s parent corporation, appeared in court but said nothing during the hearing and declined to comment afterward. “He wants to get on with his life,” his lawyer, Gregory C. Glynn, said.
Shortly after the CFTC filed a civil complaint against ITG in September, 1989, ITG filed for federal bankruptcy liquidation.
