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The full case caption appears at the end of this opinion. Easterbrook, Circuit Judge. During the spring of1989, Jerry Slusser and entities he controls cameinto possession of approximately $29 million thatGerman investors had entrusted to InternationalParticipation Corporation (IPC) for investment inAmerican financial markets. IPC raised the moneyusing a prospectus offering investors a choicefrom a number of portfolios. Portfolios III andIV were to be invested in financial futurestraded on a public exchange. Investors were toreceive 65% of all profits; IPC was entitled tothe other 35% (plus a 10% surcharge at the timeof the initial investment) to cover all operatingexpenses and trading commissions. Fund III was tostop trading if it lost 10% of invested funds(disregarding the 10% surcharge); Fund IV was tostop losses at 35% of investment. After he gainedcontrol of the $29 million, however, Slusser andhis firms (collectively “Slusser”) disregardedthese promises. He charged hefty commissionsagainst the pooled funds; he invested part of themoney in securities and another part in corporateacquisitions (two trading corporations thatSlusser treated as his own property); he kepttrading long after the stop-loss marks had beenpassed. Slusser repeatedly lied to Germanauthorities in order to extend his control of thepool. A kitty that had been approximately $29million in May 1989 dwindled to $16 million byNovember, when Slusser ceased the churning andwired the remaining funds to Germany. For theseevents Slusser has been banned for life from U.S.futures markets and fined $10 million by theCommodity Futures Trading Commission. 1999 CFTCLexis 167, Comm. Fut. L. Rep. para.27,701 (July19, 1999). He wants us to set aside the CFTC’sorder. The CFTC found that Slusser had violated theCommodity Exchange Act, 7 U.S.C. sec.sec. 1-25,in three principal ways. First, he failed toregister with the CFTC as a “commodity pooloperator” and its “associated person” even thoughhe was managing a commodity pool — initially onbehalf of IPC, then after the end of May 1989 inhis own right, following a contractual assumptionof IPC’s position. See sec.sec. 4k(2), 4m of theAct, 7 U.S.C. sec.sec. 6k(2), 6m. Second, afterassuming IPC’s duties to the investors Slusserfailed to adhere to the contractual limitationsthe prospectus placed on use of the funds, and inthe process violated the Act and the implementingregulations by charging more than $3 million inimproper commissions, devoting money to usesother than those allowed by the prospectus,commingling pool funds, and diverting investors’money to personal purposes. See sec.4o(1) of theAct, 7 U.S.C. sec.6o(1), and 17 C.F.R. sec.4.20.Third, Slusser committed multiple frauds. Seesec.4b(a) of the Act, 7 U.S.C. sec.6b(a). Many ofthe tall tales were told to German authorities inorder to buy time. For example, at the end of May1989 Slusser told the Germans that trading had sofar been profitable and that investors wouldsuffer substantial losses if the futurescontracts were liquidated prematurely. In JulySlusser wrote to a German criminal prosecutorthat “many of the traded instruments will matureover the next 90 days. We project profits fromthese positions at maturity, but there will besubstantial reductions in value if prematurelyliquidated.” The assertions about profits to datewere false, and the remaining assertions werenonsense, designed to deceive persons ignorantabout futures markets. Contracts traded on publicexchanges (as these were) do not “mature” and arenot “liquidated”; they either expire or areclosed by acquiring offsetting positions, whichrealizes all accrued gain or loss without penaltyfor “premature” action. See generally ChicagoBoard of Trade v. SEC, 883 F.2d 525 (7th Cir.1989). Slusser knew this well. The positions thathe told the German official must be leftundisturbed for 90 days soon were closed, and theaccounts were turned over many times (withcommissions deducted for each turn) beforeSlusser finally distributed the residue. Slusser’s principal response is to assert, asif it were incontestable truth, a view of mattersthat the administrative law judge and theCommission found incredible, irrelevant, or both.For example, Slusser insists that he did not knowabout the promises IPC made in the prospectusregarding the uses of the funds and the way thepool manager would be compensated; indeed,Slusser insists that for many months he did notknow anything about the funds’ origin, and thatwhen he learned their general source he did notknow that the $29 million represented theproceeds of Funds III and IV rather than otherpools mentioned in the prospectus. The ALJconcluded, on the basis of substantial evidence(including not only the contract by which Slusserassumed all of IPC’s obligations but alsodocuments showing that Slusser had an account atCommerzbank D�sseldorf into which investorsdeposited funds), that Slusser knew no later thanJune 1, 1989, exactly what his obligations as thepool’s new manager were. But suppose this iswrong, and Slusser never learned the provenanceof the funds. Then what was he doing trading ata riotous pace, rather than purchasing safevehicles such as Treasury bills until the money’sowner could be determined? Slusser made the mostof an opportunity to charge big commissionswithout supervision. The CFTC as regulator of pooloperators is entitled to require moreconscientious management of unknown investors’money. Although the CFTC’s findings of fact aresupported by substantial evidence, Slusserinsists that they are legally insufficient toprove that he committed fraud. Slusser lied to IPCwhen he promised to manage the funds according tothe prospectus; he lied to German officials whenhe said that premature liquidation would turnprofits into losses; he lied to the investors ina letter sent in July 1989 asserting that hismanagement of the funds had been successful (ithad been quite unprofitable — except to Slusser),that he was subject to regulatory oversight(neglecting to mention his failure to registerwith the CFTC), and that the principal would bereturned by September (Slusser clung to the moneyuntil November, when the investors and Germanofficials induced him to hand over the remainderby promising not to prosecute him for hisconduct). Still, Slusser insists, he is notculpable, because none of these persons testifiedthat he relied on Slusser’s statements — andreliance is an element of fraud, at least inprivate litigation where the plaintiff must showcausation. See, e.g., Basic, Inc. v. Levinson,485 U.S. 224, 243 (1988) (securities litigation);Restatement (2d) of Torts sec.sec. 525, 548(1977). We may assume that a causal chain fromdeceit to injury also is essential in privateactions under 7 U.S.C. sec.25, which requires theplaintiff to show “actual damages” attributableto a violation of the Act, and that reliance isthe usual way to show causation. Must the public prosecutor show that a privateperson was taken in? In criminal prosecutions theanswer is no, unless the statute expressly makesreliance an element of the offense. See Neder v.United States, 527 U.S. 1 (1999) (prosecution formail, wire, tax, and bank frauds). Three courtsof appeals have reached the same conclusion forfraud actions prosecuted by the SEC undersec.10(b) of the Securities Exchange Act, 15U.S.C. sec.78j(b). SEC v. North American Research& Development Corp., 424 F.2d 63, 84 (2d Cir.1970); SEC v. Blavin, 760 F.2d 706, 711 (6th Cir.1985); SEC v. Rana Research, Inc., 8 F.3d 1358,1363-64 (9th Cir. 1993). Reliance, unlike the”connection” between the misconduct and apurchase or sale of securities, see Aaron v. SEC,446 U.S. 680 (1980), is not a statutory elementand therefore is not an essential part of anadministrative case. Is there any reason to treatadministrative prosecutions under the CommodityExchange Act differently? Slusser observes thatsec.10(b) of the Securities Exchange Actprohibits not only deceptive but alsomanipulative devices, while sec.4b of theCommodity Exchange Act does not refer tomanipulation. True enough, but nothing turns onthis; Ernst & Ernst v. Hochfelder, 425 U.S. 185(1976), concluded that the plaintiff in allprivate sec.10(b) actions must demonstrate theingredients of common-law fraud. When it held inBasic that reliance is one of these elements, theCourt did not suggest that matters would differif the plaintiff stressed “manipulation” ratherthan “fraud”; it is better to say thatmanipulation is a species of fraud. NorthAmerican Research, Blavin, and Rana Research holdthat there is a difference between private andpublic actions, not that there is a differencebetween “fraud” and “manipulation.” Section 4b of the Commodity Exchange Act doesdiffer from sec.10(b) of the Securities ExchangeAct, but the differences all favor the CFTC. Forexample, although sec.10(b) does not prohibitattempted deceits, and this is a good reason whya private plaintiff must show actual reliancerather than just a potential for reliance,sec.4b(a)(i) makes it actionable “to cheat ordefraud or attempt to cheat or defraud such otherperson” (emphasis added). Perhaps, then, it isunnecessary to show reliance even in a privateaction — for an attempt that fails (perhapsbecause no one relied on it) is nonetheless aviolation of sec.4b(a)(i). Section 4b(a)(ii)reinforces this possibility by declaring that itis unlawful “willfully to make or cause to bemade to such other person any false report orstatement”, and sec.4b(a)(iii) adds that it isforbidden “willfully to deceive or attempt todeceive such other person by any meanswhatsoever”. Slusser made (or caused to be made)many false statements; these may be condemnedunder sec.4b(a)(ii) and (iii) without proof ofreliance even if the CFTC did not establish allelements of common-law “fraud.” See also PhilipMcBride Johnson & Thomas Lee Hazen, IICommodities Regulation sec.5.08[17][B] at 5-165n.821 (3d ed. 1998) (concluding that the CFTC neednot establish reliance). Although none of Slusser’s other objections tothe CFTC’s decision on the merits requirescomment, there is a serious problem with the $10million fine. Section 6(c)(3) of the Act, 7U.S.C. sec.9(3), permits the Commission to”assess . . . a civil penalty of not more thanthe higher of $100,000 or triple the monetarygain to such person for each such violation”. TheCommission justified the $10 million penalty asappropriate in relation to Slusser’s gain but didnot notice that the treble-gain provision enteredthe Act in 1992. Section 212(b) of Pub. L. 102-546, 106 Stat. 3609. Back in 1989, when Slusserwas managing the funds, the maximum penalty was$100,000 per violation. Only clear statutorylanguage justifies retroactive application of anincrease in damages or civil penalties, seeLandgraf v. USI Film Products, 511 U.S. 244(1994), and nothing in the 1992 amendments somuch as hints at retroactivity. Thus the maximumpenalty is $100,000 per violation. The complaintfiled by the Division of Enforcement listed onlysix violations. Most of the violations narratedby the complaint entail multiple acts orstatutes; it would have been easy to separate theevents into tens if not hundreds of violations,or to allege that each day of managing the fundswithout registration as a commodity pool operatorwas a separate violation. But the CFTC’s staff didnot do any of these things, perhaps because 7U.S.C. sec.13b implies that fines for each day ofa series of violations are appropriate only afterthe CFTC has issued a cease-and-desist order. Justas the sentence in a criminal case is limited bythe number of counts alleged in an indictmenttimes the maximum punishment for each offense, sothe penalty in an administrative prosecution islimited by the number of violations alleged inthe complaint times the maximum fine perviolation. A reasonable person in Slusser’sposition would have assumed that his maximumexposure was $600,000 and financed his defenseaccordingly. Despite our convenient use of “Slusser” as aplaceholder for Jerry Slusser, his associates,and the firms he controlled, there were quite afew participants in this scheme, and three remainas petitioners in this court — Slusser personallyand two corporations. The statutory cap appliesperson-by-person, as well as violation-by-violation, so the CFTC may be able to justify atotal penalty as high as $1.8 million, though itmay have considerable trouble collecting from thedefunct corporations. This potential troubleshows one way in which knowing the maximumpenalty might have affected the administrativelitigation. Until the 1992 amendment deleted it,7 U.S.C. sec.9a contained this language: In determining the amount of the moneypenalty . . . , the Commission shallconsider, in the case of a person whoseprimary business involves the use of thecommodity futures market – the appropriateness of such penalty to thesize of the business of the personcharged, the extent of such person’sability to continue in business, and thegravity of the violation; and in the case of a person whose primarybusiness does not involve the use of thecommodity futures market – the appropriateness of such penalty to thenet worth of the person charged, and thegravity of the violation. The two corporate parties, at least, are coveredby the first of these clauses, which courtsgenerally call the “collectibility” condition.Slusser believes that he personally comes withinthe second clause, so that the Commission mustconsider the appropriateness of the penalty inlight of his net worth. Yet the record does notcontain any information on Slusser’s net worth,the size of the two corporate parties, or theeffect of any penalty on their ability tocontinue in business. Each side blames the other for this deficiency.Slusser contends that the CFTC has both the burdenof production and the burden of persuasion; theCFTC asserts that Slusser had the burden ofproduction and that, because he (and the twocorporations) kept mum, the burden of persuasionbecame irrelevant. Perhaps Slusser adopted hisstrategy of silence because he anticipated a$600,000 maximum penalty and feared that evidenceabout net worth would embolden the Commission todemand the full $600,000. But that’s justspeculation. All we know is that the record isempty. When casting the burden of production onSlusser and the firms, the CFTC cited two of itsdecisions. In re Grossfeld, Comm. Fut. L. Rep.para.26,921 at 44,465-66 (CFTC Dec. 10, 1996); Inre Rothlin, Comm. Fut. L. Rep. para.21,851 at27,573 (CFTC Dec. 21, 1981). The Commission’sopinion did not mention Gimbel v. CFTC, 872 F.2d196 (7th Cir. 1989), which disapproved thatposition, at least with respect to thecollectibility consideration for futures traders.Gimbel holds that the Commission’s Division ofEnforcement has the burden of production and mustintroduce evidence about the net worth of theperson who will be called on to pay a financialpenalty. Because “the Division failed to meet itsburden of establishing the collectibility of theproposed penalty”, 872 F.2d at 201, we vacatedthe financial sanction. Accord, Premex, Inc. v.CFTC, 785 F.2d 1403, 1409 (9th Cir. 1986).Neither the CFTC’s opinion, which ignored bothGimbel and Premex, nor the CFTC’s brief in thiscourt, which cites Gimbel only for theuncontested proposition that an opportunity tooffer evidence satisfies the due process clause,suggests any reason why the burden of productionwith respect to a person’s net worth should beallocated differently from the burden ofproduction with respect to the collectibility ofa penalty imposed on a commodity futures trader.The Act is silent on the burden of production, sowe would have been attentive to an argument thatChevron U.S.A. Inc. v. Natural Resources DefenseCouncil, Inc., 467 U.S. 837 (1984), permits theCommission to regulate that aspect of its ownproceedings, provided it shoulders the burden ofpersuasion in the end. See Director, OWCP v.Greenwich Collieries, 512 U.S. 267 (1994);Steadman v. SEC, 450 U.S. 91 (1981). See alsoVermont Yankee Nuclear Power Corp. v. NaturalResources Defense Council, Inc., 435 U.S. 519(1978). By placing its head deep in the sand, andrefusing to acknowledge the adverse judicialviews, the Commission disabled itself from makingsuch a pitch. If it wants to impose any financialpenalty on these parties, the CFTC must bear boththe burden of production and the burden ofpersuasion on collectibility and net worth. The order of the Commission is enforced to theextent it revokes the registrations of, and banstrading by, the three petitioners, and ordersthem to cease and desist from further violationsof the Act. The petition for review is granted tothe extent the Commission imposed financialpenalties, and the matter is remanded forproceedings consistent with this opinion.
Slusser v. Commodity Futures Trading Commission In the United States Court of Appeals for the Seventh Circuit Jerry W. Slusser, First Republic FinancialCorporation, and First Republic TradingCorporation, Petitioners, v. Commodity Futures Trading Commission, Respondent. No. 99-2947 Petition for Review of an Order of the Commodity Futures Trading Commission Argued: February 22, 2000 Decided: April 24, 2000 Before Coffey, Easterbrook, and Williams, Circuit Judges.
 
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