WASHINGTON, Dec. 14 - The U.S. Commodity Futures Trading Commission (CFTC) obtained a consent order of permanent injunction against defendants Mark A. Vanderploeg formerly of Glendale, Ariz., and his companies, Midwest Land & Livestock, Inc. (MLL), of Glendale, Ariz., SKV Farms Inc. (SKV) of Omaha, Neb., and DCV Farms, Inc. (DCV) of Minneapolis, Minn., for engaging in an illegal, false reporting scheme.
The CFTC charged that the defendants defrauded grain elevators and cooperatives in Kansas, Iowa, Minnesota, Illinois, and South Dakota. The consent order, entered on December 9, 2011, by the Honorable Eric F. Melgren of the U.S. District Court for the District of Kansas, requires Vanderploeg, MLL, SKV, and DCV jointly and severally to pay a $70,000 civil monetary penalty and restitution totaling $112,400. The order requires the defendants to disgorge $200,000 of ill-gotten gains. The order also bans the defendants from engaging in any commodity-related activity, including trading and registering with the CFTC, for a five-year period.
According to the CFTC's complaint, Vanderploeg and his companies pretended to be farmers. In doing so, they entered into forward contracts with the grain elevators and cooperatives (grain entities) for more than one million bushels of grain during the 2008 harvest, despite the fact that the defendants, unknown to the grain entities, lacked the ability to produce the contracted-for grain.
As part of these transactions, and to hedge risks associated with these forward contracts, the grain entities entered into “short” commodity futures contracts, according to the complaint. Common practice in the grain industry is for grain elevators and cooperatives to share monetary gains that may result from hedge positions with farmers when a forward contract is cancelled due to a farmer's inability to produce the contracted-for grain, according to the complaint.
According to the complaint, just prior to the 2008 harvest, the defendants informed many of the grain entities that the defendants would be unable to deliver the contracted-for grain, which effectively cancelled their forward contracts. The complaint further alleged that where grain prices decreased, resulting in corresponding gains in the short futures positions, in many instances the defendants successfully demanded that the grain entities share with defendants their hedging gains.
However, where grain prices increased, resulting in corresponding losses in the short futures positions, in almost all instances the defendants failed to deliver any grain and simply disappeared, according to the complaint.
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