Magazine article Rural Cooperatives

DFA Pays $12 Million to Settle with CFTC

Magazine article Rural Cooperatives

DFA Pays $12 Million to Settle with CFTC

Article excerpt

Dairy Farmers of America on Dec. 16 announced settlement with the Commodity Futures Trading Commission (CFTC) over charges that the co-op manipulated Class III milk futures contracts and exceeded a speculative position limit. The settlement ends the CFTC's investigation into DFA's trading activities on the Chicago Mercantile Exchange (CME) in 2004.

Kansas City-based DFA is one of America's leading milk marketing cooperatives and is owned by 18,000 dairy farmers nationwide.

Without admitting or denying the CFTC's findings in the administrative order, DFA and two of its former officers--former CEO Gary Hanman and former Chief Financial Officer Gerald Bos--agreed to pay a penalty of $12 million. The cooperative also agreed to not engage in speculative trading in milk futures contracts for two years and to retain a monitor to review its trading activities on the CME during that period.

In DFA's announcement, co-op President/CEO Rick Smith said that agreeing to the settlement was in the best interests of the cooperative and its members. The long-pending probe was expensive and diverted time and resources from DFA's main mission of serving its members, he said.

"Settling this matter will allow us to focus wholly on serving our members and moving the cooperative forward," said Smith, who took the helm of the cooperative in 2006, two years after the trading activity in question. "The transactions addressed by the settlement took place over a one-month period more than four years ago," Smith continued. "We have fully cooperated with the CFTC's investigation and wanted to put this matter behind us."

Prior to reaching the settlement agreement, DFA management voluntarily developed and implemented new policies and procedures designed to ensure that all trading complies with both the spirit and the letter of the law, Smith said. The DFA board and management follow corporate values that stress openness, transparency and integrity, he added. …

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