The showdown between the Commodity Futures Trading Commission and oilman Nelson Bunker Hunt, initiated with a federal lawsuit on Thursday, could be a turning point in the development of the fledging.
The agency, which was severely criticized last year for failing to prevent a major default on Maine potato futures contracts traded on the New York Mercantile Exchanmge, is facing a major challenge in its attempt to prevent major speculators like the Hunts from cornering a market.
The CFTC's decision to take on the flamboyant and litigious members of the Hunt family of Dallas, Tex., and force them to divest themselves of soybean futures holdings which exceed legal limits was reportedly urged by the commission's chairman, William Bagley.
Bagley, who has announced his intention of leaving the agency within the next six months to return to California politics, amy well be trying to improve both the commission's image and his own by taking decisive action against the Hunts.
The CFTC won an interim court order Thursday form U.S. District Court Judge Joel Flaum in Chicago forbidding seven members of the Hunt family and a Hunt subsidiary from taking delivery of more than 30 million bushels of soybeans until a hearing on a government motion to force divestiture of their massive soybean futures positions is held Monday. Bagley said the commission is also seeking disgorgement of profits netted by the Hunts since January, which are estimated torange between $30 and $100 million.
A spokesman of Nelson Bunker Hunt said none of the Hunts had taken delivery of any Soybeans on the Chicago Board of Trade yesterday, although delivery notices against the May contract involving more than 3 million bushels were issued.
The Hunt spokesman sid, however, that Hunt said "business judgment at this this point" dictates that the family "will take delivery" of the contracts it holds.
The move against the Hunts, which commodity sources indicated Thursday depress prices in the volalile soybean future complex in Chicago, sparked confusion in trading yesterday. The opening was delayed briefly while exchange officials sorted out orders. Te market closed up the 45 cent limit on soybens.
"If Nelson Bunker Hunt thinks soybeans are worth something, then I'm buyin'," he said.
One of the four brokers identified as trading the Hunt accounts is Frederick G. Uhlmann, a vice president of Drexel Burnham & Co. in Chicago and a former president of the Chicago Board of Trade.
CFTC staff members said that the current court action was taken merely to stave off a serious disruption of soybean trading in the May contract, since yesterday was the first delivery notice day for that month. The Hunt's acknowledged intention to accept delivery of their holdings could have caused a price "squeeze," since they hold contracts involving 7.4 million bushels of the 10 million bushels of soybeans certified and graded for delivery on the May option.
Scores of other administrative and civil proceedings may be filed before hte Hunt case is resolved, since it presents questions of the intent and knowledge of the Hunts, their agents and brokers such as Uhlmann in participating in a scheme which may have been intended to artificially inflate prices and make illegal profits.