The Boston federal judge who refused for nearly a year to halt the operations of Lloyd, Carr & Co. in London commodity options sales yesterday issued that order against the firm, assigned a receiver for its assets and froze the partnership's bank accounts.
U.S. District Judge Joseph L. Tauro, who repeatedly blocked attempts by a federal regulatory agency to put the firm out of business, placed himself firmly in the limelight by refusing a request by government attorneys to withdraw their original motion from his court. Attorneys for the Commodity Futures Trading Commission were trying to pave the way for a Michigan federal judge - who previously had issued an injuction against the firm's operations - to appoint a receiver and freeze the company's bank accounts in 12 states.
Instead, Judge Tauro signed the order himself and appointed former Massachusetts Superior Court Chief Justice Walter H. McLaughlin to oversee the firm's assets.
Lloyd Carr was headed by a man who called himself James A. Carr, a smooth-talking businessman who officials say bilked investors out of $25 million to $50 million in allegedly fraudulent London commodity options sales.
Carr, who apparently fled the country last week after being released on $100,000 bond following his arraignment on fraud charges in Boston, has since been identified by the FBI as escaped felon Alan Abrahams. Abrahams, according to the FBI, has an extensive record for passing bad checks, forgery and minor fraud violations and is wanted for escaping from a New Jersey minimum security facility.
"By the end of the day, I couldn't tell you whose motion it was to appoint the receiver," said a weary CFTC attorney yesterday. "But Judge Tauro could have prevented this whole thing if he had just signed the TRO (temporary restraining order) when we asked for it on Feb. 8 last year. He just kept turning us down. He turned us down in August. Then we got a temporary assignment judge who nearly went along, but Tauro came back and stayed everything in the fall."
The CFTC, which is just about three years old, has been suffering through lengthy court delays and many legal battles as it has fought to establish its jurisdiction, its right to monitor and regulate the $1-trillion-a-year commodity futures markets and the $200 million to $300-million-a-year London commodity options field.
"Look, if we were the SEC (Securities and Exchange Commission) and we went into court and said somebody couldn't do business because they had failed to register with us, they judge would order them to stop doing business and would freeze their assets," one CFTC lawyer said. "But we're new. The field is new. The courts just haven't helped us much initially. We've had to fight to establish the precedence to let us do our job."
Until this winter, the agency did not attempt to block Carr's operations on fraud charges because they felt such violations were too hard to prove and require too much evidence, according to another commission official. The proliferation of firms involved in allegedly deceptive and fraudulent options sales and the incumbent publicity about the high-pressure, boiler room sales operations being carried on by about 60 firms around the country forced the CFTC to change its tactics.
CFTC chairman William T. Bagley yesterday recalled that six months ago he went before the commission and proposed that London options sales be banned in this country. "We don't have the manpower or the money to regulate it and the commodity futures markets, too," he said.
Bagley pointed out that the small commission staff would have to be beefed up to handle both regulatory jobs. On Feb. 22 the CFTC is to defend its request for a supplemental budget for fiscal 1979 of $1.8 million for options enforcement. "It'll give us between 50 and 60 new people," he said, "since we only have 26 investigators currently nationwide, it'll make a big difference."
Thursday, Sen. Walter (Dee) Huddleston (D-Ky.) introduced a bill that would halt London commodity options sales until the CFTC could prove to Congress that such transactions have some economic benefit. Huddleston and other congressional critics have long contended that such options contracts are little more than high-stakes gambling.