Nine commodities specialists were indicted yesterday on charges involving an alleged attempt to create a fraudulent $27 million tax loss for an Oklahoma firm by rigging trading in crude oil futures on the New York Cotton Exchange.
Manhattan District Attorney Robert Morgenthau, whose office began the investigation while looking into an unrelated larceny, said the indictments allege "that the market in crude oil futures was rigged. That is, all the transactions were arranged in advance among the buyers and sellers."
The indictments, both federal and state, and the arrest of those accused were announced jointly by Morgenthau and Robert Fiske Jr., U.S. Attorney for the Southern District of New York.
The federal indictment alleged the defendants conspired to fraudulently create tax-deductible losses for C. R. Rittenberry & Associates of Tulsa, a seller of petroleum products and a subsidiary of Daitsche Corp.
They did so, the indictment said, by manipulating prices and rigging and prearranging trades on the crude oil market to create fraudulent losses for Rittenberry before the end of its fiscal year.
The defendants allegedly guaranteed Rittenberry gains in its next fiscal year similar in size to the losses it supposedly had suffered.
The fraudulent crude oil trades, the indictment alleged, created a tax losses for Rittenberry of $12 million in 1974 and of $15 million in 1975.
Rittenberry and its officers were not cited in the indictment; there was no indication they had any knowledge of the alleged wrongdoing, the prosecutors said.
Two of the defendants, Norman Turkist, 43, of New York City, and Jules Nordlicht, 43, of Long Beach, N.Y., also were charged with evading a total of $250,000 in personal federal income taxes. Turkish, the indictment said, received thousands of dollars in cash payoffs for his efforts in prearranging the Rittenberry crude oil trades. Turkish was identified as a limited partner in Bear Steamst Co.; Nordlicht is an officer of Pressner Trading Corp.
In announcing the indictment, U.S. Attorney Fiske said the charges were the first resulting from a joint federal-state investigation into commodities trading in the crude oil market.
He said a "broad inquiry" was continuing and included "a number of different types of commodity trading."
Nordlicht and Turkish were among six defendants cited in related state indictments alleging tax evasion.
The three other federal defendants were identified as Michael Kellogg, 30, of West Los Angeles, formerly with Smith Barney, Harris Upham & Co; Frank Kneii, 52, of Northport, N.Y., a floor broker on the Cotton Exchange and president of World Trade Commodities Associates, and Donald Conlin, 48, of Mahwah, N.J., also a floor broker on the exchange and a vice president of World Trade.
Named as a co-conspirator in the federal indictment was broker Joseph Hamilton, who lives in Switzerland. Morgenthau said the commodity dealers transacted trades with Hamilton, losing substantial amounts of money to his benefit. Hamilton then would kickback as much as 90 percent of the money.
Also charged with evading payment of state income taxes were John Flynn, 33, of Bronxville, N.Y.; Frederick Dickson, 58, of Middletown, N.J.; Richard Esposito, 31, of Staten Island, and Angelo Del Re, 34, of Brooklyn. All of them are brokers.
If convicted, those indicted on federal charges face up to five years in prison and fines of up to $15,000 on charges of conspiracy, tax evasion and filing false returns.
The state defendants were arraigned Thursday in State Supreme Court in Manhattan.