Members of the wealthy Hunt family of Dallas have filed suit against the Securities and Exchange Commission, claiming the agency overstepped its authority in investigating the family's dealings in the silver market, a spokesman for the family said today.
In a statement released in New York, Tom Whitaker of the Hunt Energy Corp. said the Hunts are seeking to stop the SEC from "exceeding the limits of its jurisdiction in an investigation begun nearly a year ago."
A year ago, as the price of silver collapsed from a record $50 an ounce to $11, the Hunts' financial empire based on massive holdings of silver bullion and silver futures contracts also tumbled.
The Hunts did not meet calls for more collateral to back up loans from brokers and other lenders, sending shockwaves through the financial industry.
In the aftermath, the Hunts mortgaged most of their assets, from real estate to race horses, and negotiated a $1.1 billion loan from a group of banks.
The SEC and other regulatory agencies, including the Commodity Futures Trading Commission, then started investigating the Hunts' involvement in the silver market.
In their suit filed Tuesday in U.S. District Court in Dallas, the Hunts charged the SEC with "attempting to invade the exclusive jurisdiction over commodity trading granted by Congress" to the Commodity Futures Trading Commission, Whitaker said in the prepared statement.
"They have obtained subpoenas that are so broad as to allow them to obtain confidential information about numerous Hunt family members, business associates, company officers and those who are doing business with the Hunts . . .," the statement said.
Whitaker said the suit was filed on behalf of Nelson Bunker Hunt, W. H. Hunt, Lamar Hunt, Houston B. Hunt, Albert D. Huddleston and Douglas H. Hunt. Telephone calls to the Hunt Energy Corp. late today were not answered.
The suit charged the SEC is guilty of "numerous examples of agency impropriety in connection with bank subpoenas, including the issurance of subpoenas to banks without proper notice to the Hunts, the giving of notice to the Hunts of one form of subpoena while actually serving on a bank a different version, and attempted utilization of 'update' letters to banks for financial data without compliance with access-to-information methods provided by applicable law."
Andrew L. Rothman, director of public information for the SEC, said in Washington that the agency would have no comment on the suit. "The commission as a matter of policy does not comment on pending litigation," he said.
A Hunt Energy spokesman said that the Hunts had cooperated fully with the SEC investigation for nearly 12 months, supplying copies of more than 25,000 documents.
But, he said, "Requests for additional information and data were ranging so far afield and procedural violations were so numerous that a halt had to be called."
The spokesman said the latest request of the SEC involved business activities of a "highly competitive nature" and were "in no way related to the original investigation."
The statement also said the Hunts have supplied the CFTC with more than 20,000 copies of documents.
The statement said, "There are jurisdictional limits, constitutional safeguards and personal privacy protections on such investigations and they ought to be observed."