John H. Ryan v. Commodity Futures Trading Commission

CUDAHY, J.,

concurring:

Given the deferential standard of review of the Commission’s actions, I agree with the result and, in general, with the analysis adopted by the majority. However, as a member (along with Judge Kanne) of the panel that reviewed Mr. Ryan’s criminal conviction, see United States v. Ashman, 979 F.2d 469 (7th Cir.1992), I had earlier examined in some detail the circumstances which brought him and others to the present unhappy pass and may have acquired a perspective slightly different from that of the other members of the present panel.

In Ashman , the appellate panel rejected the government’s argument that open outcry trading in and of itself implicated a property right that was protected under the mail and wire fraud statutes. See id. at 477-79 . The panel reasoned that on “limit days” — that is, on days when the CBOT fixed the price of a commodity by limiting its permissible price movement — fraud was impossible because customers did not have an opportunity to obtain a better price. See id. at 479 . In light of the lack of price competition, the defendants did not deprive customers of any money or property when they failed to execute limit-day trades by open outcry. Id.

Of course, limit-day trading is not before us as a basis for the denial of Mr. Ryan’s registration application and the imposition of a six-year trading ban. Nonetheless, the earlier panel’s rejection of a per se approach to trading that is not conducted by open outcry shows the ambiguities involved in assessing the criminal, or even moral, consequences of questionable activities in the trading pit. It is by no means a “slam dunk” to distinguish violations of convenience from crimes of fraud.

In Ashman , I was concerned that the majority’s theory of culpability — that “[b]y picking customer prices and opposing traders, the defendants removed their customers from the pit’s competitive marketplace and forced the customers to accept the results they selected, guaranteeing profits to the local and denying the customer the opportu *923 nity to obtain a better price” — painted with ■ too broad a brush. See id. at 497 (Cudahy, J., concurring in part and dissenting in part) (quoting majority at 477-78). I therefore wrote a separate opinion in an effort to distinguish between those trades in which the trader gained a clear financial benefit, and those trades where there was apparently no such benefit. I felt that such detailed scrutiny was warranted where felony convictions were at stake.

The majority opinion in Ashman is, of course, the criminal law of the circuit. But it seems to me that this does not relieve the Commission — -which is effectively ending Mr. Ryan’s career — of the obligation to examine his conduct from the vantage point of its own trading expertise. Instead, however, the Commission responds to Mr. Ryan’s claim that he did not intend to harm customers only with the statement that the jury verdict in the criminal ease “establishes conclusively that [Ryan] willfully acted to the detriment of his customers.” Ryan II at * 9. Similarly, the Commission answers the argument that Mr. Ryan caused no actual harm to customers by quoting extensively from the majority’s opinion in Ashman . See id. at nn. 28 & 24. But neither a criminal jury nor the Seventh Circuit, however authoritative their declarations, can claim expertise in the conduct of trading at the CBOT. Significantly, the ALJ, who was reversed by the Commission and who presumably has such expertise, concluded that “the transactions that resulted in Ryan’s conviction do not necessarily reflect an intent to cheat or defraud customers ... I am inclined to believe that they were crimes of convenience.” ALJ II at *4.

No doubt Mr. Ryan violated CBOT rules, as well as the Commodity Exchange Act. But whether Mr. Ryan sought to take money at the expense of customers has been bitterly contested before the Commission and in the federal courts. Accordingly, the Commission — certainly an expert in matters relating to trading — should give us the benefit of its independent conclusion whether in all instances Mr. Ryan acted from motives of fraud rather than motives of convenience. And if the Commission has concluded that Mr. Ryan acted to defraud, it should explain, without simply referencing the jury verdict or Ashman , why and how Mr. Ryan engaged in such fraud. No doubt Ashman is an authoritative exposition of the criminal law, but in this civil proceeding of great consequence for Mr. Ryan, the Commission as decision-maker should provide us with its own understanding of his conduct and its import.