New York Times<\/a>\u00a0<\/span>article.<\/p>\nAllegations Leveled Against Robert Moore By U.S. Commodity Futures\u00a0Trading Commission<\/h6>\n
Court documents obtained by VI Consortium<\/em> brings to the fore the accusations the CFTC leveled against Kevin Cassidy, former CEO of Optional Inc.; Edward O’Connor, former president of Optional Inc.; Optionable Inc.; Lee and Moore on November 18, 2008.<\/p>\nThe 38-page lawsuit, which was heard in the United States District Court for the Southern District of New York, alleged that, “from at least 2003 until approximately May 2007, David Lee (“Lee”), a Bank of Montreal trader, engaged in acts and practices that constitute violations of the Commodity Exchange Act, as amended (the “Act”), 7 U.S.C. \u00a7\u00a7 i et seq. (2002).”<\/p>\n
The lawsuit explained in detail the violations the four men and the company committed, which amounted\u00a0to the largest trade loss in Canada’s history. It also revealed that, “prior to being hired as the Executive Managing Director of BMO’s derivatives trading group, Moore had been a trader himself at other organizations, [and] touted himself as an expert in energy trading.”<\/p>\n
After listing Moore’s duties as stated by his job description at BMO, the CFTC alleged Moore “engaged in and permitted violations of BMO policies.”<\/p>\n
In its lawsuit, the CFTC alleged Moore “knowingly allowed Lee and others to violate critical BMO policies.” The federal agency said\u00a0Moore “violated and allowed Lee to violate BMO’s ethical policies. For example,\u00a0each BMO employee was required to comply with its group’s “Professional and Ethical\u00a0Standards”.”<\/p>\n
According to the lawsuit, BMO’s Commodity Derivatives Group “Professional\u00a0and Ethical Standards” required employees to adhere to the following directives:<\/p>\n
\n- 4.1 To conduct the Bank’s business in accordance with established market
\npractices.<\/li>\n - 5.2 Business must not be directed to any counter-party or brokers in order to
\nreciprocate gifts, entertainment or favors. Any such benefits are to be
\ndeclared openly.<\/li>\n - 5.3 No gift or entertainment should be accepted if:
\n– it would be embarrassing to explain; or
\n– it is in excess of that which would be considered as being of modest value; or- the motives of the party providing the gift or entertainment are
\nquestionable.<\/li>\n - Any offers that contravene these guidelines, or any doubt concerning these
\nmatters, should be referred to the Commodity Products Group Executive
\nManaging Director.<\/li>\n - 5.4 Any attempt by a market participant, broker, or counterparty to obtain
\nfavors directly must be reported at once to the Commodity Products
\nGroup Executive Managing Director.<\/li>\n<\/ul>\nIn addition, the bank’s employees, during the relevant time, were required to abide by its “Principles, Code of Conduct, and Ethics.” It says a conflict of interest exists in\u00a0any situation where any of BMO’s employees:<\/p>\n
(a) has a personal interest that would be likely to adversely affect, or even
\nappear to adversely affect, our loyalty to, or judgment on behalf of, BMO
\nor a prospective or actual customer or supplier;<\/p>\n
(b) has chosen, or may appear to have chosen his\/her interests over the
\ninterests of BMO, a prospective or actual customer, or a supplier of BMO;
\nor
\n( c) takes actions or has interests that may make it difficult to perform
\nhis\/her work at BMO objectively or effectively.<\/p>\n
Nonetheless, according to the lawsuit, “disregarding these ethical policies, Moore received gifts, travel, meals and money\u00a0from Cassidy that were not business related, in excess of that which would be considered as\u00a0being of modest value, from a source whose motives were highly questionable, and failed to\u00a0openly declare them.”<\/p>\n
Furthermore, the suit states, “Moore’ s willing receipt of such gifts, travel arrangements, meals, and\u00a0funds made it difficult for him to perform his work at BMO objectively or effectively when it\u00a0came to Optionable\u00a0Inc., and Cassidy.”<\/p>\n
The CFTC further alleged\u00a0that Moore “disregarded the signs of Lee’s fraud,” and had he viewed Optionable Inc. and Lee at arm’s length, “he would have discerned that Bank of Montreal’s IPV\u00a0process could be undermined by a corrupt broker and trader.” An independent price verification\u00a0is a process for regular review of valuation of trading assets and liabilities against independently sourced instrument prices to ensure the firm’s trading positions are correctly valued and apply appropriate corrections if there are discrepancies.<\/span><\/p>\nThe lawsuit went on to describe the\u00a0relationship between Moore and Cassidy.<\/p>\n
“The nature, frequency, and value of the gifts, travel arrangements, meals and\u00a0money Moore received from Cassidy created both the appearance, as well as an actual, conflict\u00a0of interest. Notably, Cassidy repeatedly paid for Moore’s gambling vacations, some of which\u00a0were jointly attended by Lee. During these gambling vacations, Cassidy provided both Lee and\u00a0Moore with several thousand dollars with which to gamble.”<\/p>\n
According to the lawsuit, some of Cassidy’s expenditures on Moore are as follows:<\/p>\n
\u2192 On March 16, 2004 Cassidy paid $650 to Trading Places Concierge for tickets
\npurchased on behalf of Moore.<\/p>\n
\u2192 On December 5, 2004 Cassidy paid $190.40 for a room for Moore at the Hiltop Inn, a
\nhotel close to the Foxwoods Resort Casino in Ledyard, Connecticut. The same day,
\nCassidy paid $ 1 80.40 for dinner at Cedars Steak House, a gourmet restaurant in the Great Cedar Hotel at the Foxwoods Resort Casino.<\/p>\n
\u2192 On February 5, 2005 Cassidy paid $96.83 for dinner with Moore at the Summer Shack,<\/p>\n
a seafood restaurant at the Mohegan Sun Resort and Casino in Uncasvile, Connecticut.<\/p>\n
\u2192 On March 7, 2005 Cassidy paid $191.39 for car service for Moore.<\/p>\n
\u2192 On April 9, 2005 Cassidy paid $258.85 for dinner with Moore at Cedars Steak House.<\/p>\n
\u2192 On July 28,2005 Cassidy paid $454.00 to John Allan’s, a men’s grooming club in
\nManhattan, which included expenses for Moore and Noah Rothblatt, a floor broker
\nemployed by Optionable.<\/p>\n
\u2192 On October 17, 2005 Cassidy paid $939.00 to John Allan’s, which included expenses for Moore and Lee.<\/p>\n
\u2192 Over the weekend of November 18 and 19, 2005, Cassidy paid $1,218.46 for expenses
\nincurred with Lee and Moore at the Borgata Spa in the Borgata Hotel Casino & Spa in
\nAtlantic City, New Jersey.<\/p>\n
\u2192 On April 21, 2006 Cassidy paid $132.42 for dinner with Moore at the Summer Shack.<\/p>\n
\u2192 On April 22, 2006 Cassidy paid $414.40 for dinner with Moore at the Foxwoods Grand
\nPequot Tower, a hotel at the Foxwoods Resort Casino.<\/p>\n
\u2192 On June 1,2006 Cassidy arranged for transportation for Moore with Quality Executive
\nLimousine, costing $1 ,054. 14.<\/p>\n
\u2192 On August 17, 2006 Cassidy arranged for transportation for Moore with Quality
\nExecutive Limousine, costing $412.09.<\/p>\n
\u2192 On November 1, 2006 Cassidy paid $374.61 in expenses incurred with Moore at the
\nGrand Pequot Hotel and Cedars Restaurant at the Foxwoods Resort Casino.<\/p>\n
\u2192 On March 2,2007 Cassidy paid $785.07 for dinner with Moore at Michael Jordan’s
\nSteakhouse in New York.<\/p>\n
\u2192 On March 3, 2007 Cassidy paid $524.52 for a meal with Moore at the Mohegan Sun
\nHotel, at the Mohegan Sun Resort and Casino.<\/p>\n
The lawsuit can be viewed here<\/a>\u00a0(start on page 25 for allegations against Moore)<\/span><\/span>. It goes on to allege that\u00a0Moore’s interests overrode his loyalty to BMO, which became evident when he considered becoming a director of Optionable Inc., in at least 2001, yet\u00a0never disclosed this to Bank of Montreal. It added, “Moore also sought to invest funds in one of Cassidy’s businesses,\u00a0yet did not disclose this to his BMO superiors either.”<\/p>\nConcluding its allegations against Moore, the CFTC said: “By accepting ‘entertainment, travel arrangements, meals, refreshments or accommodations’ (unrelated to business discussions), Moore violated BMO ethical policies. Lee knew of Moore’s behavior and violations and this knowledge persuaded him and encouraged him to continue his fraudulent conduct with Cassidy and Optionable Inc. By violating BMO ethical policies and by allowing the appearance, as well as engaging in, an actual, conflict of interest with Cassidy and Optionable Inc., Moore failed to implement an adequate level of supervision and failed to act in good faith as Lee’s controlling person.<\/p>\n
“By failing to require Lee to avoid activities, interests, or associations that might interfere or appear to interfere with his independent exercise of good judgment, or with the best interests of BMO, Moore allowed Lee to violate BMO ethical policies. By allowing Lee to accept ‘entertainment, travel arrangements, meals, refreshments or accommodations unrelated to business discussions,’ Moore allowed Lee to violate BMO ethical policies. Lee knew that Moore allowed him to violate BMO’s ethical policies and this knowledge persuaded him and encouraged him to continue his fraudulent conduct with Cassidy and Optionable. By allowing Lee to violate BMO ethical policies, Moore failed to implement an adequate level of supervision and failed to act in good faith as Lee’s controlling person.<\/p>\n
“Aside from allowing or committing violations of BMO policies that were put in place to engender a culture of compliance and ethics, Moore disregarded salient facts that, if they had been investigated, could have led to the detection of Lee’s fraud earlier. For example, Moore knew and encouraged Lee to trade his book while on vacation, despite BMO policies strongly recommending against such practice. Moore also knew\u00a0about the disparities between Lee’s valuation of his options book and the valuations resulting\u00a0from multi-contributor sources.<\/p>\n
“Despite the size of the valuation discrepancies, Moore did not\u00a0question Lee about how he arrived at the implied volatility values that were inputted into the\u00a0model or the reliability of the skews employed in his model. Moore also knew that during the\u00a0relevant period, several OTC counter-parties disputed the value Lee attributed to their OTC\u00a0transactions, which were based on Lee’s options model. Moore did not question Lee about the\u00a0reason why so many disputes arose and why the discrepancies were so large between him and the\u00a0counter-parties. Moore did not perform any meaningful investigation into these and other matters\u00a0that, had they been investigated, could have led to the detection of Lee’s fraud earlier. Moore\u00a0failed to implement an adequate level of supervision and failed to act in good faith as Lee’s controlling person.”<\/p>\n
As previously stated, the ABR CEO settled with the CFTC for $150,000, and was permanently banned\u00a0from engaging in any conduct in violation of the Commodity Exchange Act as well as CFTC regulations concerning any commodity options transaction. Cassidy was sentenced to 30 months in prison for fraud.<\/p>\n","protected":false},"excerpt":{"rendered":"
On Tuesday, the 30th Legislature of the Virgin Islands Finance Committee met\u00a0in St. Thomas to hear testimony from various firms. However, perhaps the most anticipated hearing was that of Atlantic Basin Refining’s (ABR), where its executives, along with government officials and supporters, offered a myriad of reasons why the Operating Agreement,\u00a0signed between ABR\u00a0and the de […]<\/p>\n","protected":false},"author":1,"featured_media":11368,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3,11,191,147],"tags":[856,857],"yoast_head":"\n
Strong Allegations Leveled Against ABR CEO Robert Moore By Federal Agency CFTC - V.I. 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