CBOT Chief Quits Stotler
CHICAGO (AP) _ Karsten Mahlmann resigned Wednesday as chairman of the Chicago Board of Trade, the world’s largest commodity futures exchange, amid charges of wrongdoing at the trading company he headed.
Mahlmann, who is midway through an unprecedented fourth term as the CBOT’s chief, said he was stepping down ″in the overwhelming interest of the Board of Trade and because of my deep love and respect for the institution,″ according to a statement issued by the exchange’s board of directors.
The board said it regretfully accepted the resignation, which was effective immediately, ″in respect for his wishes and out of the respect and love he has for the Board of Trade.″
The board said it had elected CBOT Vice Chairman William F. O’Connor to serve the remainder of Mahlmann’s one-year term, which ends Dec. 31.
Earlier Wednesday, Mahlmann announced his resignation as head of Stotler Group Inc., a beleaguered commodities firm that operates a subsidiary accused of violating the Commodity Exchange Act.
Mahlmann stressed in that announcement his ″non-involvement in the day-to- day affairs″ of Stotler Group and its affiliates.
″I have had no day-to-day management responsibilities since early 1988, and my position at Stotler was constantly eroded,″ Mahlmann said.
″I simply was not a party to the financial decisions which are now being scrutinized by the exchange and the regulators,″ Mahlmann said.
Mahlmann’s resignation comes a day after federal regulators filed a civil complaint in U.S. District Court against a Stotler subsidiary, Stotler Funds Inc., a commodity pool operator owned by Stotler Group.
The Commodity Futures Trading Commission alleges that Stotler Funds improperly used pools of clients’ money that had been set up for investing in commodity futures contracts.
Stotler Funds instead used about 80 percent of one pool’s assets - about $4.55 million - to invest in Stotler Group, the government said. Stotler Funds also lent $1 million from another pool to its parent company.
The complaint seeks a court order to stop these practices and seeks the appointment of a temporary equity receiver.
The complaint comes on the heels of other problems for Stotler Group. Last week, it announced that its principal subsidiary, the Stotler and Co. futures brokerage firm, would be shut down after failing to meet minimum capital requirements.
Mahlmann, who said he remains Stotler Group’s largest shareholder, said had he been aware of Stotler’s recent financial decisions, ″I would not have condoned them, and I would have taken action to reverse them.″
Mahlmann and other Stotler officials did not return phone calls Wednesday for further comment.
Mahlmann was serving his fourth one-year term as chairman. His term would have expired in January.
Some CBOT members believed Stotler’s woes had damaged his leadership abilities at the exchange, and they called for him to resign, said John Frazier, director of the agricultural division at Chicago-based Gerald Inc., an exchange member.
Frazier said the members’ concern was that the Stotler predicament had hurt Mahlmann’s ability to lead the CBOT’s battle over regulation of the futures industry.
The exchange wants the CFTC to maintain control over stock-index futures, but the Bush adminstration is seeking to transfer that authority to the Securities and Exchange Commission, which oversees the stock market.
Rep. John D. Dingell, D-Mich., said Wednesday the House Energy and Commerce Committee would look ″into the facts and circumstances surrounding the recent collapse of Stotler & Co.″
Dingell, the committee’s chairman said ″these events raise serious questions about the adequacy of regulation and oversight in the futures industry.″
Dingell’s comments came in a letter to the heads of the SEC and the CFTC.
Mahlmann began working as a runner at the exchange in 1957, shortly after graduation from high school in his native Germany. He became a member of the CBOT in 1963, after work in its cash grains department had earned him the nickname ″Cash.″
He became director of the exchange in 1983, vice chairman in 1986, and was first elected chairman in 1987. He beat Leslie Rosenthal, a former CBOT chairman, in a close election in January.
O’Connor has been a member of the CBT since 1955, and is a partner in O’Connor and Co., which he founded in 1957. Elected CBOT vice chairman in 1990, O’Connor is also vice chairman of the MidAmerica Commodity Exchange, an affiliate of the CBOT.