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CHASE COMMODITIES CORP
CASE OUTCOME: Ordered to pay $4.2 million in restitution to defrauded customers; Banned from Registration
NFA ID:
0326799
Individuals Involved:
- LEE GORDON LAGORIO
- EXCEL EVENOR OBANDO
- UNIVERSAL FINANCIAL HOLDING CORP
For Release: October 18, 2004 LOS ANGELES FEDERAL COURT ISSUES PRELIMINARY ORDER ENJOINING CHASE COMMODITIES CORPORATION AND TWO EMPLOYEES FROM VIOLATING THE COMMODITY EXCHANGE ACT WASHINGTON, D.C. - The U.S. Commodity Futures Trading Commission (CFTC) announced today that the Honorable Percy Anderson of the United States District Court for the Central District of California has entered an order of preliminary injunction against Chase Commodities Corporation (Chase), Lee La Gorio, both of Woodland Hills, California, and Excel Obando of Sun Valley, California, enjoining them from violating certain anti-fraud sections of the Commodity Exchange Act and the CFTC's regulations. The order also continued the asset freeze the court had previously ordered as to all defendants. The court's order stems from a complaint filed on August 4, 2004 (see CFTC News Release 4973-04), and follows a statutory restraining order entered by the court on August 5, 2004. The complaint charged that defendants and other Chase salespersons told customers that large profits would be made, such as doubling the customer's money within short periods of time. Among other charges, the complaint alleged that defendants and others falsely represented to customers that the risks of loss from trading commodity options were minimal, while failing to disclose that from August 2003 to March 2004, approximately 99 percent of the firm's 359 actively trading customers lost money trading commodity options -- for a total loss of more than $4 million -- during which time Chase charged more than $2 million for commissions and fees. The court's order, issued after a hearing, found that the CFTC had made a strong showing that Chase's salespersons misrepresented the return and stability of options and that the CFTC is likely to prevail on the merits. The court further found an "unavoidable inference" that La Gorio, Chase's President and Treasurer, and Obando, Chase's Chief Compliance Officer, either "were, or should have been, aware of" the sales tactics employed by Chase's small sales staff or, if they lacked actual knowledge of the salespersons' tactics, did so only through "conscious avoidance." In its continuing litigation against defendants, the CFTC is seeking permanent injunctive relief, return of funds to defrauded customers, repayment of ill-gotten gains, and an award of civil monetary penalties. The following CFTC staff members are responsible for this case: Ken McCracken, Sandy McCarthy, Thomas Bloom, and Richard Glaser. Decision:
For Release: February 10, 2006 Los Angeles Federal Court Orders California Company and Two of its Principals to Pay $4.2 Million to Defrauded Commodity Option Customers Chase Commodities Corp., Lee LaGorio, and Excel Obando Ordered to Pay Restitution in Fraudulent Sales Solicitation Case Brought by US Commodity Futures Trading Commission Universal Financial Holding Corporation Also Found Liable Washington, DC—The U.S. Commodity Futures Trading Commission (CFTC) announced today that the United States District Court for the Central District of California entered a consent order settling the CFTC’s charges in a sales solicitation fraud case the agency brought against Chase Commodities Corporation (Chase) and Lee LaGorio, both of Woodland Hills, California; Excel Obando of Sun Valley, California; and Universal Financial Holding Corporation (UFHC) of Aventura, Florida. The consent order stems from a CFTC complaint filed on August 4, 2004 (see CFTC News Release 4973-04) charging that between August 2003 and August 2004, Chase’s sales force fraudulently solicited customers by exaggerating the profitability of trading options on futures. In the consent order, the court specifically found that Chase’s salespeople: represented that customers would make large profits -- such as doubling their money -- within short time periods by trading commodity options with Chase; based the profit representations on well-known public information that was already factored into the price of the commodity options, and on Chase’s alleged previous trading successes; and falsely represented to customers that the risk of loss from trading commodity options was minimal, while failing to disclose that between August 2003 and March 2004, most customers sustained losses. The order also finds that approximately 99 percent of the firm's 359 actively trading customers lost money trading options on futures through Chase, for a total loss of more than $4 million, at a time when Chase was charging those customers more than $2 million in commissions and fees. According to the consent order, Chase and UFHC, then a futures commission merchant, were parties to a guarantee agreement by which UFHC guaranteed “all obligations” of Chase stemming from the solicitation of, and transactions involving, customer accounts. According to the consent order, LaGorio and Obando were liable for the actions of Chase’s sales force, and UFHC was liable pursuant to its contractual agreement with Chase. The court ordered defendants to pay $4.2 million in restitution to defrauded customers; assessed separate $120,000 civil monetary penalties against LaGorio and Obando; permanently enjoined Chase, LaGorio and Obando from engaging in sales solicitation fraud in violation of the Commodity Exchange Act and CFTC regulations; and banned Chase and LaGorio permanently, and Obando for five years, from trading on markets subject to Commission jurisdiction.
Source: National Futures Association
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