The U.S. Commodity Futures Trading Commission (CFTC) announced last week that it has filed an administrative enforcement action alleging that Rockland P. McMahan, a cattle order buyer in Austin, TX, violated federal commodity laws by reporting knowingly inaccurate and misleading information regarding a purchase of feeder cattle to USDA, failing to produce to the CFTC adequate records regarding the purported sale, and delivering to the CFTC false, misleading, and/or knowingly inaccurate responses to routine inquiries and in reports or documents required to be filed with the CFTC under the Commodity Exchange Act.

According to the complaint, a USDA market price reporter in Amarillo, TX, contacted McMahan every week seeking information about cattle purchases and sales for inclusion in the USDA’s weekly cash market feeder cattle report. In late October 2004, McMahan allegedly told the USDA price reporter that he had purchased 1,800 head of feeder steers weighing an average of 725 pounds. As alleged, USDA included McMahan’s reported purchase in its weekly cash market feeder cattle report which is used as a source of market information by producers, consumers, and distributors in the sale and purchase of, among other things, livestock, meat, and grain. The complaint further alleges that the Chicago Mercantile Exchange (CME) incorporated McMahan’s reported purchase to the USDA in its calculation of the CME Feeder Cattle Index to which the CME’s feeder cattle futures contract cash settles.

As stated in the complaint, McMahan did not purchase or have a bona fide agreement to purchase any feeder steers weighing between 700 and 849 pounds—the required weight under the CME specifications for inclusion in the CME feeder cattle futures contract—and, thus, his direct report to USDA, and indirect report to CME, was false.