WASHINGTON — Two years ago at a Florida resort, one of the commodity futures markets now rocked by scandal in Chicago may have made a wise investment in its future.
The Chicago Board of Trade treated Sen. Patrick J. Leahy (D-Vt.), Leahy's son, Rep. Glenn English (D-Okla.) and English's wife to three days of sun and fun at a futures industry conference where the legislators' only work was participating in a panel discussion.
The board paid all plane, food and lodging expenses as well as hefty honorariums--$1,969 to Leahy and $1,000 to English--for their stay at the "world class" Boca Raton Resort and Club, which features golf, tennis and oceanfront rooms.
Leahy, chairman of the Senate Agriculture Committee, and English, chairman of a House Agriculture subcommittee, will now head investigations of the massive scandal in the Chicago futures markets and oversee any legislation to tighten regulation of commodity traders, who are suspected of defrauding investors of tens of millions of dollars.
The lawmakers are only two among legions who have been courted with campaign contributions and other largess by the Board of Trade and the Chicago Mercantile Exchange, which also is at the center of the investigation.
And like their colleagues, Leahy and English deny that the gifts create a conflict of interest.
"Do you think I could be bought with a trip to Florida?" Leahy asked indignantly in an interview. English dug out congressional hearing records to demonstrate that he has pushed for stronger policing of trading practices.
Whatever the case, the futures industry has built a warm relationship not only with Congress but with the Commodity Futures Trading Commission, a 14-year-old regulatory agency that is up for renewal by Congress this year.
The industry's clout has apparently had its effect. The FBI undercover probe in Chicago centers on two gaps in federal regulations that have been known for more than a decade. One makes it easy for brokers to cheat customers; the other makes it almost impossible to catch those who cheat.
But attempts within Congress and the trading commission to ban "dual trading"--which allows brokers to trade for themselves and their customers at the same time--and to require recording the exact time of each commodity transaction have been unsuccessful.
"With no public lobby to question trading practices, a weak press and a Congress that sees this industry only as its fund-raisers, it's no surprise that blind deregulation has been the order of the day," said James M. Stone, a former commission chairman who now heads Plymouth Rock Assurance Co. of Boston.
Commodity exchanges in Chicago and elsewhere defend their heavy lobbying of Congress as necessary to explain an arcane system in which traders, frantically shouting orders to each other in open pits, set present and future prices on everything from pork bellies to Swiss francs.
While the criminal investigation proceeds in Chicago, industry lobbyists are scrambling to head off a congressional crackdown on trading practices. They argue that improved self-regulation is the only way for American exchanges to ward off fierce competition from overseas marts.
The exchanges' lobbying is highly regarded. As Agriculture Secretary Clayton K. Yeutter once boasted when he was president of the Chicago Merc: "We probably do our job as well as anybody in Washington."
To bolster their advocacy, the futures industry has showered members of Congress with campaign contributions, honorariums and expense-paid trips to vacation meccas.
Over the last six years, political action committees, or PACs, representing traders at the Chicago Board of Trade and the Mercantile Exchange donated more than $1.7 million to Senate and House campaigns. Most of the congressional winners sit on panels that regulate trading practices or adjust tax laws of vital interest to traders' wallets.
Top recipients from the two PACs were Rep. English, $27,000, and Senate Agriculture Committee member Thomas A. Daschle (D-S.D.), $25,250.
Other notable recipients, according to Federal Election Commission records, were House Agriculture Committee Chairman E. (Kika) de la Garza (D-Tex.), $24,500; Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.), $23,500; House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.), $11,000, and Senate Minority Leader Bob Dole (R-Kan.), $10,000.
A study by Common Cause, the self-styled citizens' lobby, found that individual commodity traders not only donated large sums to their PACs--which then distributed the money to candidates--but also gave extraordinary amounts on their own to congressional campaigns.
Tours, Speeches, Appearances
Records show that while Yeutter headed the Merc, from 1978 to 1985, he contributed at least $13,400 to congressional candidates, $4,000 to presidential hopefuls, $1,750 to Republican party committees and $1,000 to PACs.