Release: 4602-02
For Release: February 4, 2002

CFTC SETTLES CASE AGAINST CHICAGO FIRM AND ITS MANAGING DIRECTOR

CFTC finds that Excellent USA and John Gallwas Failed to Supervise the Handling of Foreign Omnibus Accounts

CFTC Revokes Registration of Excellent USA as a Result of the Criminal Conviction of One of its Principals

WASHINGTON, D.C. -- The Commodity Futures Trading Commission (CFTC) announced today the settlement of an action filed on August 20, 2001, against Excellent USA, Inc. (Excellent USA) and John F. Gallwas (Gallwas), both of Chicago, Illinois.

The CFTC complaint charged that the respondents failed to supervise the handling of the omnibus accounts of two Japanese firms and that Excellent USA was disqualified from registration by virtue of the criminal conviction in Japan of one of the firm’s principals (see CFTC News Release 4553-01, August 20, 2001).

The CFTC settlement order finds that, between March 1994 and January 1998, Excellent USA and Gallwas regularly accepted spread orders from the Japanese firms, including simultaneously entered orders to buy or sell the same spread that resulted in the omnibus accounts holding almost equal and offsetting positions in each futures month. The order finds that such trading results were unusual, looked like possible wash sales and should have raised questions concerning the propriety of the Japanese firms’ trading.

According to the order, despite the suspicious nature of this trading, Excellent USA and Gallwas never questioned the trading. The order also finds that Excellent USA and Gallwas never reconciled the apparent discrepancies between information provided by the Japanese firms and their knowledge of business practices of the two Japanese firms. The order further finds that Excellent USA and Gallwas did not establish a systematic and meaningful system for supervising the trading of the foreign customer omnibus accounts and, as a result of the supervisory failures, failed to provide adequate protection to foreign retail customers who trade in US futures markets.

In a separate order, the CFTC revoked the registration of Excellent USA on the basis of the February 2000 criminal conviction in Japan of Toshio Yokoyama, a principal of Excellent USA and the two Japanese firms. Yokoyama was convicted of cheating and defrauding unsophisticated Japanese retail customers in connection with the futures trading of the Japanese firms in the U.S. Yokoyama was sentenced to seven years imprisonment.

The CFTC orders provide for the following sanctions:

• require Gallwas to cease and desist from further violations of regulation 166.3;
• suspend Gallwas’ registration as an associated person for six months;
• require Gallwas to pay a civil monetary of $65,000; and
• revoke Excellent USA’s registration as a futures commission merchant.

In consenting to the entry of the order and the findings in the order, the respondents neither admitted nor denied the findings of the order or the allegations of the complaint.

To see a copy of the settlement orders, go to the following Internet web address
http://www.cftc.gov/

Media Case Contact

Scott R. Williamson, (312) 886-3090
Acting Regional Counsel, Central Regional Office
CFTC Division of Enforcement

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