By SALLY JO WRIGHT

David Greising and Laurie Morse. Brokers, Bagmen, and Moles: Fraud and Corruption in the Chicago Futures Markets. New York: John Wiley & Sons, 1991. Pp. 337 with notes and index. $24.95 (cloth).

In 1984 Dwayne O. Andreas, "a political gameplayer, golfing buddy to everyone who matters in Washington, D.C., and closest American pal of Soviet President Mikhail Gorbachev," set in motion one of the longest and most complex FBI investigations in U.S. history. If you live in Decatur or are a habitue of corporate boardrooms, Andreas is familiar as the leader of Archer Daniels Midland (ADM), the nation's largest grain processing firm. Andreas believed "that the exchange's trading floor was a rigged market where not even honest members of the exchange could get a fair price." To outsiders looking in, and to insiders playing the options, futures and commodities markets of the Chicago Mercantile Exchange (Merc) and the Chicago Board of Trade (CBOT) had the reputation of "making the market work" through a series of clannish and frequently illegal trading activities. Practices that led to fines and banishment from trading floors and loss of licenses on the New York Stock Exchange had been ignored and even protected by the Merc and the CBOT in the name of self-regulation and "floor rules."

Greising and Morse provide a historical perspective of these billion-dollar markets with special emphasis on two recent FBI sting operations: Operation Sourmash and Operation Hedgeclipper. Greising and Morse begin their account one night in January 1989 with a "knock on the door" of Jimmy Sledz, a Japanese yen futures trader who found himself confronted by FBI agents. This visit provided the first public knowledge of the stings. More than two years earlier the FBI had placed four moles, or special agents, on the trading floors of the Merc and the CBOT. These moles were to insert themselves into the trading life of the exchanges in the dual roles of traders and undercover agents for the FBI. Their intent was to gather evidence of the abuses and illegalities that were considered everyday occurrences in trading activities. The result of Sourmash and Hedgeclipper: 48 indictments, 22 guilty pleas and 13 convictions, but little consensus that things are much better now. As Scott McMurray stated in the Wall Street Journal in mid-1991, "many lawyers are richer and many traders are poorer. Whether anyone is wiser is harder to answer."

Most readers will find someone in the book they know personally or recognize from local newscasts. Whether it be references to Everette "E.B." Harris, president of the Merc for most of the period between 1953 to 1977, or former Missouri U.S. Sen. Thomas F. Eagleton, a member of the Merc board, the book is peppered with factual and anecdotal material about interesting individuals — some from familiar corridors of power and others from such prosaic places as Carbondale or Mattoon.

This book weaves a tapestry connecting historical Merc and CBOT leadership to Illinois and national politics, from the Merc's $5,000-a-plate dinner for President Ronald Reagan to the Merc's contributions of $10,000 to the Illinois Victory '88 campaign. Ironically, for all the positioning of the Mercand CBOT in support of what was perceived as the more lenient position of the Republican party, "the Chicago pols did not begyi to suspect that they were pouring funds into the coffers of a Republican administration whose Justice Department was already deep into an investigation of their business practices."

Greising and Morse provide a historical perspective of these billion-dollar markets with special emphasis on two recent FBI sting operations: Operation Sourmash and Operation Hedgeclipper

Brokers, Bagmen, and Moles is easy reading. While trading strategies and mathematics are sophisticated, understandable working definitions of complicated trade positions are provided. Scenarios contribute to the readability of the book and help to explain the persistence of violations. For example, in 1977 the Hunt brothers "cornered" the soybean market with a position eight times larger than that allowed by the Board of Trade. The Hunts were fined $500,000 and required to "promise that they would stay out of the bean market for two years." Less than two years after the bean corner, the Hunt family "controlled half the supply [of silver] for delivery on the Comex and 70 percent in Chicago." Their market machinations had driven the price of silver from below $9 an ounce in late 1979 to over $52 an ounce in January 1980 and had created one of the most impressive corners in the recent history of the exchanges.

It is arguable whether the FBI stings had any lasting effect on the internal operation of these exchange giants. It is also debatable that there is, or ever was, the degree of corruption that has been attributed to these markets. What is not in doubt is that Brokers, Bagmen and Moles offers an informative and entertaining perspective on such continuing controversies.

Sally Jo Wright is professor of business administration at Sangamon State University. She does training and consulting in investment futures and options.

July 1992/Illinois Issues/23