Brokers, Bagmen, & Moles TRANSCRIPTS

[00:00:00] Anjay Nagpal: Previously on Brokers, Bagmen, and Moles.

[00:00:05] John Ryan: Didn't do a very good job of grasping what was going on because nobody understood the commodity business.

[00:00:12] Ray Pace: I think this should have been handled by the exchange, not by the federal of government.

[00:00:15] Michael Bassett: We had four agents. We put 'em in four spots. They all found the same thing.

[00:00:20] Randy Janett: You know, the self-regulation was such a joke.

[00:00:22] Michael Bassett: Make the public realize, and more importantly, the regulators in Congress realize that this doesn't work.

[00:00:37] Sen. Patrick Leahy: The system has simply not worked. We've seen a sting operation exposing widespread fraud in the trading pits. A CFTC report criticizing audit trading systems and a soybean emergency exploding in July. Rules have been ignored. Customers have not been protected and without the public's trust, futures markets cannot function.

They cannot serve the needs of our country. This unique American institution stands in serious danger of being changed unalterably, and for the worst. And we cannot and will not tolerate abuses of the system.

[00:01:18] Anjay Nagpal: On October 17th, 1989, a few months after the indictments were announced, but before any trials got underway in Chicago, the Commodity Futures Trading Commission, the government entity that regulates futures exchanges like the Board of Trade and the Merc, held reauthorization hearings in Washington DC.

That's right, the CFTC, as it was known, wasn't even a permanent organization, but a temporary and underfunded one that had to fight for its very existence every three years. The 1989 hearings were unique because, as the Washington Post put it quote, the Chicago undercover operation has turned this year's routine reauthorization of the CFTC into a referendum on regulation of the markets, unquote.

This year, operations Sour Mash and Hedge Clipper took center stage. And as Randy and Mike told me on last week's episode, it was up to Congress to decide if the FBI's findings would actually bring about any change on the floor. In other words, it was showtime.

I'm Anjay Nagpal, and this is Brokers, Bagmen, and Moles.

[00:02:55] Leo Melamed: The federal investigation of our markets cast a long and disturbing shadow.

[00:03:01] Sen. Paul Simon: That you should hold responsible those who are in charge for whatever happens, uh, under their control.

[00:03:07] David Greising: The amount of influence that they had over Congress was palpable.

[00:03:11] Sen. Thomas Eagleton: The violator should be prosecuted and should be punished, and swiftly and severely. Crookedness need not be the indispensable grease of America's futures markets.

[00:03:44] Anjay Nagpal: The first speaker during those 1989 hearings was a former senator from Missouri named Thomas Eagleton.

[00:03:53] Sen. Thomas Eagleton: After leaving the Senate, I became a member of the Board of Governors of the Chicago Mercantile Exchange, and I still am a member of that board.

[00:04:01] Anjay Nagpal: This guy is on the board of Governors of the Merc. I'm sure he's gonna praise the system and say that the bad actors have been, we weeded out and that there's nothing to worry about.

[00:04:11] Sen. Thomas Eagleton: Insofar as the prevention of misconduct is concerned, the futures exchanges of America operate on three longstanding, interrelated tenets. All of these tenets, all three of them, I'm sad to say, are false.

Tenant number one, self-regulation. It is deemed to be the be all and the end all in assuring the integrity of the futures exchanges. Mr. Chairman, the futures industry deals in billions and billions of dollars and in millions and millions of transactions.

[00:04:47] Anjay Nagpal: I was dead wrong about Senator Eagleton.

[00:04:52] Sen. Thomas Eagleton: In terms of its fiduciary relationship to the public, it is akin to a bank or to a savings and loan. No one would espouse, especially today that the banking or the SNL industry be collectively self-regulated. No one can expect any industry at all times to put the public interest ahead of its pocketbook interest. Greed and temptation are still words in the dictionary.

[00:05:21] Anjay Nagpal: What I'm hearing is he does not think the exchanges are capable of policing themselves. What about governmental supervision?

[00:05:30] Sen. Thomas Eagleton: False tenet number two, benign governmental supervision. Well, here's how this one plays in the future's world. If the folks won't abide our self regulation pitch, let's make sure that whatever the federal government does falls somewhere between benign and timid. Fulfilling this prophecy we have the Commodity Futures Trading Commission. Just about as benign and timid as they come.

[00:06:00] Anjay Nagpal: And here, I believe he really hits the nail on the head with how we got here.

[00:06:06] Sen. Thomas Eagleton: Somehow Congress designed it to be timid and has kept it timid by inadequate funding and a three-year reauthorization cycle, which keeps the agency in perpetual fear, for its own existence. And as demonstrated in by the FBI, Chicago Sting, the CFTC throughout its entire existence has been mostly too little and mostly too late. It's one of the few regulatory agencies that I know that, that that's very much fearful of those people whom they're regulating.

[00:06:40] Anjay Nagpal: Congress designed it to be timid. Because that's how the heads of the exchanges wanted it.

[00:06:47] Sen. Thomas Eagleton: If the CFTC is to remain as a separate independent agency, it should have full authority to monitor and investigate the futures industry on an active, ongoing basis. On the other hand, if the CFTC is always to be treated as a regulatory stepchild, then I think it should be folded into the SEC. This remedy, this SEC remedy is no panacea. But it is certainly better than today's status quo.

[00:07:18] Anjay Nagpal: That concept that the bigger, more powerful securities and exchange commission should probably regulate these markets. We've talked about that before in this podcast. It just makes all the sense in the world.

[00:07:32] Sen. Thomas Eagleton: False tenet number three. Too much regulation in the name of integrity will bog down the markets and will dampen market liquidity. The futures exchanges with their open outcry systems invite illegalities, self-dealing and customer abuse. Crookedness need not be the indispensable grease of America's futures markets.

[00:07:58] Anjay Nagpal: Crookedness need not be the indispensable grease of America's futures markets. This guy was like a poet laureate of financial corruption, and he tried to use his gifts to convince Congress, a Congress that included powerful members like Dan Rostenkowski, Bob Dole, and plenty of other friends of Leo Melamed, and the other floor bosses, that there were ways to move forward.

[00:08:26] Sen. Thomas Eagleton: Open outcry may have served a purpose in the era of the quill pen and Ebenezer Scrooge. But it serves absolutely no purpose in the age of Globex.

[00:08:37] Anjay Nagpal: Globex was an always on electronic trading system originally conceived of in 1987. Globex allowed futures traders all over the world to trade CME products while Chicago's traders were still sleeping or still partying. Eagleton and others thought that Globex should supplant open outcry as soon as possible.

[00:09:02] Sen. Thomas Eagleton: If there are two words that ought to be the motto of these hearings, those two words are: audit trail. Simply put, open outcry in pits of hundreds of shouters, winkers, gesticulators, and body touchers cannot be adequately verified and monitored.

[00:09:20] Anjay Nagpal: Eagleton really laid into the open outcry system and the lack of regulation at the Merc. But he wasn't done yet because next he addressed the qualifications of the traders themselves.

[00:09:34] Sen. Thomas Eagleton: A cosmetologist receives more training for his or her trade than do the traders and brokers of our nation's futures exchanges. No doubt about that. I'll say there's some out there in those exchanges that are ill-trained and ill-motivated, and they ought to be found out and eliminated. Thank you Mr. Chairman.

[00:09:55] Anjay Nagpal: The first time I heard this speech, I practically jumped out of my seat and started applauding in my home office; because Eagleton laid out the root cause of the problem that led to egregious theft so rampant that it caused the government to infiltrate our financial markets for the first time in our nation's history.

[00:10:16] Anjay Nagpal: Surely Eagleton's stunning testimony opened the eyes of Congress and things were about to change.

[00:10:25] Congressional Committee Member: Senator Eagleton, um, no one can say that you sugarcoated the testimony today. I find your testimony extremely important, but also say that, um, many ways the Chicago Merc, uh, deserves a lot of credit putting you on the board because I, um, I suspect you've been anything but cozy coming over there.

[00:10:52] Anjay Nagpal: My head exploded when I saw this. The committee jokingly thanked him for his testimony, proceeded to praise the Merk for having him on the board and failed to address the contents of Mr. Eagleton's damning speech. Eagleton was frustrated and resigned from his position at the Merc just a few months later.

Soon after his testimony, the exchange had smiled as some friendlier faces trotted out to the mic. Here's Illinois Senator Alan Dixon.

[00:11:33] Sen. Alan Dixon: The futures industry in our state employs, uh, over a hundred thousand people. Places in the financial institutions of our great state every night, $4 billion, and has, um, um, imparted a tremendous economic vitality, uh, to our state. Everybody, including those that lead that industry deeply regret as does, uh, the improprieties that have taken place.

[00:12:06] Anjay Nagpal: Wait for the but.

[00:12:07] Sen. Alan Dixon: But I would want to strenuously argue, uh, that the law is taking its course. By and large, those people have been found. They have been brought to justice and the system has worked.

[00:12:22] Anjay Nagpal: When we interviewed undercover agents, Mike Bassett and Randy Janet, they said everyone in the pit broke exchange rules. They said, finding wrongdoing, big or small. Was like shooting fish in a barrel. Senator Dixon saw it differently. He saw the operation as a covert strike force that busted the few bad apples on the floor. And now that they were gone, the rest of the traders, hardworking and honest men could go back to work and the system need not be overhauled.

[00:12:59] Sen. Alan Dixon: And if we take steps, that are injurious to our market. I think in the long term it will be a grievous error. And so I would urge you to be careful in what you do and, and to remember that the free marketplace, by and large works well.

[00:13:15] Anjay Nagpal: Illinois's other Senator Paul Simon echoed this sentiment.

[00:13:20] Sen. Paul Simon: I would urge, uh, you to be very, very careful in that as uh, Senator Dixon has said, there's a 100 to 110,000 jobs in our state.

It's a lot of jobs, but more than that, it's, it's what happens in North Dakota, the price of wheat and soybeans. It's protecting farmers, it's protecting billions of dollars that are gonna flow away from this country if we don't do the job properly and if we're unhappy with certain personnel that we don't overreact with legislation. Uh, and ultimately due harm.

[00:14:01] Anjay Nagpal: Most of the senators, especially those from agricultural states, seemed dead set on not changing the way business was done at the Merc or the Board of Trade. Of course, Leo Melamed and Cash Mahlmann, the heads of the exchanges, got a chance to speak. We'll hear it after the break.

[00:14:40] Sen. Alan Dixon: It's our privilege to introduce to you a number of witnesses that you'll hear today that are personal friends of ours. Karsten Mahlmann, chairman of the Board of Directors of the Chicago Board of Trade, Leo Melamed, Special Counsel and Chairman of the Executive Committee of the Chicago Mercantile Exchange.

[00:14:58] Anjay Nagpal: These are the men running the exchanges that Senator Eagleton trashed as being full of untrained traders who looted customers and failed to enforce the rules and they're being treated like full on rock stars. I'm not surprised they're being protected by their hometown senators cuz they brought so much money to the state of Illinois.

But I am a little taken aback about how blatant this all is. Here's longtime Merc Chairman Leo Melamed.

[00:15:32] Leo Melamed: The federal investigation of our markets cast long and disturbing shadow. This was exacerbated by a media penchant to sensationalize some of these wrongdoings. The fear we have is that there just might be an overreaction. An overreaction would do great damage to a national resource, one that we represent. Mr. Chairman and members of this committee I assure you that we feel as strongly as you in our desire to stamp out any and all wrongdoing, but these things must be put in perspective.

It must be remembered that the alleged wrongdoing to customers is diminishingly small compared to the value of services performed. And while we agree that we must do everything in an uncompromising fashion to preserve our integrity of these markets, we cannot do it without understanding the perspective that I am suggesting.

[00:16:38] Anjay Nagpal: I think Senator Eagleton did a great job of proving that these markets lacked integrity, but in a few short minutes. Leo has laid all the blame on a few bad apples while painting the exchanges as victims, and he didn't directly address any of Senator Eagleton's criticisms.

[00:17:00] Leo Melamed: We fear that legislation that impedes our markets at this moment in time will serve the competitors and they are no idle threat gentlemen of this committee.

We implore that you aid us and assist us in maintaining this national resource that we have provided through ingenuity of our private sector. No other place in the world has made it as liquid as we have as a result of open outcry.

[00:17:36] Anjay Nagpal: The head of the Board of Trade, Cash Mahlmann had an even better description of the situation.

[00:17:43] Karsten "Cash" Mahlmann: Senator, if I would be permitted to use an analogy, I would say that the car is a very useful and very good instrument for US users, and I would submit to you that the car in the hands of a drunk driver is a deathly vehicle. But we should not eliminate the car because we have a drunk driver or ten or many, and we as exchanges, have found no better system than the open auction outcry system today, and we fully support the spirit of the Senate bill that the drunk driver or the violator should be detected, should be prosecuted, and should be punished and swiftly and severely.

[00:18:36] Anjay Nagpal: I'd say they were all drunk drivers. There were just no cops around to arrest them.

[00:18:42] Sen. Paul Simon: Cash Mahlmann, who is the chairman of the Chicago Board of Trade, Leo Melamed, who's the chairman of Chicago Mercantile Exchange, have they just sat back and said, is it gonna be business as usual? They've had quite the contrary. They're people of integrity who have said immediately, we have to move on this and we have to move vigorously. And they did.

[00:19:07] Anjay Nagpal: The hearings, were turning into a regular love fest.

[00:19:11] Sen. Paul Simon: I would simply urge the committee to work with the exchanges and with others who are in positions of responsibility so that we emerge with something that is tighter, that does protect the public better, but that also doesn't shift the markets to Tokyo, London, and elsewhere.

[00:19:36] Anjay Nagpal: The exchange's favorite defense was to create fear of losing these markets to international competition, which was about as likely as the bears winning a Superbowl in the post Ditka era.

[00:19:49] Sen. Paul Simon: We have to be as careful if we're unhappy with certain personnel that we don't overreact with legislation, uh, and ultimately do harm.

[00:20:04] Anjay Nagpal: Senator Leahy of Vermont who sat on the CFTC Reauthorization Committee, assured Leo that Congress would act in the exchanges and the country's best interest.

[00:20:17] Sen. Patrick Leahy: Congress is not, uh, intent upon pushing the exchanges into an uncompetitive position. Quite the contrary those of us who take an interest in this, believe that this is an extremely important industry, that the future of it is at stake.

[00:20:36] Anjay Nagpal: A few hours into the hearing, it was like Eagleton never made his brilliant and spot on rant about how flawed the exchanges were. Instead, everyone bought into the illegitimate fear that any regulation on these exchanges would drive them right out of business opening the door for foreign competition.

To add insult to injury, the heads of the exchanges were praised by their local senators for taking action against the few bad apples on the floor, failing to hold them accountable for the actions of their private member owned exchanges. So if the exchanges and their management were not responsible for Brokers ripping off their customers, who was? Well, that prize went to none other than the temporary and underfunded CFTC. Let's listen to Senator Bob Kerrey from Nebraska questioning CFTC Chairperson Wendy Gramm.

[00:21:40] Sen. Bob Kerrey: I'm sure, uh, uh, Madam Chair that you've read, uh, and heard in my statements, uh, to Senator Eagleton, that, that I have a uh, philosophy that says that you should hold responsible, those who are in charge for whatever happens, uh, under their control.

Mm-hmm. And, uh, uh, I, I don't want this to be personal, but I've got questions about whether the, the commission itself, uh, has done all that it could.

[00:22:04] Anjay Nagpal: What about the heads of the exchanges? Aren't they responsible for what happens under their control?

[00:22:10] Sen. Bob Kerrey: I, I would like to, to ascertain, for example, uh, if your job is a full-time job, Do you work all of your hours at the CFTC?

[00:22:19] Chairperson Wendy Gramm: It's more than a full-time job.

[00:22:20] Sen. Bob Kerrey: Do you work no additional hours, uh, for this administration in other policy areas?

[00:22:25] Chairperson Wendy Gramm: In other policy areas? No.

[00:22:27] Sen. Bob Kerrey: You spend no time, uh, uh, in your working week doing other policy considerations for this administration?

[00:22:35] Chairperson Wendy Gramm: No.

[00:22:37] Anjay Nagpal: Can you imagine them asking this to Leo Melamed? After all he ran the Merc, a brokerage firm, and he was an active futures trader.

[00:22:47] Chairperson Wendy Gramm: I spent all my time on, on this job. I mean, from time to time other people may ask me, uh, issues that have come from, um, but but no time, no significant time is spent on other than my, my job.

[00:23:00] Sen. Bob Kerrey: Lemme give you one more time to answer this question, uh, Madam Chair, when they ask you questions, do you say to them, I don't have time to answer that, or do you allocate some of your time to, uh, attempt to answer other domestic policy questions that face the administration?

[00:23:18] Chairperson Wendy Gramm: I have, I'm not aware of other domestic policy issues that have, that have come up to, uh, to me to spend any significant time on again.

[00:23:27] Sen. Bob Kerrey: I didn't say significant time madam Chair, I ask you anytime, and you said none. And now you're qualifying was significant. Let me be the judge of whether it's significant or not.

[00:23:35] Sen. Bob Kerrey: Do you spend any of your time on other policy matters?

[00:23:40] Chairperson Wendy Gramm: I think, uh, I think I might spend a few minutes from, uh, uh, over the weeks on if someone asked me about, um, an issue or remembering an issue that I might have dealt with back when I was at, um, at OMB, but just to refresh their memory. But I don't, again, that's not. It might be five minutes.

[00:24:03] Sen. Bob Kerrey: You would never leave the office to go to OMB, leave the office to participate, uh, in other policy matters other than your work.

[00:24:10] Chairperson Wendy Gramm: Well, certainly not on anything other than financial market and other financial policy issues.

[00:24:15] Sen. Bob Kerrey: Thank you. Thank you.

[00:24:20] Anjay Nagpal: Well, that was uncomfortable. Senator Bond was up next. And I was hoping that he'd ask Chairperson Gramm about something more substantive than her work ethic.

[00:24:34] Sen. Christopher Bond: Madam Chairman. Um, maybe it'd be, uh, helpful to know how many, um, hours a week do you normally spend on the work of the CFTC?

[00:24:41] Chairperson Wendy Gramm: How many hours per week? Let's see. Uh, normally get in around, 8:00 more recently, 7:30 in the morning when the markets are busy, uh, leaving around 7:00 in the evening. This weekend we had a meeting on Sunday and….

[00:24:56] Anjay Nagpal: After accepting that Chairperson Gramm doesn't sleep under her desk for four hours and then go to happy hour, he decided to cut right to the point.

[00:25:06] Sen. Christopher Bond: There's been some other questions raised, uh, about, uh, the activity of the commission and whether it's a sleeping giant or sleeping pygmy. Uh, would you like to, uh, comment, or sleeping beauty? Would you like to comment on, uh, the, uh, attitude and the, um, the, um, mission as you see? Uh, uh, the CFTC under your leadership?

[00:25:33] Chairperson Wendy Gramm: I'd be happy to. I'd like to say that I'm prefer being a sleeping beauty than a sleeping pygmy.

[00:25:44] Anjay Nagpal: Obviously, I've cherry-picked some of the less pleasant moments of Chairperson Gramm's testimony, and there were some productive outcomes to the proceedings including an increase to the CFTC'S budget. But it was clear that there was a huge disparity between the way Chairperson Gramm was treated versus how the exchange heads were treated.

In addition to her work ethic, the senators questioned why she didn't start the investigation herself. She didn't have the resources or the authority. Why some indicted Brokers were still trading on behalf of clients. Which was just as much an exchange issue as a regulatory issue. And a whole host of other problems that the exchange heads could have addressed themselves, but they didn't.

Despite that, the end result of these hearings was that the CFTC was indeed reauthorized because somebody's gotta regulate the exchanges or at least appear to.

After watching those Senate hearings, I just kept wondering, how did this crazy system come to be? A conversation with CNN financial reporter, Ceci Rodgers illuminates the answer.

[00:27:22] Ceci Rodgers: The CFTC was sort seen as a lap dog regulator. They were just not as well funded, and they did not have the same sort of rigorous oversight that the SEC had clearly the preferred regulator in terms of, you know, how the futures exchanges felt about it.

They had a huge, uh, lobbying effort to make sure that they stay underneath the CFTC umbrella.

[00:27:51] Anjay Nagpal: Right, a huge lobbying effort, one that might have influenced the Senate Agricultural Committee to design a timid regulator to oversee the exchanges.

[00:28:03] Ceci Rodgers: They did spend a lot of money on whining and dining. People led around the trading floor, um, and so it was a common, it was a common sight back in the early days, especially because they were really trying very hard to avoid. Getting oversight from the SEC, which was not preferred.

[00:28:24] Anjay Nagpal: Not preferred because they might actually make the exchanges get their shit together. The Merc and the Board of Trade, despite having just a few thousand employees, collected so much money from their members that they ranked in the top 10 of all corporate political action committees. I mean, that's crazy. Here's Leo from an old interview, giving us a little peek into the exchange's special relationship with some of the biggest politicians in DC.

[00:28:59] Leo Melamed: Well, we surely thank God that, uh, Danny Rostenkowski, uh, is our friend and his from Chicago, but, uh, he can't, he can't really go to bat for us all the time. He does he is our, a good friend and as a matter of fact, uh, uh, we like him a lot.

[00:29:16] Anjay Nagpal: If you need a reminder of who Danny Rostenkowski is, here's one.

[00:29:24] News: Dan Rostenkowski, a powerhouse with enormous influence as Chairman of the House Ways and Means Committee indicted on 17 felony charges.

In term Illinois Democrat was charged with 17 felony counts. It charges him with embezzling half a million dollars, mail fraud, wire fraud, aiding and abetting a crime.

[00:29:45] Anjay Nagpal: As for the rest of Congress, Let's revisit the conversation we had with the author of Brokers, Bagmen, and Moles, David Greising.

[00:29:55] David Greising: The amount of influence that they had over Congress was palpable if you went down to the annual uh, Futures Industry Association event in Boca Raton, Florida at the Boca Raton Hotel and Club. At the year before the investigation broke, there were I think more than 15 members of Congress, including Rostenkowski, including Marty Russo, who was actually on the agriculture committee and was a protege of Rostenkowski and senators like Patrick Leahy of Vermont and Tom Daschle and others were powerful senators, sort of at the peak of their powers, and they were regular fixtures at this all expenses paid trip with honoraria, uh, for speaking, uh, at Boca every year. And so a measure of their power was just very palpably visible. They would just puppet the, you know, the free markets for free men slogan of the exchanges.

[00:30:58] David Greising: They would talk about the importance of defending this bastion of entrepreneurialism and, and capitalism, et cetera, et cetera. They really drank the Kool-Aid of the industry and weren't really of a mind to, uh, come down hard on an industry that really was provided them, uh, a lot of political support and really political alliances as well.

[00:31:24] Anjay Nagpal: You know, who else was at some of those lavish parties and fundraisers? Tim Hendricks, as in the guy I traded with for a few years who put me in touch with a lot of the people in the show. I called him to hear what went down.

[00:31:39] Tim Hendricks: I'd go to DC once a year with the whole higher up to the committee and we would move with all those guys would come to a, an event we would throw and they would eat and drink until they were purple.

They, they were like homeless people coming in. And these are senators and reps. They were just pound and they were putting chicken in their pocket. It was millions of dollars.

[00:32:06] Anjay Nagpal: So if we want to know how the exchanges maintained this inadequate system of self-regulation for so long, we have our answer. Here's Stretch.

[00:32:19] Stretch: One bipartisan thing in, uh, Washington DC and that's envelopes filled with cash.

[00:32:25] Anjay Nagpal: While the politicians were given all expenses, paid trips to visit the exchanges in Chicago or to attend conventions in Florida where they played many, many rounds of golf, and as Tim says eight and drank until they were purple, they were in fact given envelopes full of cash.

That cash covered their per diems speaking fees and something called honoraria. What's honoraria you ask? It's defined as a fee paid for a service that is usually done for free. In other words, money for nothing.

It was time to move on from the seedy world of exchange politics to the seedy world of the Chicago Outfit. Remember when we asked Agent Mike Bassett if he was looking for money laundering on the trading floor? That idea came from this news report.

[00:33:25] News: The FBI reportedly is looking into charges that relatives of organized crime figures worked at the Chicago Mercantile Exchange in positions where they could launder illegal money.

[00:33:36] Anjay Nagpal: Mike didn't think the report had any merit, but I still felt like there was something there. And then months later when we got access to the trial transcripts, I searched for anything I could on the topic and about a thousand pages into Agent Dietrich Volk's testimony, seriously, I'm not kidding, he was on the stand for six weeks; there it was in cross-examination when a defense attorney asked Agent Volk...

[00:34:08] Defense Attorney: Now, sir, you have testified that your undercover investigation was about improper trading activity on the floor of the Chicago Mercantile Exchange. Is that correct?

[00:34:18] Dietrich Volk: Yes sir.

[00:34:19] Defense Attorney: And the focus of that investigation, sir, was it not, was whether customers of the exchange were being financially disadvantaged, isn't that correct?

[00:34:29] Dietrich Volk: That was an area we were focusing on, but there were other areas as well.

[00:34:35] Defense Attorney: Tell us what your other focus was.

[00:34:38] Dietrich Volk: I recall a conversation concerning the use of the exchange to launder money.

[00:34:46] Prosecutor: Objection. And after that's true....

[00:34:49] Anjay Nagpal: The conversation was getting interesting. And then all of a sudden, the prosecutor cut off Agent Volk’s testimony.

[00:34:57] Defense Attorney: And sir, tell the jury about the investigation that you did with the customers who were laundering money through the exchange.

[00:35:02] Prosecutor: Objection, Your Honor.

[00:35:04] Defense Attorney: He just gave that answer, judge.

[00:35:07] Judge: He did, but it doesn't necessarily make it relevant. Objection sustained. We are not going into that.

[00:35:18] Anjay Nagpal: So I decided to try Agent Volk again. We'd spoken a handful of times, but he didn't wanna go on record. And then one day he changed his mind.

We booked flights to see him in Colorado. And his former partner Randy, promised we were in for a wild ride.

[00:35:41] Randy Janett: Well, Dieter is a very unique guy. I always said about Dieter, if the FBI told him to take your head and ram it into the Empire State Building until you knock it down, he would do it until he was dead. He's, he's a hundred percent old-school German.

[00:35:58] Anjay Nagpal: In case you didn't catch that, he said he would do it until he was dead. And then Agent Mike Bassett made me realize that if any of the agents knew organized crime, it was Agent Dietrich Volk.

[00:36:15] Michael Bassett: Dieter came from organized crime work in New York so he was, that was his passion coming to Chicago, so he would've been wired into to all of that.

[00:36:23] Anjay Nagpal: Agent Volk was wired into that and a whole lot more.

[00:36:29] Dietrich Volk: There were individuals trading that were of interest to the Bureau because of their organized crime affiliations. Whether it's on the streets of New York or the pits of Chicago, you have to work your way up.

I might get into a fight with somebody, but I'm pretty calm. I could hold my own. It would be hard to get a gun onto the floor.

That event would come back to haunt me later on at the Chicago Mercantile Exchange.

[00:36:59] Anjay Nagpal: That's next time on Brokers, Bagmen, and Moles.

Before you go. If you or someone you know might have a hot tip or just a funny story related to our show, we have a hotline for you. Call us at (646) 820-1452.

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I'm your host, Anjay Nagpal. Our showrunner and senior producer is Danielle Elliot.

Our producer is Jenn Swan.

Our executive producers are Tim Hendricks, Kevin "Stretch" Huff, and Dennis Stratton. Original music, sound design, and editing by Gerard Bauer.

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Fact checking by Delilah Friedler.

Show art by Rebecca Hendin.

And from Entropy Media, our in-house executive producer is Josh Fjelstad. Our head of operations is Nuna Eboe. Our project manager is Sebastian Perry. Our associate producer is Heidi Roodvoets. Our development coordinator is Simona Kessler.

And I wanna send a very special thanks to Laurie Morse and David Griesing.