http://www.ctcn.com/issue15.htm Special Treatment of Hilary So She MadeMoney - Reprint with permission USA Today Hillary Rodham Clinton had some special treatment while winning a small fortune in commodities, a four-week study by USA TODAY found. Hillary Clinton's brief but spectacularly successful career as a commodities trader in the late 1970's looks more and more like a story out of the Wild West. Like most Western yarns, it's filled with colorful characters, money, greed and shady dealings just this side of the law - and maybe a few steps beyond. At an extraordinary news conference, the first lady told her version of the story: "The fundamental facts are...I opened an account with my own money, I took the risk, I was the one who made the decision to stop trading." She denied knowledge of trading abuses by her personal broker, Robert "Red" Bone, or her brokerage firm, Refco Inc. And she denied receiving preferential treatment from Refco's Springdale, Ark., office. "There's really no evidence of that," she said. But court documents, regulatory rulings and other records reviewed by USA TODAY, and interviews with brokers and customers in the Springdale, Ark., office where Hillary traded, continue to raise questions - which she did not answer - about what she knew about Refco's trading activities, and when. USA TODAY submitted a list of detailed questions to Clinton. In her news conference, Clinton and her staff answered those questions but did not address all the details. Hillary says she knew nothing about any trading abuses in the Springdale office until months after she stopped trading with Refco. But records show many other Springdale clients, including her own investment advisor, longtime friend James Blair, knew about those questionable practices - and hoped to profit from them. Court records and her trading statements also show Clinton repeatedly received preferential treatment from Bone in posting margin. Those favors enabled her to avoid large losses in July 1979. By now, the main points of the story are well know. Between 10-78 and 7-79, Clinton made almost $100,000 trading cattle and other futures with Refco. Her timing was perfect. In late 1978, the cattle market embarked on a wild ride, as prices first soared and then plunged. Many Springdale traders, including Bone, a some-time professional gambler, made and lost - small fortunes. For the most part, Clinton correctly called each turn. She was aggressive, even reckless, sometimes opening and closing trades in a single day. But in July 1979, she abruptly stopped trading with Refco. It was a stroke of apparent luck. In early October cattle prices collapsed. Springdale traders lost nearly $20 million. The Blair family lost $5.4 million, records show. A number of traders, including Blair, filed suit against Refco and its chairman, Thomas Dittmer, charging they manipulated cattle prices in the summer and fall of 1979, causing the October losses. Blair and Refco settled out of court. Records of the case were sealed. Arkansas juries ruled for the traders in several cases filed in federal court. Those judgements were later overturned on appeal. Clinton closed her Refco account in 10-79. She says now she was too rattled by commodities trading. But at roughly the same time, she opened an account with Stephens Inc., a Little Rock brokerage. Trading a variety of commodities, but not cattle, she made $6,498. She failed to pay taxes on those earnings until recently, when she paid $14,615 in federal and state taxes and penalties. In May of 1980, she left the commodities markets. Clinton credits Blair for much of her success. "I trusted Jim Blair and it worked for me," she said. At the time, Blair was the main outside lawyer for Tyson Foods, one of Arkansas's biggest firms. He is now Tyson's general counsel. He is also a long-time activist in the Democratic party, and a donor to Democratic candidates, including Bill Clinton. Blair's role has proven sensitive. While Clinton was trading with Refco, her husband was state attorney general, then governor. During Bill Clinton's time as governor, Tyson Foods received at least $7 million in state tax credits. Records from the Springdale office also show that in 1978 and 1979, Tyson was one of the office's biggest customers, trading through three corporate accounts. In 1977, Bone, a former Tyson executive, was barred from trading for a year by the Commodity Futures Trading Commission after a probe of manipulation in the egg futures market. Similar penalties were levied against Tyson Foods and its chairman, Don Tyson. Hillary disclaimed close ties to Tyson. White House officials say she was not aware Tyson was a customer in the Springdale office. Tyson officials deny receiving any special favors from Bill Clinton. Numerous efforts to reach Bone were unsuccessful. In interviews with The New York Times and The Wall Street Journal, Bone has denied any wrongdoing. But court documents contain extensive testimony from Bone and other figures. Some specific allegations in those records: Price manipulation. In 1983, Blair testified he believed Refco and Dittmer were manipulating cattle prices during the time he advised Clinton. He said Refco brokers and customers, trading together, "helped" move cattle prices, in part by controlling delivery of live cattle to market. "They wanted to see the market go up or see it go down. There wasn't any money to be made if it didn't move," Blair said. During that time, Refco and its customers accounted for up to 40% of all cattle contracts traded on the Chicago Mercantile Exchange. Dittmer had sizable ownership stakes in cattle feed lots in Texas and Kansas. Refco and Dittmer have denied any manipulation. But they, along with Bone, were disciplined in 1979 by the exchange for repeatedly violating exchange rules and reporting requirements while trading cattle in 1978 and 1979. The exchange levied a $250,000 fine against Refco, then the largest penalty ever imposed on a broker. Bone agreed to a three-year suspension of his right to trade on the exchange. Trade allocation. Court evidence shows Bone and other Springdale brokers routinely placed trades in Refco house accounts, then distributed them to specific customers. Brokers and customers, including Blair, said trades often weren't allocated until after the mercantile exchange closed for the day. That's a key point. Testimony shows Springdale brokers often executed large "day" trades, a purchase and sale the same day. By waiting until after the market closed, they would be able to tell which trades were winners and losers - before allocating them to customers. For that reason, block trading is closely watched by regulators. Holding trades until the end of the day is, and was, forbidden. Blair now denies favoritism by the Springdale brokers. But David Jeffrey, a dentist who traded in Springdale during the same time as Clinton, raised the issue in a suit against Refco, and in a complaint he filed with the exchange against Dittmer, Bone and Jack Musteen, a Springdale broker. "After the trading sessions...orders were allocated to various accounts," Jeffrey charged. "In this way, defendants were able to illegally control the profit and loss characteristics of each account." In 1983, the exchange ordered to Refco, Bone and Musteen to repay the $27,000 Jeffrey claimed he lost as a result of their actions. His lawsuit was dismissed in 1986. Backdated trades. Two Springdale brokers, Bill McCurdy and Steven Johns, testified they participated in a cover-up of block trading in the Springdale office on a particular day in the summer of 1979. The pair were testifying as friendly witnesses for one of the investors who claimed he was defrauded by Refco. The brokers claimed they were told to lock the office doors after the market closed, set back the clocks used to time stamp trader orders, and prepare phony customer order slips that could be substituted for the block orders actually placed during the day. According to Johns' testimony, the date in question was June 27, 1979 - the day Clinton opened a trade that eventually would earn her $43,760 - her single most profitable commodities trade. It is also one of three days for which the White House says it can't locate Clinton's daily trading statements. Johns and McCurdy refuse to discuss the incident. In their testimony, the two did not specifically claim winning or losing trades were back-allocated to specific customers. Margin Waivers. Court testimony shows Bone frequently waived margin calls for certain customers - in effect, loaning them money to maintain their accounts. Clinton's records show she was repeatedly allowed to avoid posting margin, including on her June 27 trade. That shortfall peaked July 12, when her account showed a $61,000 loss. Under Refco's rules, she should have been required to add $92,364 to avoid having her account liquidated. Records show no deposit. By waiving Clinton's margin call, Bone made it possible for her to wait until the market turned back in her favor. Ultimately, she made a profit of $24,631 on her trades. Violations of account agreements. At her news conference, Clinton denied Bone could have allocated trades to her, because her account was non-discretionary, Federal and exchange rules require brokers to get customer approval before trading in non-discretionary accounts. But numerous customers and brokers testified that Bone ignored restrictions on non-discretionary accounts. Blair said Bone often placed trades in his non-discretionary account without permission.