December 1, 2010

Forged Comment Letters Surface Ahead of CFTC Hearings

Boston-based public relations firm blames 'subcontractor'

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The U.S. Commodity Futures Trading Commission has referred forged comment letters it received on a proposed derivatives trading rule to the Justice Department, CFTC chairman Gary Gensler said today.

Bloomberg reports a Boston-based public relations firm, the Dewey Square Group, confirmed yesterday that it had been hired to send comment letters to regulators on behalf of a client it wouldn’t identify. The firm said it didn’t know that the letters were fraudulent and blamed a subcontractor, Little Rock, Arkansas- based Goggans Inc.

Nasdaq OMX Group Inc. was among the financial companies that lobbied Congress on the issue raised in the letters, ownership of derivatives clearinghouses, during the debate over the Dodd-Frank financial regulatory overhaul last year. Nasdaq’s chief spokesman said yesterday that the company would have no comment on whether it had hired Dewey Square.

Bloomberg reported Nov. 29 that forged comment letters purportedly from an H.J. Heinz Co. executive, a Burger King Co. franchise and at least five other Arkansas-based officials or businesses were sent to the CFTC.

“We have removed the identified letters from the comment files and have referred the matter to the Justice Department,” Gensler said in remarks prepared for a meeting of the commission today. “We are working to ensure the integrity of the process.”

The fraudulent letters to the CFTC were critical of banks for their “cartel-like control” of the $583 trillion swaps market. The letters were in response to a CFTC proposal to limit conflicts of interest in clearinghouses and trading platforms in the swaps market. Dewey Square said some letters also were sent to the Securities and Exchange Commission, which is considering similar rules.

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