In my previous post, I quoted from MF Global's crisis plan, a document called "Stress Scenario Analysis -- Downgrade Potential Impact on MF Global." Work on that document began in January 2011, although it apparently wasn't completed until around 18 days before the bankruptcy. MF Global worried that it wouldn't have enough cash and liquid assets of its own to meet calls for collateral (margin calls), among other things, in the event of a ratings downgrade.
"Reads Like a Fraud Play-Book"
The document poses a question:
How quickly do we want to send cash back to clients, what is the message if we do not send immediately... -- page 11
I'll get back to the answer to MF Global's question about the message later. To every finance professional I know that has read the entire document, this looks as if MF Global planned to misuse, i.e., to steal clients' money to see it through a period when it anticipated being short of its own funds. One financial professional, who has no economic interest in MF Global, asserted MF Global's crisis plan "read like a fraud play-book."
In the week prior to MF Global's bankruptcy, MF Global did not immediately return clients' funds and the money went to its creditors instead. Unfortunately for MF Global's clients, it collapsed into bankruptcy and never did return missing funds.
That's just one example of the grave issues posed by events throughout 2011 at MF Global. (See my previous posts.)
Investigations or Cover-ups?
The Trustees' handling the bankruptcy looks like theater of the absurd. They've withheld documents and information. In January 2012, The Wall Street Journal reported that the investigations (by trustees, justice, regulators and congress found $1.2 billion to $1.6 billion of customer money "'vaporized' as a result of chaotic trading." But Jill Sommers of the Commodities Futures Trading Commission, the CFTC, testified in December 2011 that it reviewed MF Global's transactions and knew where all the money went.
James Giddens, a Trustee, is trying to pass off MF Global's crime as the result of chaos (perhaps he meant "Kaos," the criminals in Get Smart) or sloppy bookkeeping, and no reasonable finance professional accepts that a firm can both escape prosecution under Sarbanes Oxley and claim this type of "sloppy bookkeeping" -- much less to the tune of a missing $1.2 billion to $1.6 billion.
Giddens claimed the computer systems and employees had trouble keeping up. I can assure Giddens that computers can more than keep up. As for what the employees were doing, note that "errors" did not result in a surfeit of cash being found in customers' accounts. Instead, an estimated $1.2 to $1.6 billion of customers' funds are missing, exactly the kind of outcome one would expect if MF Global's management had engaged in the kind of fraud apparently suggested in its crisis document.
James Giddens' excuses for MF Global sound to me like whitewash. If he genuinely believes he has put forward a reasonable explanation, then he appears to me to be incompetent. Yet his undisclosed fees will probably make your eyes pop out.
Rep. Grimm Calls for Independent Investigator
Jon Corzine, the former CEO of MF Global, is a former governor (D-NJ), a former U.S. senator (D-NJ) with a connection to the Senate Agriculture Committee Chairwoman that "investigated" him, a former CEO of Goldman Sachs with connections to a former colleague on the Fed board and the head of the CFTC, and is a top tier campaign contribution bundler for President Obama.
I've recently met with many Counsels General and a few Ambassadors from countries that are among our trading partners and allies. MF Global's stench is so offensive that they question the viability of our already compromised financial system. They've noted the lack of indictments in the wake of the September 2008 financial meltdown and massive ongoing bailouts. MF Global is another glaring example of our hypocrisy and cronyism and lack of will to restore rule of law to our financial system. The perception is that the needle has moved further in the wrong direction.
Rep. Michael Grimm (R-NY) is a member of the House Financial Services Committee, and he has reportedly circulated a letter in the House asking for an independent investigator and is seeking signatures and support. Obviously appearances are important, and the "investigation" into MF Global so far has every appearance of being broadly compromised. Given our ongoing financial crisis and bailouts, so far it's a shameful performance by Congress, Justice, regulators, and the bankruptcy trustees. The dialogue the financial community has heard so far lacks credibility and basic decency.
I promised I'd answer MF Global's question about "the message if we do not send [back clients' so-called segregated funds] immediately." Even to foreign diplomats the message is that you look like co-conspirators, albeit as yet unindicted.
Endnote: Jane Wollman Rusoff interviewed me for Research Magazine's May cover story, "Finding the Culprits of the Crisis," about the deep monetary connections of Wall Street and Washington and the corrosive effect it has had on the economy and the Republic.
It is absolutely disgraceful how our Justice Department has refused so far to hold Wall Street accountable for its crimes. Congress, with some noteable exceptions, has also rolled over for Wall Street.
Corzine is a stain that will not wash out-- on the Democratic Party and on the administration, who so far, is evidently beyond the scope of justice, as the money he kept unlawfully is beyond the power of regulators to produce and return.
( I have my own idea what the MF stands for ) bad "bets." If I did anything remotely close to this, I'd be in jail or out on bond. The accounting firms are responsible as well. Same goes for the Wall Street big wigs who pretended they were blind when the last round of shenanigans occurred. I'm tired of this stuff already.
The fact that Corzine was, and continues to be, a bundler for Obama speaks volumes.
"Jon Corzine, the former CEO of MF Global, is a former governor (D-NJ), a former U.S. senator (D-NJ) with a connection to the Senate Agriculture Committee Chairwoman that "investigated" him, a former CEO of Goldman Sachs with connections to a former colleague on the Fed board and the head of the CFTC, and is a top tier campaign contribution bundler for President Obama."
It appears that Obama is holding the door open for this fraud, It is disheartening to think that Corzine can ovbersee the theft of 1.6 billion in braod daylight and nothing is done where is Eric Holder and why isn't President Obam asking for Corzines head on a pike? The liberals stand by like a bunch of deaf blind mutes as this fraud has been perpetrated against the American people. I'm flabbergasted and now Gary Gensler, Corzines dupe a the CFTC is about to cede all regulatory power of the derivative morass to the lowest foreign powers. His claim that all of this activity will move off shore is the reason that the bill HR 2682 that allows derivatives to be held with no capital reserves and the current practice of stuffing our FDIC insured banks with the toxic mess.
Even more criminal is the way MF was allowed to go bankrupt which placed JP Morgan and other Creditors of MF global in first position forcing the segregated account holders to suck wind.
Sounds like it was Corzine's "friend" who is "investigating" this incident which has perpetrated a fraud of an investigation on the american people.