Oh my: E-mail contradicts Corzine testimony about tapping MF Global customer funds as firm collapsed

posted at 7:12 pm on March 23, 2012 by Allahpundit

Remember, fully $1.2 billion of customer money was “vaporized,” possibly never to be recovered, as the firm scrambled to stay afloat last fall. The suspicion was that MF Global managers had dipped into customer accounts — which are supposed to be strictly segregated just in case, oh, say, the firm fails — to fund firm business, but there was no hard evidence that Corzine himself had ordered it. Lots of fall guys to choose from potentially, but nothing pointing directly at Joe Biden’s buddy Jon.

Until now:

Jon S. Corzine, MF Global Holding Ltd. (MFGLQ)’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. (JPM) accounts in London, according to an e-mail sent by a firm executive.

Edith O’Brien, a treasurer for the firm, said in an e-mail sent the afternoon of Oct. 28, three days before the company collapsed, that the transfer of the funds was “Per JC’s direct instructions,” according to a copy of a memo drafted by congressional investigators and obtained by Bloomberg News…

“Over the course of that week, MF Global (MFGLQ)’s financial position deteriorated, but the firm represented to its regulators and self-regulatory organizations that its customers’ segregated funds were safe,” said the memo, written by Financial Services Committee staff and sent to lawmakers.

Vinay Mahajan, global treasurer of MF Global Holdings, wrote an e-mail on Oct. 28 that said JPMorgan was “holding up vital business in the U.S. as a result” of the overdrawn account, which had to be “fully funded ASAP,” according to the memo.

Watch the highlight reel of his House testimony below. Lots of gaps in his memory, but even so, he was pretty sure at the time that he never ordered anyone to tap customer funds. In fact, he told both a House and a Senate panel that and insisted that he “simply doesn’t know” where the money went. If they don’t throw a perjury charge at him for this, it’s only because he has so many friends left over in Congress from his days as a Senator. Exit question for prosecutors and securities litigators: What other charges is he facing here, conceivably? Fraud and breach of fiduciary duty. What else?


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Sadly, like so many crooks, nothing will ever come of this. I know, my cup is half empty. This is what politics has taught me.

scalleywag on March 23, 2012 at 9:40 PM

There’s nothing worse than people on the left trying to blame Bush and on the right trying to blame the ‘government’ in general with a paucity of real facts. The crisis has been thoroughly documented by Too Big To Fail and other insider accounts. It’s not a state secret. But people are too lazy to read.

bayam on March 23, 2012 at 9:19 PM

Well, take it up with Obama and the MSM to start. The fact is that both the government and the bankers are to blame. Without the other, neither would have been able to cause the amount of damage that they did. Sadly, the same exact people that created the problems are the ones “fixing” them.

Seriously, Barney Frank and Chris Dodd are going to be the rescuers of the financial industry? Really?

That’s like would be like putting Ken Lay or Bernie Madoff in charge of the SEC and making Tony Hayward the administrator of the EPA.

Resist We Much on March 23, 2012 at 9:41 PM

No, not breach of fiduciary duty. He had no fiduciary relationship with the holders of the securities.

There’s actually not that much he can be charged with. All he did, essentially, was prefer one creditor or one set of creditors over others. That’s not illegal. At best, a bankruptcy trustee can avoid the transfers and bring the funds back into MF Global for distribution to all creditors. But that’s done in all bankruptcies.

No crime here, folks. Seriously. Other than perjury. I don’t why he lied. He’s dumb.

JoeShmoe99 on March 23, 2012 at 9:52 PM

JoeShmoe99 on March 23, 2012 at 9:52 PM

Real lawyer, or do you just play one online?

strictnein on March 23, 2012 at 10:10 PM

strictnein on March 23, 2012 at 10:10 PM

lol, no, real lawyer.

JoeShmoe99 on March 23, 2012 at 10:17 PM

We had a meeting with the patent lawyers at my company and they told us in no uncertain terms: Good news by email. Bad news by phone.

Dandapani on March 23, 2012 at 10:22 PM

Wasn’t the O administration floating the idea that Corzine would replace Geithner when the latter left as head of Treasury?

onlineanalyst on March 23, 2012 at 10:25 PM

No crime here, folks. Seriously. Other than perjury. I don’t why he lied. He’s dumb.

JoeShmoe99 on March 23, 2012 at 9:52 PM

Seriously? He converted funds that were deposited for investment and used them to pay company expenses, and that’s not theft? Then why is Bernie Madoff in jail?

Jaibones on March 23, 2012 at 10:41 PM

Move along folks.

newportmike on March 23, 2012 at 10:47 PM

If I ever saw a reason to drag this POS into a back room with a single drain in the checkered floor….like in the old USSR where justice was sure and swift.

This scum bag.. this thief…..this crook…makes Tony Soprano look like a GD Girl Scout cookie thief.

At least Tony….earned his “vig”…this bearded scumbag whore…..this maniac….still is allowed to…..lie? And lie to his thieving whore ‘former” congressional…whores?

Twana on March 23, 2012 at 11:04 PM

Let’s not forget, good ol’, simple, basic theft.

seanrobins on March 23, 2012 at 11:26 PM

You can’t use segregated investor deposits to pay off other debts. That’s why they are segregated, to prevent this exact scenario and protect the investor from fraud…

Illegal.

JoeShmoe my ass.

RockyJ. on March 23, 2012 at 11:34 PM

lol, no, real lawyer.

JoeShmoe99 on March 23, 2012 at 10:17 PM

One of those “empathy” sorts of lawyers, I see. You legal analysis is beyond laughable.

ThePrimordialOrderedPair on March 23, 2012 at 11:41 PM

Seriously? He converted funds that were deposited for investment and used them to pay company expenses, and that’s not theft? Then why is Bernie Madoff in jail?

Jaibones on March 23, 2012 at 10:41 PM

Because Bernie Madoff defrauded liberals. Corzine, OTOH, just redistributed funds from a bunch of toothless flyover country teabaggers for the benefit of the people, so it’s all good.

Isn’t just about it, leftists?

Gator Country on March 23, 2012 at 11:44 PM

Corzine will skate.

MF Global will be resurrected as FOAD Global.

CorporatePiggy on March 24, 2012 at 1:45 AM

OK. The memo is not a “smoking gun.” It is, however, a very strong element of a circumstantial case that indicates Jon Corzine assisted in the “vaporization” of segregated customer funds. Those funds were not the property of MF Global or Jon Corzine and should not have been used to meet a margin call.

Corzine panicked when the margin call came in.

Guilty of a crime. Simple as that.

BigAlSouth on March 24, 2012 at 6:24 AM

Does not matter if he has “left over friends in Congress or not” he is responsible for crimes here, including perjury, so lets get on with Grand Jury, charges, trial, and prison and fines. You just cannot protect former elected officials anymore. Glad it wasn’t any of my money, as I would be mad as hell, and am sure the folks who lost money are more than mad.

Amazingoly on March 24, 2012 at 8:10 AM

Corzine is a big dem and supposedly is a financial genius like Turbo Tax Tim, so why has he always been such a miserable failure? He should have stayed in the senate and looked like he was working.

Kissmygrits on March 24, 2012 at 9:45 AM

It seems to me that much of the blame for this transfer (“theft”) of customer funds can be put on Gary Gensler of the CFTC. This “regulator” conveniently left a loophole in place:

It’s known as Rule 1.25 and until the agency modified it after the MF Global scandal broke, it allowed brokerages to invest customer money in debt of foreign nations, the kind of bet that Corzine made.

A year ago, the CFTC thought about eliminating that loophole. It’s a great irony of the Washington insider game that Corzine and MF Global went on record as asking that the loophole be maintained in the name of padding profits.

Another irony: CME Group (CME), the exchange operator whose own behavior in this episode is under scrutiny, expressed the same view. It’s a profit-making company that has auditing responsibility for its customers, and MF Global was among its biggest.

http://www.suntimes.com/business/9488246-420/corzines-best-defense-is-an-offensive-rule.html

http://www.advisorone.com/2011/12/06/senators-bash-cftcs-gensler-over-mf-global-collaps

It seems to have been another big rich-cronies-are-us love fest. Clearly, if you’re in the right crowd then what the sucker customer doesn’t know might make your gambles pay off, and you don’t have to share any of the payoff if it does. Obama, if he were not so much into crony corruption, would have done a lot of firing by now.

BTW doesn’t that oversize “The Honorable Jon S Corzine” sign make you sick?

Chessplayer on March 24, 2012 at 10:26 AM

Because Bernie Madoff defrauded liberals. Corzine, OTOH, just redistributed funds from a bunch of toothless flyover country teabaggers for the benefit of the people, so it’s all good.

Isn’t just about it, leftists?

Gator Country on March 23, 2012 at 11:44 PM

AND, the DONORS, let’s not forget the donors.

askwhatif on March 24, 2012 at 11:07 AM

Corzine panicked when the margin call came in.

Guilty of a crime. Simple as that.

BigAlSouth on March 24, 2012 at 6:24 AM

I’m sure ole Jon still received his salary plus a year-end bonus.
But NO RESPONSIBILITY? NO ACCOUNTING for those actions?
If it were murder, would you use the panic defense?

askwhatif on March 24, 2012 at 11:12 AM

Exit answer: Being a high profile, mega-bucks bundler for the Obama campaign.

Ah, true. But the way this clown did it might possibly be illegal.

locomotivebreath1901 on March 24, 2012 at 11:38 AM

Hang em high.

banzaibob on March 24, 2012 at 11:40 AM

No, not breach of fiduciary duty. He had no fiduciary relationship with the holders of the securities.

JoeShmoe99 on March 23, 2012 at 9:52 PM

Okay then, counselor, please explain this from the article:

Client money is required by law to be held separately from a brokerage firm’s cash to protect investors in case a firm fails. If MF Global misused client money, it would violate a fundamental investor protection for people who trade options and futures.

Rod on March 24, 2012 at 5:18 PM

JoeShmoe99 on March 23, 2012 at 9:52 PM

Okay then, counselor, please explain this from the article:

Client money is required by law to be held separately from a brokerage firm’s cash to protect investors in case a firm fails. If MF Global misused client money, it would violate a fundamental investor protection for people who trade options and futures.

Rod on March 24, 2012 at 5:18 PM

Never mind. I see where

Chessplayer on March 24, 2012 at 10:26 AM

covers his use of client funds under “rule 1.25″.

Rod on March 24, 2012 at 5:21 PM

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