We noted last November:
Things have become so lawless in America that one investor wrote – in response to the theft of over a billion dollars of client funds by MF Global:
I will never do business in the United States of America again. The system to protect futures accounts is broken. And the whole world knows knows it.
(He’s not the only one).
Today, Bloomberg reported that MF Global CEO Jon Corzine personally instructed that $200 million dollars in customers funds be raided:
Lisa Du notes:
This bombshell may have huge implications for Corzine. Remember that a sacred rule in brokerages is that customer funds must be strictly segregated from the firm’s money. Breaking such a rule on purpose could mean criminal charges. Before MF Global fell, Corzine was a prominent figure in finance and politics, serving as CEO of Goldman Sachs in the ’90s and a Democratic senator and governor of New Jersey after that.
Yves Smith writes:
The transfer occurred on October 28, when the firm had an overdrawn London account with JP Morgan and JP Morgan was holding up business in the US as a result. It isn’t hard to imagine the firm would have failed that day as opposed to on the 31st, and with lower customer losses, had the pilfering of the account not taken place.
This was also the same transfer in which JP Morgan asked for written assurance that the funds were not coming from customer holdings. The assistant treasurer, Edith O’Brien (who was also the author of the e-mail saying that she had the approval of Corzine for the action) never provided the requested confirmation.
Note that this e-mail contradicts Congressional testimony by Corzine:
Corzine testified that he never intended a misuse of customer funds at MF Global, and that he doesn’t know where client funds went.
“I did not instruct anyone to lend customer funds to anyone,” Corzine told lawmakers in December.
It isn’t hard to anticipate that Corzine will deny the O’Brien e-mail, but with the CFO on holiday during the meltdown and O’Brien an assistant treasurer, it seems entirely credible that she’s seek senior level approval for an action like this. And we have this tidbit:
The memo’s account of the e-mail exchanges aligns with what Terrence Duffy, the executive chairman at CME Group Inc. (CME), told lawmakers during a December congressional hearing. Auditors at CME, which had authority to oversee MF Global, learned from an employee of the brokerage that Corzine knew about the loans involving a European affiliate, Duffy told committee members.
Put it another way: if there isn’t some serious action after this revelation, between this and Obama’s Make America Safe for Bucket Shops Act, investors can no longer regard themselves as having adequate protection from broker chicanery.
Of course, just like the other fatcats, MF Global wants to hand out bonuses – even after going belly up and stealing customer money.
Professor of law and economics – and senior S & L prosecutor – Bill Black says of the MF Global fraud:
All that doeth evil hateth the light.