MF Global CEO Jon Corzine Personally Ordered Illegal Raiding of Customer Funds

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).

Indeed, countries have lost so much faith in the trustworthiness of the American financial system that they are demanding their gold back. See this and this.

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.

And – surprise, surprise – the government apparently tried to help MF Global cover it up.

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.

 

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  • jo6pac

    We all know NO One Will Go To Jail because this is really no different than what everyone on ws has done and they are still free. Then this election yr so they’ll be noise fron doj then it will go quiet. Then in less he becomes the ? lamb, not going to happen he’s a club memeber. It’s just more of that hopey changey thing with we never look back for crimes in the past. The New Amerika.
    Thanks for your time and work.

  • DocP

    Early on in this scandal, some blog (I wish I had bookmarked it) published information about the various legal statutes that pertain to this mess. One was that it is illegal to dip into customer accounts that are held in the US, but perfectly legal to take funds from accounts that customers have allowed (probably unknowingly) to be held in other countries, e.g., the UK. So, you see, “no crime was committed.” I recall that many of the legal provisions that decriminalized many immoral, unethical, and at one time illegal activities are buried in the good old Bankruptcy Reform act of the early 2000’s. That’s why nobody goes to jail.

    I’m surprised that anyone does business with any institution associated with the US. There no longer is a “rule of law.”

    I, too, thank Washington’s Blog for the excellent work it does.

    • Fabian

      You’re right it’s called re hypothequization (sorry for the spelling). In the docs signed by US clients there is a waiver somewhere that allows the broker to transfer their funds to any jurisdiction and such funds were transferred to the London branch where segregation is not mandatory.

  • Dick A

    Come on! It’s just a little over a billion, just a drop in the bucket compared to what the big banks steal.

  • gozounlimited

    Exactly …. This sucker stole from his clients and bold faced lied to Congress and is still enjoying the pig life. But then so is Blankfein …. another protected criminal who did the exactly the same thing, and continues to do so with our corporate/governments blessings! And then here comes BATS Global Markets shutting down their IPO (weather derivatives). Maybe investors out there need to know about our broken market and how it’s rigged with fraud to steal your money. Geesh …. you would think people are smarter …. would have figured it out by know … financial rape must get some people off!

  • Ira Cotton

    The article I read cited an email that SOMEONE ELSE sent, claiming that Corzine authorized the transfer. If true, this is hearsay and not a smoking gun. I don’t care for Corzine and believe he acted recklessly and that as CEO had the responsibility to ensure the proper financial controls were in place, but I would like to see the full truth reported.

  • http://roycobden.blogspot.com Disgusted up north

    “…when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you—when you see corruption being rewarded and honesty becoming a self-sacrifice—you may know that your society is doomed.”

    – Atlas Shrugged.

  • ed

    What else would you expect from someone who goes 90mph without seat belts. No regard for risk or respect for the law

  • Kevin Beck

    After that scumbag Corzine is convicted (which he should be), make his new home UNDER the jail.

  • craig

    Wall Street knows Obama is a paid off sissy and they are walking all over his administration. They believe the US ship is going down and they are stealing as much as they can.

  • sekema

    I heard that SOB is getting away with this because he is a former partner with our current DOJ head. This is disgusting. He belongs in jail and his assets confiscated.

 

 

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