Grimm reaper

May 15, 2012 07:22 AM

New York Republican Congressman Michael Grimm finally delivered his well-publicized letter calling on Attorney General Eric Holder to appoint an independent counsel in the MF Global investigation to the AG’s office. Grimm managed to get 64 of his fellow Republican member of Congress to sign it.

It may have held more weight if he was able to secure some Democratic signatures, something the Commodity Customer Coalition was working hard--to no avail -- to secure. The language in the letter and in yesterday’s press release announcing the delivery of the letter may have made it difficult to get bipartisan support, which is too bad because the extremely poor way in which the situation has been handled should be beyond politics.

While it is always hard to separate politics out in such cases—and the connection of Jon Corzine to the current administration and high level regulators within it cannot and should not be ignored—it may have been better to focus on some pertinent facts of this case instead of bringing up Solyndra and Fast and Furious and generally trying to claim it is part of a larger ethical problem. The facts that need to be focused on is the unusual and thoroughly bungled way this process started and the apparent lack of urgency by the numerous agencies investigating this collapse.

The CCC brings up an important fact in its objection to MF Global Holding's (MFGH) most recent application for an extension of its Statement of Financial Affairs. If granted, this would be the sixth extension delaying the reporting of basic fundamental documents by 217 days according to the CCC objection.

The CCC and others had previously raised questions regarding the trustee for MF Global Inc.’s relationship with JP Morgan. His firm had done extensive work for a firm mired in the middle of this mess. MFGI Trustee James Giddens reportedly is working with JP Morgan on returning customer money that ended up at the bank. It hasn’t happened yet more than six months after the filing.

The MFGH trustee Louis Freeh is hiring a boatload of lawyers as well as his own consulting firm and most are charging close to $1,000 per hour. MF Global filed for bankruptcy on Oct. 31, customers have not been made whole and the person in charge of the firm is spending a lot of money with no apparent sense of urgency in completing or even documenting his work. And there are two trustees piling up costs. That alone needs to be investigated. How a firm operating basically as a futures broker could be split apart with the brokerage arm having a hole in what is supposed to be safely segregated funds and the other side allowed to continue on managing assets in a Chapter 11 restructuring makes no sense. And you have two trustees competing for resources and not sharing all information while a criminal investigation is going on. These are the arguments that need to be made and the reason the status quo shouldn’t stand. By touching on partisan talking points Grimm weakens his cause and probably loses half his audience.

Perhaps making it a partisan issue will capture popular cable media attention and put more eyes on the injustice that continues in this case but it shouldn’t have to be that way. The Department of Justice is on the clock.

About the Author

Editor-in-Chief of Modern Trader, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board of Trade and Chicago Mercantile Exchange.