Is DOJ running out the clock on MF Global investigation?

Who says Corzine won't go to jail?

The MF Global bankruptcy not only gave a black eye to the futures industry, it shattered the claim that futures customers have never lost money due to the failure of a broker -- a claim that withstood the Lehman Brothers failure -- which distinguished it in American financial circles.

That claim came crashing down. For some customers and industry participants, there was only one thing that would satisfy them, even beyond getting their money back: seeing former MF Global Chairman and CEO Jon Corzine behind bars. (A perusal of MF Global blogs and forums quickly confirms this sentiment.) Corzine placed the sovereign debt trades that put the firm in trouble and as head of the firm was responsible for it following rules on segregation.

But the case was different from the beginning. Regulators responsible for ensuring brokers followed the rules appeared to be caught off guard and lacked a sense of urgency. So when another story came out today -- citing unnamed sources -- claiming that “people involved in the case” say Federal prosecutors do not expect to file criminal charges against the former New Jersey governor, MF Global victims were angry but not surprised.

“After following all the details in this case since day one, I am no longer surprised or shocked by the failure of regulators and the [Department of Justice] to hold anyone accountable for the multiple criminal acts that occurred at MF Global,” says Stanley Haar, a former MF Global customer. “It should be clear to any objective observer, of whatever political persuasion, that this case is all about cronyism and political corruption, not justice. If customer segregated custodial accounts can be looted with impunity, how can anyone have faith in the safety of our financial system?”

Trace Schmeltz, partner with Barnes & Thornburg, who is also representing the Commodity Customer Coalition (CCC), adds: “In a firm like MF Global where story after story suggests that there was not a proper tone at the top, that Corzine shouted down compliance and risk management officers, had people replaced because they didn’t share his view of proper risk management, to suggest that a failure of risk management absolves a CEO and other top executives of responsibility is irresponsible.”

The MF Global debacle from the start has been one where the victims have had to stand up and demand action because they didn’t believe there was anyone looking out for their interests. An ad-hoc coalition of former customers -- the CCC -- was created to hold the bankruptcy trustees and regulators’ feet to the fire. It is clear that without the CCC, the initial distribution of customer funds would have been much slower.

Next page: Disappointing revelations

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