On Aug. 15 a story came out that angered many people following the MF Global saga, particularly futures market participants who are still out money that by law should have been protected in segregated accounts. Though it did not really surprise anyone, when the New York Times Deal Book web page reported, citing unnamed sources, that investigators had likely concluded its investigation into MF Global and its Chairman and CEO Jon Corzine and there likely would be no criminal charges filed against senior MF Global officials including Corzine, it did reignite their anger.
There were so many problems with the story that we hesitated to mention it, but it seemed important in that it appears to be following a trend. We have seen this before and need to ask why?
There have been several stories citing unnamed sources hinting that there would not be a criminal prosecution in the case. There is so much anger from the futures community over the MF Global debacle and lack of any sense of outrage or urgency from authorities, be it regulators or criminal investigators, that it is easy to suspect that officials within agencies charged with investigating corporate fraud were testing the waters to see what would be the repercussions if no charges were filed.
This assessment is being made while the trustee investigating the bankruptcy and charged with liquidating the MF Global Inc. estate and securing missing funds for former MF Global customers, James Giddens, is on the record that he believes there are valid claims of “breach of fiduciary duty and negligence” against top MF Global officials including Corzine.
What do those unnamed sources see or don’t see that is so different? Obviously, this case in complicated by Corzine’s political connections. So much so that stories like these appear to be a way to gauge just how much fallout there would be if no charges are brought. It is disappointing that a news organization would allow itself to be played this way. The story briefly anticipates the "frustration" a lack of prosecution will lead to and barely discusses the multiple conflicts that make it suspicious.
Then it appeared to double-down on the incredulous meter by speaking to folks “close to Corzine” about his plans for the future. “Mr. Corzine, in a bid to rebuild his image and engage his passion for trading, is weighing whether to start a hedge fund, according to people with knowledge of his plans,” notes the story.
That he is so blind — or believes that the rest of us including thousands of account holders still owed money by MF Global would simply let this fade away — not to assume that short of criminal charges he would face civil penalties that would prevent him from ever being in a position of trust with other people’s money is beyond the pale.
It borders on journalistic malpractice to float this out there as a reasonable expectation without broadly laying out the facts of the case. This together with the overall assertions of the story makes this doubly suspicious as it leads to the perception that Corzine will not only escape criminal prosecution, but that he will walk away from the episode free to pursue opportunities in the space as if nothing happened.
The story went on to point out, “Typically in white-collar cases, investigators start their interviews with lower-level employees and build up to the top executives of a firm. In July, when Federal authorities first approached Mr. Corzine’s lawyers, it was not clear whether he would agree to an interview.”
Agree to an interview! Who is calling the shots? What about a subpoena? And was it really July, a full eight months after MF Global declared bankruptcy, that Federal authorities first approached Corzine or his lawyers?
The story then agrees with its own dubious premise, by stating, “Even with the worst behind him, Mr. Corzine’s reputation has suffered lasting damage.”
Who says the worst is behind him? And what worst. He is off in the Hamptons and apparently hasn’t even faced questioning from authorities. And we are 10 months into this. The one lower level official — the only one — who apparently knows anything isn’t talking. Edith O’Brien is still waiting on an immunity deal. One that for some strange reason is not forth coming.
MF Global violated rules of customer segregation. Jon Corzine was not only the head of the firm but the person who directed the trading activity that caused its downfall.
Too many people have lost too much and an industry has suffered too much damage to its reputation for this to simply fade away, regardless of what is leaked by "people involved in the case."
James Koutoulas, co-founder of the Commodity Customer Coalition (CCC) knows this and is taking his case to individual states by asking the Attorney Generals of various states to take up the case.