“Nothing good can come of this headline,” I said to my husband and a house guest on Sunday night, Oct. 16, 2011. I was perusing my iPad from the comfort of my living room couch to get caught up on weekend news when “MF Global Told to Boost Capital” was posted to the online version of The Wall Street Journal.
Unfortunately, I was right. Two weeks later, the company I worked for was bankrupt. Within a month, I was unemployed, with no severance, no unused vacation pay and a monthly health insurance bill bigger than my mortgage.
The speed with which events unfolded wasn’t surprising, though. I’d already been through one bankruptcy—Refco in October 2005—where it took just a single week to go from news headline to bankruptcy. This time around, I took comfort in believing that my “been there, done that” experience would repeat. I expected that MF Global’s FCM business would be acquired and moved seamlessly to another firm, with customer positions and segregated funds intact. We’d all still have jobs. Just a new owner and a new name on the door.
In the meantime, those of us on the former Lind-Waldock staff in Chicago who had been through Refco completely skipped the “deer in the headlights” phase and went into triage mode, knowing that we needed to: (1) Have good, complete, consistent answers to the hard questions that clients on the phone were asking of brokers and sales representatives; (2) Use all the online tools at our disposal—email, website and trading platform messaging—to communicate with clients about the latest developments; (3) Halt advertising while MF Global was the top story each news cycle; and (4) Keep the lines of communication open between senior management and employees.
Refco had gotten an “F” for each of those efforts six years earlier. And, although MF Global did do better, it didn’t earn much more than a C- or D+. Clients and employees largely got most of their information about what was happening to MF Global from CNBC, online news sources and the social media rumor mill.
To his credit, CEO Jon Corzine did hold a global, company-wide conference call on the morning of Tuesday, October 25. But, it probably did more harm than good. We expected the normally dynamic and open leader to explain in detail what had occurred over the previous week and the European debt trading position that had precipitated it all. We expected him to tell us how the firm was working to shore up its capital in the face of increased regulatory requirements and “buy the rumor, sell the fact” behavior by clients that had depleted client assets over the last six days. We expected to hear him say that he was so confident in MF Global’s future that he was personally buying millions of shares of stock at the currently depressed price near $2 per share.
Instead, we heard an anemic pep talk and a reminder that “the sun will come out tomorrow.” People hung up the phone and sang the song from the Broadway musical “Annie” while they began polishing their resumes and putting personal items on their desks into their bags to take home that night.
The Marketing and Communications team, headquartered in New York and of which I was a part, did its best to disseminate useful information to clients and those on the front line with clients. But, there was too much “incoming”—both externally and internally—for our already understaffed team to keep up effectively. By the time something was written, prepared and cleared by legal and compliance (because we were a public company with certain regulatory obligations), the information often had changed.
Instead, word-of-mouth became the norm—particularly on the morning of October 31, when CME Group cut off online trading access to MF Global clients without warning. We got first whiff of the news from clients whose trades wouldn’t go through and called screaming “WTF!” I am in awe of the brokers and sales reps who all stayed at their desks and kept picking up the phone whenever it rang, trying to answer questions as best they could.
MF Global filed for bankruptcy within the hour. Worse yet the filing was precipitated by a report that there was a shortfall in customer segregated funds, which not only killed a reported sale to Interactive Brokers but reduced the likelihood of an orderly transfer of business. Yet, the Refco experience kept our spirits up. We still expected that there would be a buyer of our valuable retail futures business. Despite the reported shortfall in customer funds bringing the company's sale to a screeching middle-of-the-night halt, those of us at “Lind” held out hope that the retail futures business could still survive intact. Indeed, R.J. O’Brien quickly stepped to the fore and tried to acquire the Lind-Waldock brand (which had been retired on August 1, 2012 in a massive rebranding effort) and the retail futures business from the trustee.
Those of us on the 14th floor of the CBOT annex filed into the conference room to pick up personalized packets that contained employee application forms and instructions on getting pre-hire drug tests. We expected to become RJO employees shortly after the accounts moved on the first weekend in November.
But, the trustee wouldn’t play ball. Although many from the “Lind” team worked throughout the weekend of November 5-6 when most of the retail futures accounts were transferred to RJO, the grand plan to bring back the Lind-Waldock brand with all of its supporting employees intact fell through when RJO couldn’t acquire the brand assets from the estate. We went from taking drug tests on November 8 to unemployed on November 11, with 30 minutes to get out of the building under the scrutiny of a half-dozen security guards posted at the front door.
It was fast, just like Refco. It was sudden, just like Refco. But, just like the markets, the story wasn’t exactly the same. No matter how much we expect history to repeat itself.
Susan Abbott Gidel was Lind-Waldock’s Director of Marketing for more than 10 years, and had been promoted to Vice President of Retail Marketing at MF Global concurrent with Lind’s rebranding in August 2012.