As most traders know, brokers have to tape phone calls. So perhaps the most interesting aspect of the Commodity Futures Trading Commission’s (CFTC) enforcement action against Jon Corzine, Edith O’Brien and MF Global are the internal phone calls and e-mails between staff when the firm was going down. On June 27, Corzine was charged by the CFTC that MF Global unlawfully used nearly one billion dollars of customer segregated funds to support its own proprietary operations and the operations of its affiliates…. Corzine bears responsibility for MF Global’s unlawful acts. He held and exercised direct or indirect control over MF Global and Holdings and either did not act in good faith or knowingly induced these violations, the CFTC stated in its complaint. Likewise, Edith O’Brien, assistant treasurer of MF Global and head of liquidity management, approved and/or caused numerous illegal transfers of customer segregated funds to the Firm’s proprietary accounts, and otherwise aided and abetted MF Global’s customer segregated fund liquidity.
The CFTC complaint is against MF Global Inc., MF Global Holdings, Jon Corzine and Edith O’Brien. MF Global receivers have signed off on the settlement and now it’s up to the U.S. bankruptcy court to approve.
After the complaint was announced, word spread through a New York Post story quoting an anonymous source that the Department of Justice(DOJ) had dropped any criminal investigations against Corzine, although the DOJ’s only on-the-record comment was “no comment.” One source told us that historically government agencies will wait to press civil charges until after any DOJ criminal actions; in this case that didn’t happen, inferring but not confirming criminal charges won’t be filed. But this isn’t always true, especially when customer funds are on hold, noted one attorney. On another front, Rep. Michael Grimm (R-NY) is calling on the DOJ for criminal charges against Corzine, citing that based on the taped calls by Corzine, he perjured himself during congressional hearings. Update: on Aug. 1, a letter from several Republican lawmakers was sent to the DOJ requesting an investigation of Corzine, comments he was taped as saying and his testimony in front of Congress.