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“The People v Jon Corzine et al”

Posted by Larry Doyle on March 26, 2012 8:40 AM |

If you were away over the weekend, as I was, or somehow missed the news late Friday afternoon, you may awake this morning unaware that the smoking gun in the fiasco known as MF Global may have been unearthed and now points directly back at one Mr. Jon Corzine.

How is it that neither The Wall Street Journal nor the Financial Times are prominently highlighting ongoing developments in this story in their morning newspapers? You don’t think our news flow is ‘managed’? What a joke, but that is another story for another time. Thank you to Bloomberg for keeping us current in what I believe should be the the eventual case of “The People v Jon Corzine et al.”

While Corzine may look for and receive cover from friends in Washington and on Wall Street, friends of Sense on Cents know the power of truth and transparency provide the greatest disinfectant against the stench of financial chicanery, aka misappropriating customer funds. Mr. Corzine himself may need a little extra personal disinfectant as he is likely sweating a little harder this morning. Why is that? Bloomberg reports late last evening that MF Global’s Corzine May Be Liable if Customer Risk Known:

Jon S. Corzine, MF Global Holding Ltd.’s former chief executive officer, may face potential legal liability if investigators show he knew customer money might be used when he ordered $200 million transferred to a U.K. account as his brokerage neared collapse, former prosecutors said.

The ex-Goldman Sachs Group Inc. (GS) co-chairman gave “direct instructions” to move money from a U.S. account to meet an overdraft with JPMorgan Chase & Co. (JPM) just days before MF Global’s bankruptcy, according to a memo by congressional investigators. Such accounts may have contained assets belonging to both customers and MF Global.

“It’s not whether he specified,” John Moscow, a former chief prosecutor in the office of Manhattan District Attorney Robert Morgenthau, said yesterday in an interview. “The economics of the situation were he was out of money. The bottom line is, he was taking a risk with somebody else’s money.”

In a casino, said Moscow, now with Baker Hostetler LLP in New York, “if I put your money on the table, I’ve committed larceny as soon as I expose it to risk.”

Edith O’Brien, a treasurer for New York-based MF Global, said in an e-mail quoted in the Congressional memo that the $200 million transfer was “Per JC’s direct instructions,” according to a copy of the memo obtained by Bloomberg News.

Michael Clark, a former federal prosecutor who has handled financial fraud cases, said the government may be able to show “that Corzine and the staffers knew at that time the request was made that it necessarily meant they’d have to pull funds without authorization from other customer accounts.”

Clark, now with the law firm Duane Morris LLP in Houston, said the actions of Corzine’s employees may make him vulnerable to litigation.

“The law recognizes that a principal can be liable for the actions of his agents under such circumstances,” he said.

Proving intent to abuse customer money “can be shown by direct evidence, such as documented instructions or staffers’ testimony, or by circumstantial evidence of intent showing he was willfully blind in that he chose to ignore what otherwise would have been obvious to him under the circumstances,” Clark said.

If Corzine asked employees to take funds temporarily from client accounts, the lawyer said, “the liability is more direct since that violates fiduciary and other legal duties owed to customers and the government.”
Gerald Shargel, a criminal defense lawyer in New York, agreed with Clark, saying if Corzine is found to have directed the transfer of funds, a case for fraud could be brought based on a manager’s breach of fiduciary duty to clients.

Even if Corzine didn’t specify to O’Brien that she use client funds, but demanded that “needed” funds be transferred to JPMorgan while knowing there wasn’t enough company funds to make up the amount, the government may have a strong case, Shargel said.

If Corzine knew there wasn’t enough money to complete a transfer without dipping into client funds, there would be circumstantial evidence that could make a stronger case than testimony from O’Brien saying she was told specifically to take client funds, he said.

“When you have a web of circumstantial evidence, it’s stronger than a direct-evidence case: it doesn’t depend on memory, opportunity, bias, or hostility from an employee, who might be trying to get out from their own problems,’’ Shargel said.

You do not need to read The Wall Street Journal, the FT, Bloomberg, or Sense on Cents to know that a compelling case can be made against Corzine and other MF Global execs. All we need to do is listen to the customers of MF Global who continue to be unable to access THEIR money. We have heard from customers previously. I would call on them again to voice their opinion on the civil and criminal liability of Mr. Corzine et al.

Please help us send a message to the WSJ, the FT, Washington, and Wall Street that customer funds are sacrosanct and that those who would violate that sanctity MUST pay in spades.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

  • Peter S.

    LD, with all due respect considering your mantra; truth, transparency, and integrity, I am disappointed that the one photo of Corzine you have chosen includes the President. Stick to the facts; timelines, inconsistent financial filings, internal documents, emails, sworn testimony, and motives, etc. Only in considering the facts, devoid of political innuendo, will truth, transparency, and justice be better served. Your better than that!

  • LD

    Peter,

    Love your comments but do you believe that Mr. Corzine’s relationships with many power brokers, including our current commander in chief, have not served to protect him to this point?

    I think he is definitely gaining a large degree of protection given his status and relationships. Undeservedly so.

    The photo is intended to highlight the relationship and the likelihood that there may very well be a double standard and different form of justice for those in such a position.

    • Peter S.

      It’s obvious that on Oct 28th, JPMorgan was concerned that the transfer included customer funds. Corzine’s response to JPMorgan’s request on Oct 28th that MF Global sign a document assuring that customer funds were not co-mingled in the $175 million dollar transfer is damning. Three separate drafts of a response were created. When scurrying about, while covering your tracks, you’re bound to leave droppings.

      E-Mail to Corzine Said Transfer Was Not Customer Money

    • Peter S.

      No I do not. I imagine Corzine has become what no man should be – an island.

  • Don

    Larry,

    This was the lead story above the fold on Saturdays WSJ. This man MUST go to prison. Don’t even get me started.

    This man is an integral part of the current administration & a part of their “pocketbook”. He stole from American farmers and will continue to be above the law. This is some great system that a select few get to operate in.

  • Mark J. Novitsky

    An ABSOLUTE LITMUS TEST here for the “Rule of Law”… and will serve to confirm whether or not the “laws” are applied equally, justly, and fairly. SOMEBODY IS LYING!!! – You don’t think that ALL FINANCIAL TRANSACTIONS DATA are monitored REAL TIME? From your personal bank account to GS & MF Global???

    • Peter S.

      Spot on!

  • Mark J. Novitsky

    How about the People vs. the SEC? (Selective Enforcement Commission) – The Greg Smith / GS “Resignation Letter” and the subsequent JPM “Insider” letter are both a stunning indictments of the LAX / co-conspiratorial (mis)conduct at the SEC and DOJ and the “failure” to investigate, indict, & prosecute despite detailed and documented evidence. like a videotaped congressional hearing!) –If the SEC was as aggressive against massive corporate FELONS as they are against whistleblowers (internal & citizen) and Judge Rakoff…we might have SOME actual trust in the “system”.

  • RB

    Come on people, the media is already in full swing to clear him of any wrong-doing.. and to think that he has not had benefit of his associations with the current Administration is terribly naive. Here’s the link for what I read first thing this morning on the Corzine knowledge of customer monies:

    http://dealbook.nytimes.com/2012/03/25/e-mail-to-corzine-said-transfer-was-not-customer-money/

  • Ed

    Many writers, regulators and financial associations are asking that there be an extension of liability for the financial professional (broker, agent, advisor), which is generally referred to as imposing a “fiduciary standard.”

    See how much good that will do when applied to the obviously fiduciary status of Jon Corzine and MF Global. Will he have to give up his personal wealth? Not Likely!

    For smaller, average financial professionals, their entire financial well being is at risk. But for Jon Corzine, formerly affiliated with Goldman Sachs, and major donor to the President – he is “too big to fail” or maybe that is “too connected to be liable.”

    You have talked about the incestuous relationships between Wall Street, Regulators, Congress and the Oval Office. There is another term that is more applicable….

    Statutory Rape of The Citizenry.

  • LD

    Corzine, in testimony before the House panel in December,said he didn’t order any improper transfer of customer funds. He also testified that he never intended a misuse of customer funds at MF Global, and that he doesn’t know where client funds went.

    “I never gave any instruction to misuse customer funds, I never intended anyone at MF Global to misuse customer funds and I don’t believe that anything I said could reasonably have been interpreted as an instruction to misuse customer funds,” Corzine told lawmakers in December.

    O’Brien is scheduled to appear before lawmakers with Christine Serwinski, another MF Global executive, and Henri Steenkamp, the firm’s chief financial officer.

    Steenkamp, in his testimony, said he had “limited knowledge” of the movement of segregated customer funds in the final days before the firm’s failure. Steenkamp said he understood that lawmakers would have questions this week about the missing funds.

    “I share many of these questions and I am personally extremely frustrated and distressed that they remain outstanding and the client funds have not been paid in full,” Steenkamp said in his prepared remarks.

    Can’t you just picture the testimony where Corzine, Steenkamp, et al are informed, “Let me remind you that you are under oath.”

    MF Global’s Counsel Resisted Giving Assurances on Transfers

    • Geoff

      Possible translations to the quotes referenced in that Bloomberg commentary:

      “I didn’t want to sign anything saying I was following the rules, because I couldn’t assure that the left hand knew what the right hand was doing.”

      “We’re a regulated entity, but we won’t actually represent that we follow the rules that apply to us.”

      “I was involved in drafting and/or signing something but I had no idea it was related to anything based in reality whatsoever.”

      “We can’t provide any assurances that we have any idea what the f*&k is going on.”

      What a load of hor$%*^t.

  • RB

    Well, Larry.. if Steenkamp pleads lack of knowledge or simply lies through his teeth and O’Brien pleads the 5th as investigators failed to strike a deal with her, where do you think that leaves us? I am just going to come right out and say it.. The Rule of Law no longer applies to the elite, it is reserved only for punishing the average American, as proven over and over to us by the current Administration.

  • Peter S.

    What prompted JPMorgan to ask for documented assurances that the funds being transferred by MF Global did not include customer funds? Why did JPMorgan insist that the documented assurance include “past, present, and future” transfers? Why did anyone from MF Global balk at signing that letter – knowing that such use of customer funds is a violation of securities law 101, and that no investment firm would ever do such a thing? How did over a billion dollars evaporate into thin air? Those involved at the receiving end of this financial debacle should testify as well – with the question asked, “What prompted your concerns that the MFGlobal transfer may contain customer funds? Why did you ask for assurances that past transfers, as well as the current one being questioned, did not include customer funds?”

  • Bill

    I fail to understand why customer and MF funds were in the same account to begin with. Perhaps this is some necessity driven by the nature of that business, but it seems nothing but a prescription for the sort of mischief we see here. Analogizing to the legal profession, lawyers must segregate client funds in a trust account totally separate from any law firm funds and may not commingle any firm funds with the client funds. While this does not prevent defalcation from a lawyer trust account, it precludes the argument by a guy like Corzine that he thought he was pulling his money from the account. And Larry, I think that photo of Corzine with Obama is quite illustrative of Corzine’s politically cloistered existence.

  • Bill

    So far as any civil liability of Corzine, you can bet whatever assets he has not already sequestered are being placed beyond reach of creditors, rendering him judgment proof.

  • LD

    Did MF Global knowingly commit a fraud by writing checks to customers —knowing the checks would bounce—looking to close accounts rather than maintaining standard practice of wiring funds?

    Clients Raise Questions About MF Global Checks






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