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Jon Corzine: At Best, A Negligent Nitwit

Posted by Larry Doyle on June 5, 2012 8:18 AM |

Did Jon Corzine perpetrate a fraud at MF Global? Many believe there is sufficient evidence to pursue an indictment of Mr. Corzine and others for the demise of the firm.

The MF Global trustee’s report released yesterday falls short in providing the smoking gun with Corzine’s fingerprints. That said, Corzine should hardly rest easy as the Financial Times writes this morning, MF Global Trustee Eyes Suing Corzine:

The legal trustee overseeing MF Global’s bankruptcy has blamed Jon Corzine, the broker-dealer’s former chief executive, for ramping up risk while failing to overhaul money management systems.

James Giddens said on Monday that he would decide within 60 days whether to sue Mr Corzine, the former New Jersey governor and senator, and other former staff members at the company for “breach of fiduciary duty and negligence”. 

Those who might care to defend Corzine and other MF Global executives for falling victim to a last minute whirlwind meltdown of the firm should take heed of the warning signals that were flashing long before those fateful days in late October 2011. To wit, the FT offers:

1.  “Notwithstanding the increased demands on global money management and liquidity, the firm’s treasury department, which was involved in implementing the transfers of funds, did not expand or modernise.”

2.  Edith O’Brien, the former MF Global assistant treasurer who has emerged as a central figure in the congressional probe into the company’s collapse, told one senior colleague in an August email that she spent hours every day “shuffling cash and loans from entity to entity” in a process she described as a “shell game”.

3.  Internal audits undertaken by the broker-dealer in the spring of 2010 and presented to the company’s board also “identified MF Global’s risk policies as not congruent with the changes to its broker-dealer business”, with “dozens of gaps in policies, procedures and technology”.

We can only hope that the trustee’s report will bring the appropriate pressure upon regulators and others to fulfill their duties in this specific case. There is no doubt that these regulators have TOTALLY failed to perform . . . again. This is not a surprise.

We will wait to see what the future holds for Corzine and, more importantly, the MF Global customers. While we do that, though, the report released yesterday clearly finds Corzine guilty on two fronts:

1. During his short tenure at MF Global, he was little more than an impetuous cowboy indiscriminately throwing around other people’s money.

2. In terms of business acumen and operations management, he showed himself to be nothing more than a negligent nitwit.

To think that he was one step removed from running Goldman Sachs — let alone the United States Treasury — is a pretty scary thought.

Not to beat a dead horse, but again, you cannot make this stuff up so . . .

Sense on Cents Related Commentary
Jon Corzine/MF Global

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 so that investor confidence and investor protection can be achieved.


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