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The MF Global Smoking Gun?

Posted by Larry Doyle on June 6, 2012 9:21 AM |

As with any alleged illicit financial activity, the questions beg: who knew what and when did they know it?

In regard to the MF Global debacle, we have had more of the “I did not know” and “I did not intentionally” type of statements than any of us should have to stomach.

That nonsense may suffice for compliant media and regulators, but fortunately we have others in our nation who take a harder look. Thanks to those at CFO for digging through past Congressional testimony — made under oath — and the recent trustee’s report to find what looks very much like a smoking gun. 

CFO released yesterday, MF Global Finance Execs Knew of Risks to Customer Money:

The demise of MF Global was not as sudden as the company’s executives had portrayed it, and senior finance executives were aware of risks to customer money as early as three months before the futures dealer went bankrupt. Those were some of the findings of an investigation by a bankruptcy trustee of MF Global, which were released Monday.

At least one of the broker’s CFOs and the firm’s assistant treasurer knew intercompany loans and other funding practices were putting customer funds at risk, according to the report. Christine Serwinski, former finance chief for North America, even questioned the practice in reports to upper management, and in e-mails to colleagues she expressed concern that the firm was utilizing client assets to fund working capital for the firm’s new broker-dealer business. But the practices continued until MF Global declared bankruptcy on October 31, 2011.

Serwinski and Henri Steenkamp, CFO of the parent company, testified to Congress last March that they had little knowledge of how customer funds could have been “misused” in MF Global’s final days. But the trustee’s investigation shows they were aware of the risks related to tapping “customer-segregated” accounts housed in the futures commission merchant (FCM) side of the business, which handles buy and sell orders on commodity futures and futures options.

Are we looking at a potential perjury charge? Are we supposed to believe that Serwinski and Steenkamp did not share their knowledge with others in the organization? What do the internal communications show? Does anybody in America believe for a second that Serwinski and Steenkamp would not have highlighted these risks to the very hands-on CEO Jon Corzine?

What might happen or is happening behind the scenes? A regular reader weighs in this morning with the following comment:

I think the powers that be will have a little chat with the trustee and dissuade him from dragging Obama’s best friend through the muck.. telling him it’s simply a very bad time for the country to even consider such a thing, etc.. playing upon his patriotism and if that doesn’t work.. getting the right kind of guys to directly threaten him so there’s no misunderstanding that he is to lay off Corzine.

The trustee will probably pursue a far lesser figure at the company with Corzine being dismissed as simply not having paid close enough attention.  Things are not working out so well yet for Obama’s re-election as the economy is most definitely not cooperating, so I would be most surprised if the trustee was to truly take Corzine to task.

They should also be taken to task for the way in which the bankruptcy was filed, which was clearly done to eliminate the super priority lien that customer deposits would have had in a normal bankruptcy of the firm.

It is enough to make any honest person sick to their stomach that the  country we were once so very proud of has degenerated to one being run by criminal cronies operating as sock puppets for the  big money interests.

What do others think?

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.

 

  • Peter S.

    For the very reasons stated by the regular reader ( beyond an elected, or appointed citizen’s sworn duty to country), I would think that any government entity willing to hold “one of its own” accountable for violations of law benefit greatly in the eyes of our nation. As a matter of fact, I believe there has been no better opportunity than the present to bolster investor confidence by holding accountable anyone betraying their fiduciary duty. I have to believe in good government, I have a twelve year old son.

    LD, very concise post, I have always preferred the Dragnet approach to holding individuals accountable – you’re probably too young to remember Sgt. Joe Friday.

  • LD

    Loved Joe Friday. One of my favorite shows growing up…

    On that note, let’s take a step back and appreciate the work Joe Friday did.

    Who could ever forget?

    Dragnet

  • Obsvr-1

    just the facts, ma’am

  • Don

    Larry I love that you’re staying on top of this story, and I think the regular reader you referenced, unfortunately, has nailed it. It’s an election year and the POTUS does NOT want a scandal – certainly not one of this magnitude. Sad how this story is barely covered by the “main stream” media. No one is holding Corzines’ feet to the fire aside from you.

  • Mark J. Novitsky

    One would assume an actual Justice Department / Attorney General would move Fast and Furious against documented actionable financial crimes AND LYING TO CONGRESS…(Hey Holder…the Corzine “misstatements” are on on video tape!) — But do you know what the DOJ/AG IS actually doing? Going after Whistelblowers unlike any administratione EVER and blowing cases like the ones the “Justice” dept. tried to pursue / Prosecutorial Misconduct…like the Sen. Ted Stevens case and John Edwards. You know…You know…the BIG stuff! – That and Baseball players that used steroids.

  • Mark J. Novitsky

    AND…everyone knows. If you give the SEC a smoking gun they will simply reload then use it against you!

  • Bill

    The DC mafia in action.






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