February 8, 2012
Attain Capital
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Riddle us this…
Let’s say you’re an insurance claims investigator. You’re looking into a case where a man’s home burnt down. Not only do you smell accelerant at the site of the fire, but you find out that the man took out a massive insurance policy on the residence just a few days before it burnt down. What’s your gut going to tell you?
On our side of it, we tend to believe that where there’s smoke, there’s fire, and since the futures industry watched Corzine torch the confidence of investors everywhere amidst scandalous claims of illegal-tasting (if not actually against the law) rehypothecation, we’ve been smelling gasoline. Turns out, it may have been with good reason. Bloomberg reports:
MF Global Holdings Ltd.’s insurance unit issued $190 million of liability policies for Jon Corzine, other professionals and the company through May to cover costs of defending against allegations of wrongdoing, according to a court filing.
The wholly owned unit, MFG Assurance, provided $70 million of coverage for MF Global, its units and professionals for lawsuits through May 2011, and $120 million for the period through May of this year, trustee Louis Freeh said in the Feb. 3 filing in U.S. Bankruptcy Court in Manhattan. The policies don’t belong to the bankrupt estate and the coverage should be continued, he said.
There may be some highly-paid CEOs out there that disagree, but in our opinion, you shouldn’t be able to sell yourself insurance covering you against yourself. Here we have a situation where Jon Corzine is fighting in court for that same estate money clients are fighting for, except the clients are fighting for it so they can have their hard earned money paid back – and Corzine is doing it so that he doesn’t have to pay for losing the clients’ hard earned money.
If there was ever a case of the rank and file (can I have my money back please?) versus the connected elite (no, I lost it, and I need some of what’s left to defend myself against the lawsuits arising out of my losing it) – this sums it up pretty nicely. And it only strengthens our argument that the best way to fix the futures industry moving forward is to mandate that any and all payouts from a clearing firm (for salaries, insurance claims, bond coupons, severance pay, margin calls, etc.) are subservient (by law) to any claims customers who held their accounts at that firm have against the estate. This will insure that any investor, employee, trading partner, etc. with the company is minding their P’s and Q’s for fear of being in the back of the line when the music stops.
Until then, no amount of smoke and mirrors can hide the stench of this…
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February 9, 2012
[…] policy on the residence just a few days before it burnt down. What’s your gut going to tell you? Continue reading… This entry was posted in Uncategorized by MFG UK Clients. Bookmark the […]