Corzine Dodging Bullets?

Last Friday, thousands of burned MF Global clients and industry defenders (ourselves included) seemed to let loose a victory cry when an email surfaced that seemed to implicate Jon Corzine in the plundering of MF Global segregated funds just hours before the futures titan went under. With a headline that read, “MF’s Corzine Ordered Funds Moved to JP Morgan, Memo Says,” the Bloomberg article explained:

Edith O’Brien, a treasurer for the firm, said in an e-mail quoted in the memo that the transfer was “Per JC’s direct instructions,” according to a copy of the memo obtained by Bloomberg News. The e-mail, dated Oct. 28, was sent three days before the company collapsed, the memo says. The memo does not indicate whether that phrase was the full text of the e-mail or an excerpt.

O’Brien’s internal e-mail was sent as the New York-based broker found intraday credit lines limited by JPMorgan, the firm’s clearing bank as well as one of its custodian banks for segregated customer funds, according to the memo, which was prepared for a March 28 House Financial Services subcommittee hearing on the firm’s collapse. O’Brien is scheduled to testify at the hearing after being subpoenaed this week.

The article went on to weave an interesting (if not loosely bound) story about the chaotic last hours, even if the resounding “smoking gun” component to the memo seemed to be missing. Nonetheless, the initial reaction to the relevation was elation at some clarity to the situation, and the long overdue subpoenaing of O’Brien.

But what a difference a few days can make. As the sun peeks out across Lake Michigan this morning, reports are circulating that additional emails indicate Corzine had no idea the transfer was out of segregated accounts.

The e-mail, sent by an executive in MF Global’s Chicago office, showed that the company had transferred $175 million to replenish an overdrawn account at JPMorgan Chase in London. The transfer, the e-mail said, was a “House Wire,” meaning that it came from the firm’s own money. The e-mail, sent at 2:20 p.m. on Oct. 28 to Mr. Corzine and two of his assistants in New York, says the transfer came from a “nonseg” account, industry speak for a noncustomer account.

It appears as though Corzine’s game of plausible deniability is about to continue. After all, there are no records of him explicitly telling someone to raid the client accounts (that we know of). There is only him telling O’Brien, “You gotta fix it.” In fact, during his testimony, he alluded to the fact that someone could have misinterpreted such a statement. Given O’Brien’s refusal to participate in the investigation to date, and her anticipated invocation of the fifth in front of the House Financial Services subcommittee, the set up is nearly Shakespearean in nature. As political blog Donklephant put it:

Consider the off-the-cuff remark by King Henry II: “Will no one rid me of this meddlesome priest?”. He makes an innocent statement, it is overheard by nearby corporate treasurers knights in his employ, and the next thing he knows, the Archbishop of Canterbury is lying in a pool of his own blood.

These things happens. Nobody was really at fault. He was simply misunderstood. All he said was “Just fix it.”

If Corzine is able to skate on such a technicality, it will be a travesty, but it will also be one of many outrageous components to this case. How long does it take to sift through 72 hours worth of wires? Is $1.6 billion really so paltry a sum that it cannot be found? Where is JPMorgan? Their silence on the matter only exacerbates an already poor public opinion of their operations. Since the regulators supposedly found all the money months back, where is it? Why is it, after all these months, that the only thing we’ve been able to find is a pile of more questions?

We wish we had some answers for you, but unfortunately, we don’t. We continue to be inspired by the futures industry’s collaboration toward system-wide reform, and we will continue to encourage you to seek out relationships with smaller firms. Here’s hoping that, at some point here, the facts get set straight.

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  1. […] Corzine Dodging Bullets? (managed-futures-blog.attaincapital.com) Share this:TwitterFacebookRedditStumbleUponDiggEmailPrintLike this:LikeBe the first to like this post. […]

  2. […] less than honorable…. as he started betting firm money on complex sovereign debt repos, then used customer funds to meet margin calls, which led to a run on the bank of sorts, which ultimately ran the firm into the ground in what […]

  3. […] less than honorable…. as he started betting firm money on complex sovereign debt repos, then used customer funds to meet margin calls, which led to a run on the bank of sorts, which ultimately ran the firm into the ground in what […]

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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