MF Global: Now We Know Who Stole the Money

By Shlomo Maital   

 MF Global? Doubtful…

   Last December 14, I uploaded a blog about MF Global, and the $1 b. in investors’ money that was ‘missing’.  (The Inside Story About MF Global: $1 b. of Customer Money Is STILL Missing). 

    An active investigation has been ongoing since.  At the center of it is former U.S. Senator,  NJ Governor and Goldman, Sachs head Jon Corzine, who ran MF Global when it went broke.  The issue is: What was his role and responsibility, in MF Global using its investors’ funds to cover its own trading losses?

   Now, comes a tiny back page piece, reporting that U.S. Congressional investigators have uncovered evidence, that Corzine himself sent email messages telling workers to use MF Global’s investors’ personal funds (for which MF has a fiduciary responsibility) to cover its growing overdraft.  The overdraft was caused by Corzine’s taking a huge, wrongheaded $6.3 b. bet on European sovereign bonds (he bet they’d drop like a stone; they did not).   To place his bet, he leveraged his firm’s assets by as much as five times! 

    Corzine told Congress that he never ever told his workers to use investors’ personal funds to cover the overdraft.  Now, it appears that a “senior official” of MF Global sent an email to workers, in Oct. 2011, stating that Corzine himself authorized transferring $200 m. from an account of an investor, to cover an MF Global overdraft, on its account with J.P. Morgan Chase in London.  

   Now, lying to Congress is definitely a felony, that should bring a jail term, a lengthy one.  Will Corzine go to jail?  Doubtful.  Did he authorize stealing investors’ private funds?  For sure.  Did MF Global wreck the basic trust that is so essential, between investors and the investment companies that manage their money?  It did. 

    And will this tiny back-page piece about Corzine’s culpability go almost un-noticed?

    It will, and it has.  Alas. 

   Here, by the way, is the relevant section of the US penal code:  (a) Except as otherwise provided in this section, whoever, ….knowingly

and willfully – (1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact;  (2) makes any materially false, fictitious, or fraudulent statement or representation; or (3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry; shall be fined under this title, imprisoned not more than 5 years..”