So James Giddens, who is working diligently to find John Corzine’s former clients’ money, sent a letter to a few MF Global introducing brokers and other vendors. One-hundred and forty, give or take. The missive includes words and phrases like, “considering whether to seek to recover” and “records suggest” you may have “received more than” you should and “litigation” and “right to insist on payment.”
In retrospect, now that it’s been brought to his attention by The New York Times, the trustee sheepishly acknowledges that these may seem like arm-twisting tactics. But he assures you that when he wrote all of those things and then offered to go away if you paid him 90% of what he was asking for, bullying you was the furthest thing from his mind. Read more »
When Jon Corzine Wasn’t Masterminding A High-Level Scam At MF Global, He Was Twirling A Handlebar Mustache With One Hand And Stroking A White Cat With The Other: Litigation TrusteeBy Bess Levin
Point: Jon Corzine acted in good faith while at the helm of MF Global, accept it, move on, show’s over, nothing else to see here, this man is a saint, god why are you so obsessed with him? Counterpoint: Oh, he was a saint alright. The Patron Saint of Plot Hatching and Unauthorized Cash Transfers. Read more »
The thing is that when you run a brokerage company and it goes and loses $1bn of customer money, the CFTC really ought to charge you with “fail[ing] to supervise diligently the activities of [your] officers, employees, and agents,” no? At least? There are various views of Jon Corzine’s role in MF Global’s efforts to misplace a billion dollars – did he intentionally misuse customer funds? was he aggressive but above-board? just confused? – but no one is going around saying “oh, yeah, Corzine was really on the ball there protecting customer money.” You’re just irreducibly not supposed to lose a billion dollars in customer money, and if you do, “failure to supervise diligently” is pretty much the kindest possible description.
Anyway here is the CFTC press release and complaint against Corzine and Edith O’Brien, the MF Global assistant treasurer and general fall guy. There have been approximately eight thousand lengthy blow-by-blows of the MF Global implosion by now, and I would understand if you didn’t want to read this one; I sure didn’t. Unlike the others, though, the CFTC complaint is enlivened by recorded telephone conversations. In which Edith O’Brien does not come off well: Read more »
MF Global Report Shows Limits Of The “Just Write All Your Positions On Post-Its” Method Of Risk ManagementBy Matt Levine
There’s a new report out today describing how MF Global blew up, which is not to be confused with the other two reports describing how MF Global blew up, and really enough is enough. If you’re interested in how MF Global blew up, basically Jon Corzine decided to put all its money into ultimately-not-all-that-horrible peripheral European sovereign bonds with repo-to-maturity funding, and the markets moved against him and he faced huge margin calls, and MF Global couldn’t meet those margin calls and went kaput, and at some point between the margin calls and the kaput MF Global seems to have used some client money to meet the margin calls, and that was a no-no, etc. Read more here or here or here or in the report.1
Still the report does have fun new details about just what a mess MF Global was. This one may have boggled me the most:
The Company’s efforts to sell its Euro RTM portfolio suffered a setback when Abelow brought a representative of the investment bank Jefferies & Company (“Jefferies”) to meet with Corzine to discuss selling the portfolio. Corzine refused to meet with the representative because he was in the process of auctioning some commercial paper, and needed to complete the sales before the close of the London market. Consequently, no sale of the Euro RTMs was discussed with Jefferies at this time.
This was on October 26, a day before the downgrade that ultimately sparked MF Global’s October 31 bankruptcy. I am trying and failing to imagine another financial company CEO missing his last chance to sell off a position in the bond trading book because he was too busy pricing a CP deal. Most financial companies have, y’know, treasury departments to sell their CP, and bond traders to trade their bonds.
Also on October 26, this happened: Read more »
National Futures Association Politely Requests That Jon Corzine Apply For Membership So That It Can Ban Him For LifeBy Bess Levin
Earlier this week, the NFA met to discuss the possibility of a lifetime ban of Jon Corzine from the futures industry. Two directors in particular– John Roe and James Koutoulas– wanted him out and wanted him out bad. Guy thought he could take down a once proud brokerage firm for yuks and then get off scot free? He had another thing coming, Roe and Koutoulas probably said to each other while putting the finishing touches on a press release they planned to send out announcing the news, in addition to skywriting plane they put a deposit on to spell out “Hit the bricks, pal,” over Corzine’s house. Unfortunately, the duo will most likely lose their $150 and most definitely have to save the party hats they sent others to pick up for another time. It seems in their excitement to tell JSC that he was “finished here,” Roe and Koutalas failed to make sure he was actually a member of their organization. Read more »
House Subcommittee Has Some Suggestions For The Next Time Jon Corzine Runs A Financial Services CompanyBy Matt Levine
This House Financial Services investigations subcommittee hatchet job on MF Global is, I don’t know, pretty reasonable and not-that-hatchety? It’s 100 pages and not exactly full of new news, but it’s a good read, stuff happens, there’s a clear story arc, heros and villains (kidding, just villains), you’re in suspense until the end. There’s some law of narrative that demands that every financial disaster be a parable for something, and the Fall of the House of Corzine obliges nicely. It reads like the sort of fairy tale where three whatevers come to the guy and tell him “repent repent a thing will happen” and each time he’s like “naaaah” but the third time the thing happens and he’s all “huh, wish I’d repented.”
The thing that was going to happen – which has the benefit of being inevitable in this report though I guess maybe not in real time – was that MF Global’s inventory of fairly short-dated peripheral Eurozone sovereign bonds, which it had bought and then financed via repo-to-maturity transactions, were going to be the death of it. And people kept telling Corzine that and he was all “I SAID NAAAAAH.” And then they were the death of it.
The first people who told him were his auditors at PwC in late 2010, who were troubled by how MF Global was accounting for the repos-to-maturity.1 The RTMs were accounted for as a sale plus a derivative purchase liability; the forward was required to be marked to market but MF Global used its own models to determine that the mark-to-market was so small as to be immaterial because Corzine was pretty sure the chances of default were low. PwC were unamused and advocated a mark-to-market that marked more to the actual market.