Better Late Than Never

Finally, the artificial walls came tumbling down around Jon Corzine.  Finally.  In case you need reminding, Corzine took $1.6 billion US dollars from his own clients to cover trading losses he incurred.  On October 31, 2011 the story broke.

Not only did Corzine destroy confidence in futures commission merchants everywhere, he destroyed confidence in public marketplaces and destroyed company value in terms of $CME and $ICE.  He was a one man wrecking crew when it came to costing people money.

Today, finally, two things happened that will be interesting to watch.  First, the CFTC charged Corzine.

The Commodity Futures Trading Commission said on Thursday it will seek to ban Corzine and former Assistant Treasurer Edith O’Brien from the industry in a civil case, and also seek penalties against the two.

“Mr. Corzine is charged with being more than a passive actor in the downfall of MF Global,” CFTC enforcement head David Meister said on a call with journalists. “He lacked good faith and … violated his supervision obligations.”

Hitting him with a ban is a hand slap compared to what he did.

Congressman Michael Grimm went further.  He charged Corzine with perjury, and asked the Attorney General’s office to bring charges.  It’s clear that Corzine didn’t tell the truth .

In 2011, Jon Corzine gave the following statements to Congress:

  • “I simply do not know where the money is.”  -made in written and verbal testimony before House and Senate Agriculture Committees (Dec. 7, 2011; Dec. 13, 2011)
  • “I was stunned when I was told on Sunday October 30, 2011, that MF Global could not account for many hundreds of millions of dollars of client money.” - written testimony to Senate Agriculture Committee (Dec 13, 2011)
  • “I did not, however, generally involve myself in the mechanics of the clearing and settlement of trades, or in the movement of cash and collateral.”  - written testimony to Senate Agriculture Committee (Dec. 13, 2011)

CME Executive Chairman Terry Duffy testified before a Congressional committee that there was no way Corzine could have told the truth.

Senator Pat Roberts, the top Republican on the committee, raised his voice, asking, “How many heads do we have to have around here before we finally drill down and find somebody’s name that knows what the heck is going on?”

CME’s Duffy provided the most answers.

He not only revealed the allegations about Corzine’s knowledge about customer-backed loans, but also stated that $950 million dollars was moved out of the customer segregated accounts to MF Global’s broker dealer.

Typhon Capital Management CEO James Koutoulas, who is helping MF Global customers recover their funds, was at the hearing on Tuesday and said Duffy’s testimony was a breath of fresh air after the panel with Corzine and the executives.

“We’d listened to the three stooges say they knew nothing and it wasn’t their responsibility and then somebody like Duffy came in. The reaction was great. He dropped a total bombshell,” he said.

There are plenty of plaudits to be passed around, but the one person everyone should be congratulating today is James Koutoulas of the Commodity Customer Coalition.  Without his tenacity, Corzine might not have been brought to justice.  James was consistent in his message. He stood up when others would have taken cover.  He gave others to have the courage to take up the fight.  Without him, Corzine might have gotten away with it.  Now, it looks like we will get a full hearing on the matter.

They may have to give Treasurer Edith O’ Brien full immunity.  But, so much fiscal and psychological damage was perpetrated on an industry, that the trade off might be worth it.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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