Monday, January 30, 2012

MF Global Clients May Never See $1.2 Billion Recovered

MF Global, the company that was headed up by prominent Democrat and former New Jersey Governor Jon Corzine, may never know what happened to the $1.2 billion in mission client money even though investigators thought they were making progress in unwinding the company's actions immediately prior to the bankruptcy:
Previously it looked as though regulators and probably the company's CEO Jon Corzine knew where that shortfall ended up without saying where they thought it went publicly. Some news outlets reported that, for example, roughly $200 million of the missing customer money went to JP Morgan. And today, The Journal's Scott Patterson and Aaron Lucchetti make the case for why that missing $1.2 billion is gone forever. One hypothesis floated again is that MF Global employees dipped into customer money to improperly use in other parts of the company. Another theory is that the company simply lost customers' funds on bad bets outside of the European bond market: "Investigators also are examining other scenarios that have gained traction in recent weeks, such as the possibility that MF Global suffered steep losses on investments made using customer money."
That's right; no one knows what happened to the money and they are characterizing the money as having been "vaporized". If the trustee in bankruptcy can't find the money, then the clients whose money was stolen will have to figure out the next steps. I can't imagine them not suing Corzine and other key figures in the company for fraud and breach of fiduciary responsibility in both their individual and corporate obligations.

Still, the money wasn't vaporized; it was misappropriated and stolen from client accounts. That's a criminal matter, and I concur with the view that a grand jury should be investigating filing charges against key individuals at MF Global, up to and including Corzine.

MF Global so completely ignored general accounting principles and the first rule of investments and brokerages - to keep corporate and client funds separate. Their malfeasance is overwhelming and Congress will once again hold hearings on the situation on February 2.

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