Stop Leaking and Start Investigating

CFTC

Why is it that just as the heat begins to turn up on Jon Corzine and his role in destroying MF Global and  causing a shortfall in customer segregated funds of nearly $1 billion that put many introducing brokers, commodity trading advisors, farmers, ranchers and others out of business and adversely affected the business of thousands threatening the very foundation of the futures markets does a leak come out apparently from the Department of Justice indicating that there will be no criminal charges against Corzine?

Yesterday as the heat following revelations in the Commodity Futures Trading Commission enforcement action against MF Global, Corzine and Edition O’Brien regarding his role in the illegal transfer of funds out of protected customer segregated accounts was beginning to build the New York Post reported — citing unnamed sources — that the DOJ had concluded its investigation and no charges were being sought against Corzine.

The Post reported, “After 18 months of investigation, the criminal probe into Jon Corzine is now being dropped,” a person with knowledge of the probe told The Post. There is no evidence of criminal wrongdoing,” this person said.

Not everyone agrees as Rep. Michael G. Grimm (R-NY) renewed his call for Attorney General Eric Holder to bring criminal charges against Jon Corzine for the collapse of MF Global and the theft of customer funds, citing evidence of perjury based on the discrepancies in the recorded conversations cited in the CFTC complaint and Corzine’s testimony at Congressional hearings. Something we pointed out recently.

The Post story follows a dizzying pattern of leaks to compliant media outlets regarding this case. First it was the ridiculous claim published in the Wall Street Journal — citing an unnamed source familiar with the case — that the missing billion in customer funds simply vaporized due to sloppy bookkeeping. We asked at the time why would a reporter protect a source providing an answer appropriate to a five-year-old caught with his hand in the cookie jar.

Next and more ominously was a New York Times Dealbook story on August 15, 2012 that indicated no criminal charges would be filed against Corzine. The story stated: “After 10 months of stitching together evidence on the firm’s demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear, according to people involved in the case.”

It was odd in that it came out less than two weeks after Congressional hearings where MF Global Inc. Trustee James Giddens  made specific claims against Corzine. Giddens stated under oath before a Congressional committee, “Management’s actions, along with the lack of sufficient monitoring and systems, resulted in customer property being used during the liquidity crisis to fund the extraordinary liquidity drains elsewhere in the business, including margin calls on European sovereign debt positions. …I have determined there may be valid claims against certain individuals and entities. I believe that there are [plausible] claims, including claims for breach of fiduciary duty and negligence, against former MF Global CEO Jon Corzine, former MF Global CFO Henri Steenkamp, and former MF Global Assistant Treasurer Edith O’Brien, among others.”

At the same hearing CFTC Commissioner Jill Sommers testified that “a shortfall if customer segregated funds could amount to a violation of the Commodity Exchange Act (CEA) and commission regulations including those that govern segregated funds, prevent theft of customer money, require our registrants to properly supervise accounts [and] prevent making false statements. A willful violation of the CEA is a Federal crime so if there is evidence to indicate that, that would be something that a U.S. Attorney would be able to pursue.”

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