OK. Fraud has a specific legal meaning, which hasn’t been proven yet in court.
How about “screwed over their entire customer base, cast doubt on the stability of the entire futures market, and hamstrung innocent farmers.”
Let’s be clear: Corzine’s bets on European debt amounted to ~$6 billion, roughly 5 times MFG’s total equity. This was a direct result of Corzine’s strategy to dramatically increase proprietary trading with the firm’s own capital:
Corzine was personally warned about this exposure by people within his own company, and court papers filed at the bankruptcy by MFG state that this proprietary trading was responsible for much of MF Global’s massive 3rd-quarter loss.
Hindsight is 20-20 of course, but it’s fairly easy to argue that his decisions led directly to the collapse of his firm. And besides the obvious outrage over comingled funds, I also suspect that there’s some piling on here because MFG was essentially hoping for a quick bailout of bankers holding sovereign debt at a time when the public is wondering why they keep having to shovel money directly to the banks–why can’t bankers feel some of the pain in this crisis? It’s probably not fair to punish him for being on the wrong side of public opinion, but I don’t doubt that’s a part of it.
I’d like a little more detail about what knowingly means in this case. For example, if there’s a law that it is illegal to knowingly discharge waste containing greater than 10 ppb hexavalent chrome, I can’t evade the law by simply not testing the waste and flush it down the toilet. In this case knowingly applies to the act of discharging and not to the chrome concentration. I have a duty to know what the concentration is, and being ignorant won’t help in court.
If Jon Corzine has a fiduciary responsibility to know certain things, does the fact that he doesn’t help him at all in court?
Okay, I’ll give you that one.
In a criminal case, it most likely does. In a civil case (say, a shareholder suit), probably not.
MF Global’s primary business was brokerage, but they also traded on their own account. They made a bet on the bonds of some of the PIIGS, buying them at a discount. The bet was that Europe would come to some kind of resolution (likely a temporary kicking-of-the-can) and the bonds would pay off at maturity. Problem is, they had to borrow lots of money from counterparties to maintain their position, and the position was marked-to-market, meaning if the value of the bonds declined too much then MF Global would have to pony up more funds as collateral to maintain their position (otherwise, the counterparties would force them to sell the bonds before maturity and take a haircut). To keep the bet going, MF Global raided the accounts of their brokerage customers, and the money is still missing.
As SarbOx requires Corzine to certify that the company’s internal controls are up to snuff, his claims of ignorance and of some random employee accidentally misusing customer funds don’t really help him.
I just hear about this on the radio a few days ago, in fact, here’s the transcript.
From this particular story Corzine, and the board of directors for that matter, don’t come out looking too good.
On Michael Roseman, the company’s Chief Risk Officer
So a risk officer gets replaced with a yes man, who then gets concerned himself, but Corzine ignores both risk officers and keeps on course running the company into the ground, with the board’s blessing it appears.
Corzine bet big with his company and leveraged capital. He was also long and wrong as they say in the business. He’s not being framed, he is guilty as all get out for trying to take a low margin and relatively low risk business and turn it into a high margin high risk business. Proprietary trading is the highest risk major business on Wall Street.
Corzine bet it all on black 20 and lost. How is this a frame up? OP come back and 'splain please.
We need to make our financial culture boring. Like it’s supposed to be, full of cautious and dull white guys. Guys with no desire whatsover to be lion-tamers. Guys who’s job description is about finding secure and solid investments with modest but reliabie returns. That is, investments, money you park somewhere and leave it there.
Regulate the living hell out of it, stamp out the last vestige of creativity. We’ve had quite enough excitement for a while. A nice stretch of exceedingly dull would be soothing for our national nerves.
A major Wall Street firm goes bankrupt, they are literally missing $1,200,000,000 in customer funds (which, it appears, may have been stolen to attempt to cover up the firm’s losses), and you’re trying to come up with excuses for why the CEO of 18 months, a former CEO of Goldman Sachs and Wall Street insider, is not responsible? What kind of bizarro world have I just been teleported into?
Oh, he’s a Democrat. Never mind.
Talk about a double standard. If Corzine were anyone else people would be calling for his head on a stick.
Who is looking at party affiliation?
I had the same reaction as Absolute, I’ll admit. I think most people from either party will waste no time making excuses for him. But those who do–I am speculating–are protecting a Dem because they simply can’t resist. This circumstance is so egregiously bad, to describe it as a frame-up defies any sort of rational explanation.
Again, I offer this just in reaction to Absolute’s post and as testament to my character flaws in assuming such awful things. I am very ashamed. 
Don’t we all?
I acknowledge that Corzine ran the firm into the ground. But how many CEO’s get hauled in front of Congress for doing so? CIT Group took TARP money and shortly after filed chapter 11. No one at that financial company was investigated by Congress. Every penny of that public money was lost.
So I agree with you that he is guilty - of poor business business judgment as you note. He should lose his securities license as well (for the co-mingling)
As for the politics involved its obvious. He is a political figure and a fundraiser. But he did not “steal” a billion dollars like is being implied by some political enemies.
So you think he should get a slap on the wrist for being the head-honcho of a firm that straight-up stole customers’ money. Why?
When its discovered Who and When the comingling took place appropriate penalties should apply.
If Corzine knowingly signed false financial statements then Sarbanes-Oxley should apply (which is highly unlikely given the company’s history).
And to make matters seem worse to some, George Soros bought the $6.3 billion of Euro bonds for $2 billion.
The trustee should use those proceeds to make the clients of MF whole. They should stand in front of the secured creditors of MF.
I agree.
But the fact that the clients can potentially be made whole doesn’t excuse the fact that their money was put at risk to cover a bet that MF Global made to profit for themselves. And Corzine was the one who felt that MFG should be making prop trades to try and pad their bottom line. So I still don’t see why you think Corzine should just skate off without at least having to face some heat.
Please explain what you are talking about? Soros bought Euro6.3billion face value bonds for USD2billion? What would be wrong with that, pray tell?
You are absolutely right-the fact that Soros was able to buy these bonds at such a tremendous discount, means that the bonds are absolutely “junk”-there is a substantial chance that they might be worthless.
Say what you will about Soros-but he is taking an enormous risk. If it pays off, he he makes a killing-but if not, he loses his entire investment.
Soros spends $2 billion on $6.3 billion of junk - then buys CDS to protect the bonds (maybe 15% of face on a 1 yr maturities) and he makes a healthy $3 billion.
Is it risk free? No, of course not.
Anyway - my point was that the combo of Soros, Corzine, and Obama will set the conspiracy theorists into hyper-drive.