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MF Global Roundup: Louis Freeh Feeling the Heat; Bill Black Talks Fraud on Capital Account

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Submitted by EconomicPolicyJournal.com

It's been another action packed week on the MF Global scene. As we wrote yesterday, CFTC Chairman Gensler will go hat in hand to Congress today to beg for a budget increase. This, despite the fact that two of his own commissioners issued a scathing dissent to his fiscal year 2011 annual performance report. Commissioners Sommers and O'Malia revealed, among other things, that three major exchanges were not reviewed in fiscal year 2011: ICE, CBT and CME, the latter of which was of course MF Global's regulator.
 
They go on to write what is the closest we will probably ever get to an admission that the CFTC was asleep at the wheel as MF burned (emphasis ours):

We do not want to diminish the hard work of the Commission and the staff, to meet or exceed the Commission’s goals in many other areas. However, the Commission cannot afford to ignore mission-critical responsibilities either. The Commission originally voted to establish these goals and to make every effort to achieve them. Therefore, the Commission must use this report to review its shortcomings and make adjustments to both its budget and surveillance priorities to ensure that critical futures market oversight is not neglected. Failure to make these adjustments expose futures markets to both systemic and operational risk and could cost customers hundreds of millions of dollars. MF Global provides a startling wake up call for the Commission to review its existing rules and regulations for flaws and to ensure that the Commission’s current obsession with the Dodd-Frank rules do not compromise its existing mission.

We hope the Ag Subcommittee will not give up the chance to ask some tough questions of Gensler today. A few suggestions may be found here.
 
Moving along, it's been a rough couple of weeks for MF Global Trustee Louis Freeh. We learned the former FBI director is being investigated by the Treasury Department for allegedly taking tens of thousands of dollars in speaking fees from a designated Iranian terrorist group.

Freeh was also pounded last Friday by the Senate Agricultural Committee, which sent him a letter signed by every single member of the committee, itself a rare event. They wrote:

We are deeply troubled by media reports that you are considering seeking permission of the court to pay enormous bonuses to top executives of the now-bankrupt MF Global Holdings. It is difficult to understand why you would even consider paying anyone a bonus while nearly $1.6 billion in customer money is still missing. And it is absolutely outrageous to propose paying bonuses to the very people who were responsible for the firm’s operational, legal, and financial management at the time customer money disappeared.

These "very people" would be MF's top executives (sans Corzine) and lower level employees that were retained under the MF Global Holdings USA unit, which curiously filed for Chapter 11 protection only as recently as March 2, 2012. Four of these employees will testify next Wednesday, March 28, 2012, including General Counsel Laurie Ferber, known for being able to pull regulatory strings, and Christine Serwinski, who signed off on the MF Global Inc. broker unit annual audit that the SEC first withheld from the public, then changed the file stamp dateMr. Henri Steenkamp, the PricewaterhouseCoopers-trained CFO, will testify again, as will the treasury back office worker, Edith O'Brien, for the first time.

It wasn't over for Mr. Freeh, however, as Sapere Wealth Management LLC called him out on a scandal that might be even more outrageous than bonus-gate. It turns out that there is a collection of insurance policies totaling $120 million underwritten by an MF affiliate, MFG Assurance Company Limited. Despite the sworn statement by one of the insurer's directors, John Oliver Heyliger, that these are not D&O policies, Mr. Freeh has sought to divert the payout from the broker customers that have yet to be made whole, to the MF directors and executives, including Jon Corzine, for legal defense fees. Blasts Sapere:
 
3. MFGI’s commodities customers seek in other courts to recover the full balance of the damages to which the law entitles them (i.e., out-of-pocket loss plus other tort damages) from non-debtor persons whose acts and omissions caused MFGI’s breach of its duty to maintain fund segregation. The non-debtors whom the MFGI commodities customers sued consist of former directors and officers and others (Jon Corzine, et al.). If the Chapter 11 Trustee and MFGA were to have their way, these liability policies’ proceeds would not be used to pay down a portion of MFGI’s existing liability to its commodities customers for their out-of-pocket loss. Instead, the policies’ proceeds would be diverted from the injured persons whose claims the policies cover and who have vested rights to the proceeds protected by N.Y. Ins. Law § 3420(a)(1), and instead used by Corzine, et al. to defend against actions by MFGI’s commodities customers. Because defense costs erode the policies’ limits, this would also waste MFGI’s estate property and would unlawfully subordinate the rights of MFGI’s commodities customers in order to favor Corzine, et al. The Chapter 11 Trustee’s and MFGA’s positions are outrageous, unjust, inequitable, legally untenable and absurd.
 
Sapere's attorneys also called out the broker unit's SIPA Trustee, James W. Giddens, for again not living up to his statutory duty to protect customer interests (just who does he work for, anyway?):

The Trustee is a fiduciary and has the duty to do this as promptly as possible. For unfathomable reasons, the Trustee has not collected the policy proceeds. Instead, the Trustee is passively acquiescing in efforts being made to devest MFGI’s commodities customers of the policies’ proceeds and to divert them to pay Corzine, et al.’s defense costs in actions brought against them in other courts by MFGI’s commodities customers trying to recover the entire loss to which tort law entitles them.

[Update: see Daniel Collins' article in FuturesMag, which expands on Giddens' mischieviousness.] 
 
Finally, Dr. William K. Black took time to talk to Lauren Lyster at Capital Account yesterday about the MF Global cover-up. When the man who smoked out the Keating Five talks fraud, we listen.


 


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Thu, 03/22/2012 - 18:39 | Link to Comment W10321303
W10321303's picture
Matt Taibbi's Newest Rolling Stone Piece Is The Harshest Thing We ...   articles.businessinsider.com/.../31195419_1_fdic-first-union-ed-crutc...Cached You +1'd this publicly. Undo

Mar 15, 2012 – It's Bank of America's turn to get chewed up and spit out by Rolling Stone's Matt Taibbi. This month's issue of Rolling Stone (to hit stands Friday) ...
Can we say Obama's Boss, Boys and Girls?

Thu, 03/22/2012 - 18:11 | Link to Comment swani
swani's picture

What can we expect from Mr.Whitewash?

I'm sure, as 'investigator' for Penn State, Freeh will not find any wrong doing. He will not find 'the reason' that Sandusky was allowed to roam free around the campus by Penn State management, for years, after it was reported to them that Sandusky was having penetrative sex with a 10 year old in the showers, or after parents reported that Sandusky had showered naked with their young sons and other disturbing reports. It is widely rumoured that Sandusky was using his charity to send young boys for weekends 'away' with wealthy donors who happened to also share his taste for young boys.

Nothing will come of the investigation, of course, just as nothing that will benefit the MF Global account holders will come out of the MF Global bankruptcy and the media, except for ZH or RT will under report or spin. There is no justice, it should surprise no one, but it is still painful.

 

 

Thu, 03/22/2012 - 17:43 | Link to Comment Bulldog1
Bulldog1's picture

http://www.youtube.com/watch?v=2_PDVTHF9g0

This video is a priceless satire on the Corzine and the lack of prosecution.  Crucifies obama, and his "script" - or state of the union address.

Thu, 03/22/2012 - 17:22 | Link to Comment Cult of Criminality
Cult of Criminality's picture

Freeh needs to go the same way as Corzine

How about a nice frontline seat in Afghanistan,maybe they can help fight for their freedom. think that would be more than fair.

Thu, 03/22/2012 - 15:14 | Link to Comment Dburn
Dburn's picture

Trustees are paid supposed to recover assets for creditors of the bankrupt estate. They should and do , in most cases, have an adversarial relationship with the officers who ran the now dead business. Freeh's actions show a 180 degree relationship with the debtors.

Contrast Freeh with Picard (Madoff)  who is doing a rich on rich thing by not only going after banks who were complict but suing people who got their money plus profits out of the ponzi as preferential treatment and winning.

 

 

 

Thu, 03/22/2012 - 14:28 | Link to Comment Eric L. Prentis
Eric L. Prentis's picture

I love Lauren Lyster.

She asks insightful and interesting questions and allows her on-screen guests to answer fully her questions without distracting interruptions. Lyster is intelligent, handles herself well, has a wonderful personality, is beautiful and—has great posture.  

Thu, 03/22/2012 - 21:36 | Link to Comment Tapeworm
Tapeworm's picture

The producer of the show is a pretty hard core libertarian. That is another reason that I want to find out who backs RT.

Thu, 03/22/2012 - 21:30 | Link to Comment Tapeworm
Tapeworm's picture

The posture reference is spot on. The first time I looked at Capital Account I was floored by her "walk" at the beginning of the show. She does a superb job in interviews, but is too visually distracting at times.

 I wonder how RT pays? For that matter, where does RT get the dough to run a lot of truly good shows.

Thu, 03/22/2012 - 13:41 | Link to Comment tony bonn
tony bonn's picture

louis freeh is an absolute fucking murderer....he was a perpetrator in 9/11, along with other elite cadre of the bush crime syndicate, so his remuneration from a cia terrorist group is no surprise....

mf global was a bush crime syndicate job without doubt....

Thu, 03/22/2012 - 13:01 | Link to Comment Dingleberry
Dingleberry's picture

Louis Freeh is YET ANOTHER "public servant" that has gone to the dark side for the money, to use his etensive contacts and insider knowledge of the federal law enforcement system to get the worst of the worst out of trouble. For the highest buck. He represents JPM, MF Global, and I am surprised he doesn't represent Madoff.  Must not be enough money left for him.  He is alo leading the Penn State pedophile investigation. Wonder how that will turn out? I predict it will show no one else was involved.  

Thu, 03/22/2012 - 17:43 | Link to Comment chemystical
chemystical's picture

" He is alo leading the Penn State pedophile investigation. Wonder how that will turn out? I predict it will show no one else was involved."

Depends on how many Jews were involved. 

Consider also how often we've heard lately that Jewish law forbids testifying against a fellow Jew in a non-Jewish court.  (See Brooklyn pedophiles for one appallling incident).  The unspoken part of that is that it is, of course, perfectly fein to testify against non-Jews.

No one circles the wagons like the world's biggest fucking hypocrites.

Thu, 03/22/2012 - 12:33 | Link to Comment BlackholeDivestment
BlackholeDivestment's picture

Hey Louie, your head is as ripe as Jamie Dimon's boy and your time is aaah coming. http://www.youtube.com/watch?v=DdPrMxFgLUo Remember the USS Cole and John O'Neil? ...you evil bastard.

 

Thu, 03/22/2012 - 12:32 | Link to Comment Jason_1sandal
Jason_1sandal's picture

Lauren Lyster makes me seeth with vital hormonal secretions.... and she's intelligent too !

Thu, 03/22/2012 - 13:41 | Link to Comment steelhead23
steelhead23's picture

Geez dude.  Here we have Dr. Black detailing just how far America has fallen, and your brain was apparently more stimulated by your sexual appetite than by Black's apt description of the end of civilization as we know it.  I'll give you this Jason, you have about as good a chance of scoring with Lauren Lyster as Corzine has of going to jail.  I wish you both the best of luck.

Thu, 03/22/2012 - 16:15 | Link to Comment Jason_1sandal
Jason_1sandal's picture

hahahaha... I haven't had the chance to watch the vid yet. I have to save them til I get home from work (can't hear a damn thing with the machines going.) I never intended to have a relationship with Ms. Lyster btw. That is my way of saying she is awesome ! I'm passionate about my current lady anyways..... They are definately both in the same league.

Thu, 03/22/2012 - 11:45 | Link to Comment fleur de lis
fleur de lis's picture

I took Freeh for smarter than that. How could he allow himself to get mixed up with the MF crew? Did it not occur to him that he would be double-crossed like everybody else? After all those years in criminal investigations how did this one get past him?

Thu, 03/22/2012 - 15:31 | Link to Comment mvsjcl
mvsjcl's picture

Freeh is one EVIL bastard. He's been involved in more cover-ups than a Cover Girl factory.

Thu, 03/22/2012 - 12:40 | Link to Comment sessinpo
sessinpo's picture

fleur de lis

I took Freeh for smarter than that. How could he allow himself to get mixed up with the MF crew?

 

Comment:

Greed, corruption, money. It will only get worse as we get closer to the end. Not surprised by much any more. Soon Preacher Pat Robertson will call for the legalization of marijuana. Woops, to late on that one. You get my drift. Up is down, down is up and paper is money until it isn't one day.

 

Thu, 03/22/2012 - 12:02 | Link to Comment NotApplicable
NotApplicable's picture

If you haven't noticed by now, he's their "fixer."

James Baker is getting too old, and had to be replaced.

Thu, 03/22/2012 - 12:00 | Link to Comment americanspirit
americanspirit's picture

Because fleur de lis it takes one to know one and Freeh is one. He is not an innocent dupe.

Thu, 03/22/2012 - 11:43 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Where is Jon Corzine.....could they answer that question firstly?

When Enron ocurred (Acct fraud...not theft of investor client funds) Ken lay was on Big media every day....and of course shown to be GWB's bestest friend.

Jon Corzine was a huge Obama supporter, fund raiser, and DEM Gov of Nuevo feckin' Hersey !

Where is Jon Corzine ??

Thu, 03/22/2012 - 15:58 | Link to Comment OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Corzine's in the Caribbean with Ken Lay

Thu, 03/22/2012 - 13:59 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

Hopefully dead.

Thu, 03/22/2012 - 11:24 | Link to Comment dexter_morgan
dexter_morgan's picture

it's like WTF is becoming a phrase I find myself constantly spewing out several times a day as new shit keeps popping up about the outrageous levels of corruption across the board out there..........

Thu, 03/22/2012 - 11:42 | Link to Comment NotApplicable
NotApplicable's picture

Once you learn to ALWAYS replace the word government with criminals then those moments go away, as these actions become so obvious as to be expected.

Thu, 03/22/2012 - 11:11 | Link to Comment use-ta-be-rich
use-ta-be-rich's picture

but that parrot has nice legs

Thu, 03/22/2012 - 11:54 | Link to Comment eatthebanksters
eatthebanksters's picture

I'd do her with a smile...

Thu, 03/22/2012 - 12:04 | Link to Comment FeralSerf
FeralSerf's picture

.

Thu, 03/22/2012 - 11:04 | Link to Comment Boxed Merlot
Boxed Merlot's picture

And why can't the FBI make the connection to Teneo?, Because there is no connection. They are one in the same.

Teneo does not provide protection, they are protection. They have metastasized themselves into every institution in such a way as to make elective office holding irrelevant and will perpetuate their life draining existence causing their host to convulse and writhe in delirium as the rule of law is put on hold indefinitely.

 

Thu, 03/22/2012 - 12:52 | Link to Comment EB
EB's picture

But, remember, Clinton's not drawing a salary from Teneo.  He thinks he should be paying them.

http://www.huffingtonpost.com/2012/03/02/bill-clinton-teneo-capital_n_1315067.html

Would make for some interesting questions next week.

Thu, 03/22/2012 - 11:01 | Link to Comment illyia
illyia's picture

Yeah! Nice to see this article on ZH. May it multiply and prosper!

Thu, 03/22/2012 - 10:48 | Link to Comment Widowmaker
Widowmaker's picture

Absolutely all malfeasance will be buried and bonuses paid -- book it under the "no one saw it coming" guarantee.

Thu, 03/22/2012 - 11:05 | Link to Comment illyia
illyia's picture

So all is lost and its death and destruction from here. Guaranteed it will happen... if everyone turns away in cynicism. Yes it will be bloody - it will be war - maybe actually. But that fight will be based on you and me and everyone else (on ZH or anywhere) shooting this around the net so hard that it can't be denied (ultimately).

So shove it around, under the noses of your friends, family, neighbors.

Make it really absurd that the corp/gov powers aren't talking.

Thu, 03/22/2012 - 10:26 | Link to Comment vachon
vachon's picture

Black may have important stuff to say, but somebody please take that talking hostess parrot out of her misery.

Unwatchable.

Thu, 03/22/2012 - 17:25 | Link to Comment gorillaonyourback
gorillaonyourback's picture

not ure what to make of that comment, only that its highly likely you're a closeted gay man, filled with jealousy.  jeez maybe go and treat yourself to a new pair of red pumps

Thu, 03/22/2012 - 12:55 | Link to Comment Dingleberry
Dingleberry's picture

Maybe you haven't watched her before, but she knows the deal. If she didn't she would be on CNBS or repace Erin "the government made money on TARP" and "the government made money on the S & L crisis" Burnett.  She would even get her own primetime show if she were that stupid!!!!

Thu, 03/22/2012 - 11:59 | Link to Comment NotApplicable
NotApplicable's picture

Gee, the woman I'm watching had a complete grasp of the issues, and did an excellent job of bringing up the most important points. In other words, totally opposite of the US MSM.

Are you watching "The View" again?

Thu, 03/22/2012 - 12:27 | Link to Comment Jason_1sandal
Jason_1sandal's picture

Ditto

Thu, 03/22/2012 - 11:06 | Link to Comment sherryw
sherryw's picture

What, are you a misogynist or something? She actually has a brain, unlike the MSM teleprompter readers.

Thu, 03/22/2012 - 10:25 | Link to Comment Zero Govt
Zero Govt's picture

it's JP Morgan what's got it

if JPM had been fleeced by MFG, Corzine would have been cuffed, indited and jailed (for life) by now

We can assume the Parasite Club are very happy with the current situation, that's why the legal wheels are not turning, they're frozen stiff like a turkey ..'Gobble Gobble' 

Thu, 03/22/2012 - 10:24 | Link to Comment Quinvarius
Quinvarius's picture

Buy gold and hide it.  This shit is never going to end.

Seriously.  You are a fool if you are watching what is happening and you are still involved in the paper banking system in any way shape or form.  You WILL lose everything.

This is not hype.  This is not advice.  I am telling you.  You WILL lose everything unless you get out of the system.  Between MF Global and Greece, you should know the plan.  They are letting the first dominos fall and there is no way to stop the chain reaction.  They could have stopped it by running up gold prices to back the debt before Greece fell.  But they didn't.  And now it is over.  They can't stop the chain reactions.  It is too late.

Thu, 03/22/2012 - 12:00 | Link to Comment redytogo
redytogo's picture

Ditto..

Do NOT follow this link or you will be banned from the site!