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On Corzine - MFG in the fog of war

Bruce Krasting's picture




 

I watched Jon boy. I didn’t hear any smoking guns. That doesn’t mean there weren't any. Keep in mind that Corzine has the best lawyer (for this) that money can buy. Andrew Levander has been advising the former CEO of MFG on every word he says.

I was surprised that there was no 5th Amendment stuff. I’m sure that Levander was pushing for that. But Corzine really didn't have much of an option. If the former Senator/ Governor pled the fifth he would have been convicted in the public’s eye.

So Jon talked, but he said nothing. You can be absolutely certain that Corzine spent many hours with his lawyers fielding question that might have been asked by the congressional committee. When Corzine seemed to stutter, pause, look up at the ceiling groping for the right words to use, it was just a very well orchestrated and practiced acting job.

Jon made one response that I thought was significant. He said several times:

"I never intended to break any rules.”

This could mean anything, but consider that this canned response was formulated word for word by Levander. I think what Corzine was saying was that he may have authorized some actions in the later stages of MFG’s existence that ultimately led to the expropriation and loss of customer funds. He is trying to establish that whatever he may have said (or signed), he did not understand the consequences. Whether this is true or not, I don't know.

We might find out at some point that some clown in the treasury department at MFG asked JC a question in the middle of the panic:

“We could re-hypothecate the seg accounts and plug the gap tonight! Should we do that?”

And Jon could have looked up and said:


“Do what you can!”

The problem with the “I never intended” defense is that it doesn’t work for a CEO who should have know better.

 

**************************************

I recently had a conversation with an individual (we'll call him Bob) who had three MFG accounts. He, like many other customers, smelled a rat with MFG as the stock price plunged and the FINRA issues with the Euro bond positions became known.

Bob voted with his feet. He closed off all open positions. He got back to cash. Then he requested a wire transfer for the balance(s). He left a small operating balance in the accounts in order to keep them open. This fellow was small potatoes. Two of the accounts were under $20k. The other was $215k.

Wire transfers to a bank were requested.

According to Bob, the wires went out on Wednesday, October 26 (four days before BK). All three wire transfers were received on Thursday October 27.

But on Friday, October 28, the bank that had received the funds reversed the wire transfer for the larger amount. The transfers for the two smaller amounts were not reversed.

This is highly unusual. It is extremely difficult to reverse a wire transfer. Wire transfers are considered to be Immediately Available Funds or “Good Funds”. Absent a court order, the only way to reverse a wire transfer is when the remitting bank provides a letter of indemnity ("LOI") to the receiving bank. I’ve written these letters. They would look something like this:

To: ABC Bank
 

From: XYZ Bank

Reference:Wire Transfer #123456 date 10/26/2011 for $215,000 for further credit to "Bob", Account #AB3355


 

We hereby request that you immediately debt the account of (Bob) for the full amount of the transfer and return the funds to us.


 

If you comply with this request we hereby agree to hold you free and harmless of any consequences that may arise as a result of this request.



XYZ Bank


Basically XYZ has to give ABC a blanket guarantee that they will not get hurt by the request.

Here’s the rub. I’m told that in the matter at hand, the "XYZ" bank operating on behalf of MFG was JPM.

If I’m right that a LOI was required to claw back a wire transfer, then - assuming my information is correct, and I think it is - it had to have been JPM that wrote the indemnity letter.  (No one would have acted on a LOI from MFG on 10/28).

I'm speculating quite a bit. But it’s still worth considering. At this point, anything is worth considering. We are six weeks past the BK. As Corzine and all the others said today, they have no clue where the missing money is. There has been any army of forensic accountants (FBI & KPMG) toiling night and day. No one has found the money. That's crazy to me.

A possible daisy chain:

(1) MFG orders XYZ Bank to make a money transfer.

(2) XYZ makes the transfer.

(3) After the transfer has been made (or during the same day) XYZ issues a letter of indemnity (“LOI”) and obtains a refund of the transfer.

(4) The initial wire transfer is accounted for (correctly) at MFG as a reduction of the customer account liabilities (Segregated account).

(5) When the money comes back into XYZ (pursuant to the LOI) it is not credited back to the Seg./customer account. (The fog of war factor? Deliberate?)

(6) After the money has been returned to XYZ bank, it appears to be "unrestricted funds" of MFG. It gets commingled. Someone grabs the money to offset a claim. The Chinese Wall between the Seg. account and MFG corporate account has been broached. Once the money is commingled, it is impossible to figure out who owes what to whom.

A question for any of those many MFG account holders: Did any of you have a similar experience with wire transfers? If so, could you let me know? I’d love to get to the bottom of this mystery.
Bkrasting@gmail.com

 

Note: I'm aware that in the final days, MFG issued checks to customers that bounced. This is similar to the wire transfer issue I describe. But it is also a different kettle of legal fish. There are many reasons for a check to bounce. Checks, unlike wire transfers are not "good funds".  To claw-back a wire transfer requires significant human intervention. Banks do not write LOIs without carefully considering the consequences. There's always a signature on an LOI......

.

 

 

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Fri, 12/09/2011 - 01:01 | 1961934 Bruce Krasting
Bruce Krasting's picture

I'm in.

Fri, 12/09/2011 - 05:59 | 1962150 bank guy in Brussels
bank guy in Brussels's picture

Bruce, you are a Swiss citizen ... If you want to run for President, are you ready for the birth certificate controversy?

Do you have a photoshopped fake birth certificate like the Obama White House put out ... the one so fake that even an anti-tinfoil sceptic like Karl Denninger wound up patiently explaining how it was fake beyond any possibility of redemption ... and the White House has no reply?

Would you support going back to the American Articles of Confederation of 1783, returning the American States to a government more like Switzerland?

Many American 'Liberty Movement' people support a return to the 1783 Confederation Articles ... even in 1789 there were critics who predicted that the US Constitution would lead to tyranny and fascism, excercised through a cabal of dishonest federal judges, exactly like America has become.

Would you help make it easier for those poor MF-Global-and-other-fraud-burdened Americans to get a Swiss bank account again, as easy as it was a few years back?

Would you accept a No. 2 spot on the ticket with Ron Paul?

Fri, 12/09/2011 - 08:12 | 1962257 Bruce Krasting
Bruce Krasting's picture

I have two passports. Swiss and US. I was born here. So I'm eligible.

As of this AM no one has called me....

I'm joking about this, but I would work for R Paul for a dollar a year if he made it to the WH.

Thu, 12/08/2011 - 22:37 | 1961560 Everyman
Everyman's picture

Question remains:

Why in the world would ANYONE trust banking, accounting, investing, or money guys in general anymore?

Why in the world are people that do these kind of thing, or participate in them, or enable or facilitate the transactions NOT IN JAIL?  OR DEAD???

Fri, 12/09/2011 - 01:58 | 1962012 Seer
Seer's picture

It's the 1%, they have no other game.  Their entire being is wrapped up in the scam.

Kind of like tossing money at a stripped in hopes that you will score.

But, really, when it's ALL fake how can we claim some sort of moral ground on any of it?  The music stopped and there aren't any chairs, yet, people still pretend that there ARE chairs.  Mother Nature and gravity are going to drag people back down to earth.

Thu, 12/08/2011 - 22:35 | 1961557 KickIce
KickIce's picture

Been visiting the ag boards and it seems a fair amount had accounts therre.  Several are now in jeopardy of losing property or even securing loans to plant.  All by design folks, I fear the CBs are going to score a ton of prime farmland over this deal.

Fri, 12/09/2011 - 17:23 | 1964380 Uchtdorf
Uchtdorf's picture

The plan is to NOT plant those fields. The elite needs to starve off a few dozen million of us CO2 exhalers.

Fri, 12/09/2011 - 02:50 | 1962056 azusgm
azusgm's picture

Soros's fund is buying grain elevators and other ag enterprises.

www.gavilon.com

Check it out and google it for more info.

Fri, 12/09/2011 - 02:04 | 1962019 Seer
Seer's picture

I'd warned about an attack via ethanol.  Trouble making that one happen (I spent lots of time educating folks).

Fri, 12/09/2011 - 00:58 | 1961927 Sunshine n Lollipops
Sunshine n Lollipops's picture

Wow. That's seriously cynical, dude.

And probably true.

Fri, 12/09/2011 - 01:47 | 1962004 KickIce
KickIce's picture

It's all about the commodities and real estate for the bankers, no matter what they say publicly.  Meanwhile, the sheeple concentrate on fiat, DWTS, ESPN, flar screen tv's and the latest Apple product all while losing freedom's on a daily basis.  The majority won't realize what happened to them until the door is shut and locked.

Fri, 12/09/2011 - 03:06 | 1962065 azusgm
azusgm's picture

Interesting that independent ag is being hit from different sides at the same time. MF Global steals their money. The EPA wants to regulate their operations. The labor department wants to regulate what chores the kids can do for money through their call for more stringent child labor laws. Another department (transportation?) is floating the idea that operating a tractor should require a commercial driver's license especially if the tractor is driven on a public road or on the shoulder of a public road going from field to field. The Food Safety Modernization Act is proving to be a nightmare. (Health inspectors showed up where volunteers were serving home-prepared food to firefighters during the Texas wildfires and shut down the free food in favor of commercial operations.)

And then there is Farmageddon.

http://www.financialsense.com/financial-sense-newshour/guest-expert/2011...

Fri, 12/09/2011 - 09:19 | 1962447 Everybodys All ...
Everybodys All American's picture

This just calls for a complete sweep out of the current governence when this stuff hapens. No common sense and no way is this representative government. Never thought I would see this kind of stuff in my lifetime.

Fri, 12/09/2011 - 08:01 | 1962230 KickIce
KickIce's picture

And did you see the Jon Stewart video (linked by GW I beileve) where it shows Rand Paul saying that anyone with over 7 days of food might be considered a terrorist...  Yeah, ag is under serious attack.

Thu, 12/08/2011 - 22:28 | 1961545 falun bong
falun bong's picture

For him to be convicted there needs to be willful intent. That's why he was so careful as to say that he "did not intend to do anything wrong".

He had a choice: admit he was totally incompetent, or admit he broke the law. We saw which one he chose.

Nothing a 50' length of rope couldn't cure...

 

Thu, 12/08/2011 - 23:09 | 1961631 kaiserhoff
kaiserhoff's picture

Yes and No.  In English Common Law, there are five elements of Fraud.  The most difficult to prove in court, as you suggest, is intent.  Corzine had a fiduciary responsibility to his customers, to be competent, careful, and protective of their interests.  That means recklessness or careless disregard with client money should be enough to hang him.

That, in broad outline, is the law.  As to WTF will happen, your guess is as good as mine.

Fri, 12/09/2011 - 00:19 | 1961841 Freddie
Freddie's picture

+1

Thu, 12/08/2011 - 23:06 | 1961619 alien-IQ
alien-IQ's picture

The "willful intent" defense reminds me of something I once heard at a George Carlin concert:

"A man in Ohio today killed his wife, his mother, his mother-in-law, his father-in-law, his next door neighbor, a gas station attendant, a tow truck driver and a meter maid. He said he was just cleaning his gun when it accidentally went off"

Thu, 12/08/2011 - 22:22 | 1961531 Delancey
Delancey's picture

Thanks for the information about the reversal of the wire transfer, Bruce.  Frightening how little our regulators understand about how financial institutions are funding themselves.  This will all come out, and there is no way that no one knew a thing!  Thanks for adding to the clues.

 

Thu, 12/08/2011 - 22:22 | 1961528 polizeros
polizeros's picture

A friend is a CPA and a forensic (Certified Fraud Examiner) and says the first transfer out is easy to track. Afther that, not so easy. The money could sluice all around the world and even Uncle Sam can't track it easily, if at all.

Bruce's theory makes sense. Transfer out, then back in but not into client accounts, then poof, it disappears.

As for "I never intended to break any rules,” my friend says, "It's better to be seen as dumb than culpable."

Fri, 12/09/2011 - 04:06 | 1962106 Libertarian777
Libertarian777's picture

True true, once the funds get commingled you can track the source into the omnibus account but funds going out of the account is another matter

Thu, 12/08/2011 - 22:17 | 1961523 Long-John-Silver
Long-John-Silver's picture

$1.2 billion in Silver and Gold naked shorts went poof. That's where the money went. Those poor chaps with all their digital Gold and Silver contracts never even got the chance to burn them for their 12.44 BTU heat content.

Fri, 12/09/2011 - 00:31 | 1961864 Snidley Whipsnae
Snidley Whipsnae's picture

After all that has happened I cannot feel sympathy for those that are still playing in front of the locomotive with paper PMs.

They had sufficient warning, they continued to play in the rigged casino, and they lost.

Got physical?

Thu, 12/08/2011 - 22:08 | 1961512 trackstar
trackstar's picture

Bruce, how many people have seen you, a middle age white guy, tagging a wall with a $1 can of paint and a $1000 camera? I imagine the looks those people give you are golden. How about taking a shot next time it happens and posting that with the tag!?

Thu, 12/08/2011 - 22:04 | 1961500 Everybodys All ...
Everybodys All American's picture

This money was not lost in the last days of MFG but over a longer period of time making it nearly impossible to figure out in my opinion. I think the answer lies though with the Italian debt purchases. No one was dumb enough to be buying this sovereign debt except for Jon Corzine and MFG? My question today would have been why were you buying this debt. Something just does not smell right. Now today I see that Soros bought this debt from him as MFG collapsed. That is not a coincidence.

Thu, 12/08/2011 - 22:03 | 1961497 vegas
vegas's picture

Somebody find out if Tony Rezko had an MFG account. Check the Solyndra checking accounts. Take every skunk within 5 layers of Barry Soetero and you will eventually find the money. My favorite theory: a hit job by the Excrement Pile Known as the Bernank otherwise JPM & HSBC go under with not enough gold and silver for DEC delivery to COMEX.

 

http://vegasxau.blogspot.com

Thu, 12/08/2011 - 22:01 | 1961492 nmewn
nmewn's picture

"So Jon talked, but he said nothing."

Well, yeah. He's a politician and Goldman ex.

It was kinda like...I don't know teacher...I think my dog ate the half billion so go talk to him. I claim complete ignorance on the eating habits of my dog...lol.

Fri, 12/09/2011 - 05:26 | 1962139 Miles Kendig
Miles Kendig's picture

Correct me if I'm mistaken here nmewn, but I didn't hear Corzine deny anything.  To me this is THE tell tale of a well lawyered individual concerned with getting caught up at the bar. 

Corzine shoulda just done the smart thing and parlayed his bucket of chum into a lobbyist gig and made another bundle on the expert network/diversified insider [trading] racket.  Instead he let his ego slam the sliding patio door on his cock.  I'm sure he's singing some..

http://www.youtube.com/watch?v=Bp4UI_FxGLE

Fri, 12/09/2011 - 07:26 | 1962185 nmewn
nmewn's picture

"To me this is THE tell tale of a well lawyered individual concerned with getting caught up at the bar."

Thats the way I see it too. As much as I despise the guy (and despite my piling on) I would have done the same thing. The honorable as well as the dishonorable knows (or should know) in one of those dog & pony shows you either say nothing or talk in circles.

The biggest thing to come out of it was the headline "I don't know where the money is." Which points to his competency and his fiduciary duty to know where his clients money is.

"And you could have it all, my empire of dirt.

I will let you down. I will make you hurt."

Nice selection old friend ;-)

Thu, 12/08/2011 - 21:52 | 1961472 flattrader
flattrader's picture

Bruce,

This story gets more interesting.

Unfortunately, your friend was small potatoes.  You had to be a billionaire to get all of your money out of MFG

http://www.huffingtonpost.com/daniel-dicker/the-koch-brothers-and-mf-_b_...
But perhaps the most stunning piece of news we're getting in the wake of the MF Global collapse is in the clients of the firm who managed to get away scot-free, with no freezing of accounts or capital -- particularly the accounts of the mega-cap independent oil company Koch Industries, run by the politically active Koch brothers. A recent report in Reuters has described the billions of dollars of client accounts that were withdrawn from MF Global in the last few weeks before their collapse, including 8 accounts from Koch industries engaged in oil trade that were transferred to Mizuho Securities after years of a steady and profitable relationship with MF. The Reuters piece concentrates on the possibilities of legal "clawback" of client money if the bankruptcy does not allow remaining client accounts to be made whole. The Reuters piece misses the point. Both the Commodity Futures Trading Commission and the Chicago Mercantile Exchange were charged with overseeing MF Global, their clearing member. If we are to believe them, they had no idea of any difficulties within the firm before customer accounts went missing just a few days before the collapse. But someone clearly knew of the cratering positions and imminent collapse of MF Global, as billions of dollars of accounts were "coincidentally" withdrawn. And what do the Koch brothers say was the reason for these withdrawals? There's been no comment.
Thu, 12/08/2011 - 22:07 | 1961507 nmewn
nmewn's picture

Doesn't this implicate Corzine as the pivot man in a Koch sucking ring?

Thu, 12/08/2011 - 23:01 | 1961581 ISEEIT
ISEEIT's picture

Or a soros circle jerk?

Just hit edit. I watch drudge/huff/firedog ect...Just to keep up with the hegelian game status.

http://online.wsj.com/article/SB10001424052970204319004577086652040716704.html

Mafia bitchez.

I've long held that the DNC is nothing more than an organized criminal gang. RNC as well but the difference is that the underlying support DNC wise is criminal to it's core, while with the RNC much of the ground support is made of vastly better stock. Ron Paul isn't associated to the RNC without reason. It is the preferable of two evils. Getting the republican base on board with reality is doable. Not true with the DNC crowd. These people are mostly beyond help.

Fri, 12/09/2011 - 09:16 | 1962439 JohnF
JohnF's picture

DNC? Organized Criminal Gang?

 

You repeat yourself...

Thu, 12/08/2011 - 23:03 | 1961607 nmewn
nmewn's picture

Saw that...bob posted that on another thread from Bloomie.

I guess if you get them for pennies on the euro/dollar and they hold it all together till December 2012 it pays off at that interest rate...lol.

And no telling what "sweetners" were added to this particular cocktail of debt to make it more palatable. These fuckers I swear...

Thu, 12/08/2011 - 23:39 | 1961742 ISEEIT
ISEEIT's picture

So soros bets it will hold till 12/12. He is most likely correct. These monsters are not playing and they still have an eager audiance dependent on them providing further encores. I am geared toward a soon sharp drop in EUR/USD. 

soros is not an idiot. He is a very sick and disturbed man. If he expects to profit then it is is only because his inside knowledge is privy to the game.

I don't think the collapse will happen just yet. 110.00 ? Maybe. But obama is all signed up and ready to 'do his thang' for history and all that, so expect 2012 to be balls to the walls, full on fake em before you break em bullshit.

The collapse won't likely happen until 2013-2015.

 

Fri, 12/09/2011 - 01:21 | 1961965 Manthong
Manthong's picture

And speaking of that crusty old S.O.B. ..

"Investor George Soros's family fund bought about $2 billion of European bonds formerly owned by MF Global Holdings Ltd.,"

http://online.wsj.com/article/SB10001424052970204319004577086652040716704.html


I wonder what dirt was behind THAT deal.

 

Thu, 12/08/2011 - 21:52 | 1961469 Manthong
Manthong's picture

"I never intended to break any rules.”

And Geithner never intended to be too stupid to use Turbo-Tax.

Ignorance of the law is no excuse..

Except if you are lying, low life, miserable member of the power elite.

Thu, 12/08/2011 - 22:01 | 1961494 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Corzine smiled through his testimony.

Thu, 12/08/2011 - 22:20 | 1961526 Long-John-Silver
Long-John-Silver's picture

A smile hides a lie much better than a frown.

Fri, 12/09/2011 - 01:15 | 1961948 Manthong
Manthong's picture

And it gets even better.. in testimony to Congress:

"Lying,' Holder Says, 'Has to Do With Your State of Mind"...

"whether or not you had the requisite intent to come up with something that would be considered perjury or a lie," Holder said."

http://www.weeklystandard.com/blogs/lying-holder-says-has-do-your-state-mind_611731.html

This “intent” thing can be pretty handy if you are a power elite crook and/or the Attorney General of the United States, or even a President of the United States who does not intend an incriminating meaning of the word "is".

Thu, 12/08/2011 - 21:52 | 1961467 Elmer Fudd
Elmer Fudd's picture

Good on you, but be careful.  I expect at least 3 "suicides" over this.

Thu, 12/08/2011 - 21:50 | 1961465 spinone
spinone's picture

I know the tone is hysterical, but what do you think of this?

http://silverdoctors.blogspot.com/2011/12/jim-willie-jp-morgan-crashed-mf-global.html

Thu, 12/08/2011 - 22:52 | 1961588 Almost Solvent
Almost Solvent's picture

Those funds are not FDIC insured, so basically one is left to sue JPM directly, maybe a class action?

 

Either way, there is nothing stopping your 401(k)/MMA/etc. from vanishing overnight, then it's up to little you to do something about it . . . 

Fri, 12/09/2011 - 00:55 | 1961920 Snidley Whipsnae
Snidley Whipsnae's picture

"If you think that your Wall Street funds are safe, you are kidding yourself. If you think you are safe in bullion, but do not own it and know exactly where it is, you don't have it. You may own a claim to something, and will stand in line and take what you are given like the MF Global customers when your time comes.

What will it take for people to realize that what is happening to 'the other guy' will happen to them too?

Former SEC Chairman Harvey Pitt was just commenting that the rules do not matter if the people running the financial firms do not have basic character and integrity and honesty. Of course it does not work voluntarily. Self-regulation is a joke to sociopaths and psychopaths."

http://jessescrossroadscafe.blogspot.com/2011/12/corzine-to-take-ceo-defense.html

Sat, 12/10/2011 - 05:17 | 1965664 omniversling
omniversling's picture

"if you do not have possession of your physical..."

So the depositors pockets were picked as they stood in the queue...As this unravels, and the SLV/GLD paper charade ignites, CME must get caught out. The MFG and JPM scam may have averted the collapse of COMEX this time (see http://silverdoctors.blogspot.com/2011/12/jim-willie-jp-morgan-crashed-m...)..

But with hypothocated leveraged fiat falling out of the sky, how easy do think it will be to actually get your physical now that the SHTF?

HSBC Sues MF Global Brokerage Over $850,000 Worth of Gold
http://www.businessweek.com/news/2011-12-09/hsbc-sues-mf-global-brokerag...


Thu, 12/08/2011 - 21:49 | 1961464 disabledvet
disabledvet's picture

there's a simple rule in Committee: "never ask a question you don't already know the answer to." Whatever specifics the fact that Senator Corzine...who is a truly amazing man btw..."didn't have time to prepare." Obviously this wasn't true of those asking him "the questions he already knows the answer to" as well. Ahhh, Congressmen. And to think people complain! "How could they not know he was lying???!!!!" was the refrain. Ahhhh. I could have listened to it all day. So let me say again "Jon Corzine truly is an amazing man" because if you think you could have done what he did for more than 5 minutes you're a bigger liar than any man alive.

Thu, 12/08/2011 - 21:46 | 1961458 non_anon
non_anon's picture

the fix is in

Fri, 12/09/2011 - 02:23 | 1962033 Boxed Merlot
Boxed Merlot's picture

the fix is in...

His hedge was / is Teneo. The best in the business at greasing the wheels of "justice", all at the bargain basement cost of one's soul. No one associated with this corrupt organization or those requiring their services has any need for their soul anyway.

They're only concern is that everyone else be as bereft of intellectual honesty as they are. imo.

Thu, 12/08/2011 - 21:44 | 1961450 kaiserhoff
kaiserhoff's picture

Nice summary, Bruce.  I still think this is fraud, pure and simple.  They were not booking transactions to the general ledger in the last few days.  That alone tells you there was a complete break-down in control, and all the key officers are guilty as hell.

Corzine probably said something simple like "Who will rid me of this meddlesome priest?"

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