Apparently This MF Global "Clusterfuck" Does Not Deserve Criminal Charges
We salute the CFTC for finally, if belatedly, doing the right thing and going after Jon "the bundler" Corzine. However, we wonder, just how is the following documented exchange between Edith O'Brien, MFG's assistant treasurer, and some MF Global employee, not considered crime-worthy by Eric Holder? Or is the US Attorney General too busy to answer, having to come up with his own alibi to avoid going to jail for lying to Congress under oath?
Just prior to 6:30 p.m. ET, O’Brien told Employee #2 on a recorded telephone line that the Firm would not be in compliance with customer segregation rules because funds were not being returned to customer segregated accounts:
O’BRIEN: It is a total clusterfuck . . . . They have to move half a billion dollars out of BONY to pay me back . . . . Tell me how much money is coming in and I will make sure it gets posted. But if you don’t tell me, then tomorrow morning I am going to have a seg problem . . . . I need the money back from the broker-dealer I already gave them. I can’t afford a seg problem.
At approximately 6:45 p.m. ET, O’Brien also told Employee #2 on a recorded telephone line that she was “on the phone with [BONY] trying to negotiate something right now. Otherwise we are going to be underseg.”
O’Brien was able to get a portion of the customer segregated funds returned to customer segregated accounts, as BONY agreed to transfer $325 million of funds from MF Global’s proprietary operating account at BONY to a customer segregated account that MF Global maintained at BONY.
O’Brien was aware that, as of the time of this BONY transfer, MF Global had been unlawfully under-segregated during the day. Even with the $325 million transfer back to a customer segregated account, MF Global remained under-segregated.
At approximately 11:30 p.m. ET, referring to transfers from customer segregated accounts to MF Global’s broker-dealer division, O’Brien sent an email to an MF Global employee titled “Heads up my projection,” which stated: “Due to large B/D client wires we could be negative seg tomorrow AM.”
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Corzine knew that various encumbrances and impediments on these $602 million worth of assets made them not immediately available for the Firm to use to meet its cash needs. In fact, acknowledging that these assets were restricted or not as liquid as cash, Corzine, in a recorded conversation, referred to them euphemistically as the “moral equivalent” of cash.