You Can't Make This Up: MF Global Sues PWC, Blames It For Its Collapse

Tyler Durden's picture

File this one in the "you can't make it up" category. Over two years after the MF Global collapse, in which the primary dealer headed by Jon "I don't recall" Corzine all but admitted it had engaged in the cardinal sin of any financial intermediary, i.e., commingling money, to cover up a trade gone horribly bad and which resulted in the disappearance of some $1 billion in client funds until such time as the bankruptcy process managed to "liberate" funds from other part of the company, MF Global has suddenly figured who is at fault: not the CEO, not his brown-nosing lackey, not some janitor meant to be scapegoated precisely in a situation such as this, not even the infamous "glitch" - no, the party that is accountable for the firm's theft of client funds, and horrible investing decisions that led to its bankruptcy, are the accountants.

No really: yesterday MF Global Holdings sued PricewaterhouseCoopers LLP for $1 billion, alleging accounting malpractice helped bring down the brokerage company.

Like we said, you can't make this up. From Bloomberg:

PwC, which provided outside auditing and accounting experts, failed to advise the firm to account properly for its European sovereign debt holdings, leading it to over-invest in them, MF Global Holdings said in a complaint filed today in Manhattan federal court.


But for PwC’s erroneous accounting advice, MF Global Holdings could not have -- and would not have -- invested heavily in European sovereign debt to generate immediate revenues and would not have suffered the massive damages that befell the company in 2011,” MF Global Holdings said in the complaint.


MF Global filed for bankruptcy on Oct. 31, 2011. Customers have claimed in lawsuits against the firm’s former executives that more than $1.6 billion of their funds that should have been segregated went missing, transferred to other parts of the company during the liquidity crisis.


Christopher Atkins, a PwC spokesman, didn’t immediately return a voice-mail message seeking comment on the suit.

In retrospect: almost brilliant. MF Global, or what's left of the estate, is using the old tried and true "Enron defense", where if there was corporate criminality, the accountants were surely involved. And they most probably were. There is one problem though: in the case of Enron, all of its key executives, Lay, Skilling and Fastow, got prison sentences. In MF Global's case of Jon Corzine... not so much.


Why? The answer:

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crazzziecanuck's picture

Marx wrote that history repeats itself.  First as tragedy, then as farce.

Arrowflinger's picture

The MFers pulled another Enron. There is an old Chinese saying - "He who screws with book cooker in pantry often gets ass in a scam."


smlbizman's picture

see...i knew it couldnt be jon...he is the honorable mr. corzine...cause that what it says on his plaque

kliguy38's picture

honorable?? ...maybe not so much......but that is one smokin' hot i guess crime does pay.....if you're in the club

PT's picture

Here, let me have a try:

But if PWC didn't tell MFG what they wanted to hear then MFG would have hired someone else.

Am I getting close? 

HoofHearted's picture

So, if I steal money from other people and then don't pay it back, it would be okay as long as I knew the Choomer in Chief? Cool. I need to call ol' Barack up, bring some of the good shit with me, and then stop paying my mortgage, my credit card bills, etc.

What dit the woman say about not having to worry anymore? Barack's going to pay for my house, fill up my car, and so on. It looks like it least for the 0.01%

PT's picture

Was I too subtle?  I'll try again:

"It's the free market's fault.  I bought the best accountants that money could buy and they still weren't good enough!"

Maybe I shoulda stuck a "/sarc" tag in there somewhere.

PT's picture

"No Jon, when I told you that good accountants make you money, that's not what I meant."
"... and when I said that good accountants pay for themselves, it doesn't quite work that way.  You still have to pay them."


scraping_by's picture

In all the Mafia stories, the consigliore never gets whacked. They just show up and calm down the capo di capo tutti.

Different level of gangster, it seems.

RiverRoad's picture

Who they should be suing is the Fed.  It's he Fed who's been funneling $$ to Europe to keep their interest rates from rising.  As a result MFG was left empty-handed re their investments in junk bonds there.

PT's picture

Can we sue them for keeping house prices unaffordable for the last 15 years plus ... 

DoChenRollingBearing's picture

When, o when will Corzine go to jail?

He would then have ample time to consider the maginitude of his sins and to figure out how to make amends...  Oh, say, like, pay the money back he stole, you know, that sort of thing.

He will have to do a LOT of forgiving before he will ever be forgiven.  A hopeless task?  Perhaps not, but in his case, probably so.

Corzine...  Like ZH member "nmewn" last night coined the term "Rubinomics", "Corzine" might become a term that gains traction.

seek's picture

ZH should submit ZH-isms weekly to, eventually some of them might stick.

When someone says they've been Corzined, I know exactly what they mean.

DoChenRollingBearing's picture

This is not a ZH-ism, but one I think you will like seek.  This is the kind of thing that fonestar perhaps should be posting:

A confidence builder...


I joined with the handle "OROBTC".

It was a bitcointalker who solved my QR Code question (at my blog), NOT a ZH-er (to my knowledge), so I sent him his 0.05 BTC prize from Peru.

Son of Loki's picture

great photo: The Honorable Jon Corzine with that Nobel Peace Prize winner..what's his name again....?

Ifigenia's picture

no, they should sue the sheeps for been ignorants and dociles.

KickIce's picture

I think that's the same defense Michael Jackson's doctor used but with drugs.  Accounting, and especially auditing have slippery slopes, it would be like allowing high school students to determine their teacher's wages based on grades and disciplinary action.

zhandax's picture

Question remains, why didn't they think of this 'defense' two years ago?  Got their lawyers at Big Lots?

Troll Magnet's picture

I think that's his dead son's girlfriend.

Ooh..Was that in poor taste?

Troll Magnet's picture

What? I'm just pointing out how much they enjoy commingling all things. *feign innocence*

Skateboarder's picture

Jeff Corzine is turning in his grave.

Jayda1850's picture

Thank you. That comment made my day.

willwork4food's picture

Sometimes it just pays to be an asshole.

Rafferty's picture

Statutory auditors will never find anything that the Directors don't want found. Because if they do they lose their contract to some company that will look the other way.  It applies all way down the line and especially in the FIRE sector.

Rafferty's picture

I just can't get it into my head that Corzine is not a member of the tribe.  He just seems to, well, tick a lot of the boxes.......

yogibear's picture

Plenty of golddiggers around.

SilverIsKing's picture

These same accounting firms are signing off on all the mark to fantasy bullshit sitting on JPM, BAC, C, etc balance sheets without qualification.

If I were PwC or any other audit firm, I would begin qualifying all the bad shit so as to avoid this when the SHTF with the banks.

PT's picture

Just a gentle reminder to CYA - Cover Your Arse.

markar's picture

Congress made "mark to fantasy" legal.

SilverIsKing's picture

So if PwC does it's own testing and finds impairments based on rational analysis, PwC will be indemnified if and when the toxic paper blows up?

seek's picture

If that happens, PwC doesn't approve the audit and doesn't sign off.

That's why when companies change accounting firms/auditors it's such a big red flag. The accountants indemnify themselves by not participating in fraud they find.

Auditors don't have free reign in the company, they only confirm the books they've been presented are correct. What an audit really proves is that a corrupt company is good at cooking the books. Failing an audit means that the corruption and/or accounting practices are so bad that even cooked books can't cover it up.

syntaxterror's picture

kliguy38 wrote: "Honorable? Maybe not so much, but that is one smokin' hot babe. So i guess crime does pay if you're in the club."


The 'smokin hot babe' is Sharon Elghanayan, his wife. Here are some sizzling photos of her from the same beach romp:

Oh, and by the way, as you lube up, I thought I should mention that she's 65 years old.



Disenchanted's picture

Plus, she's a psycho's therapist...

Now I think she's pushing 69, no not THAT 69.


Excuse me, now I need to find a bucket.

jerry_theking_lawler's picture

This is the EXACT case here.....wasn't MF buying EU debt instruments that got them in trouble..?? Can't remember all of the details from this incident but it sounded like MF was helping hide the EU insolvency problem.

Againstthelie's picture

The hidden rulership of the international Money Masters. It's a Plutocracy, not Fascism.

One key element of Fascism is (restoration of the) primacy of politics!

Another one is the authoritarian principle of LEADERSHIP and another one therefore re-alignment of responsibility and personality to remove the influence of the hidden forces. In a Plutocracy the elected politicians do not decide, and those that decide are not elected. In Fascism the leaders are known and are held responsible.

Btw, any organization in reality that functions well, is organized after the authoritarian principle: companies, police, military, families.


Millivanilli's picture

Jon Corizine HERE.


You can't catch me.  We got you dazzled with Titties and Beer.

Frank Zappa

Murf_DaSurf's picture



So that picture is showing Corzine focused at his new job testing each and every Chaise Lounge product beyond its  recommended design envelope ?

Spore's picture

LOL! That was me dazzled!

ugmug's picture

Its 'The Butler Did It' defense!

Alan Dershowitz should be immediately summoned to take the case.

The whole thing is turning into the popular Wall Street boardroom game 'Clueless'......

optimator's picture

If the tit don't fit....the "anything more than a handful is a mouthful wasted defense".

TideFighter's picture

Any chance that island has cannibals? Yeah, they would eat her first, but that would leave the Stew of Jon in the pot a little longer to tenderize.

Disenchanted's picture

re: " Yeah, they would eat her first"

That ain't no fresh sushi we're talking about here...

holmes's picture

By this logic, next time I get caught sticking up the local liquor store,

I'm gonna sue the cops for not stopping me first.


williambanzai7's picture

I know it sounds ridiculous, particularly because the officers are all walking.

However, the goal of this kind of a lawsuit is to sue on behalf of the bankruptcy estate to increase the asset pool available to the firm's creditors, including those who lost unlawfully commingled assets. The accountants are liable to the firm, just like lawyers and other advisors who gave incorrect advice.

Of course, the estate can also try to sue the officers and directors as well. But they are all indemnified by the firm and its D&O insurance, which brings the whole farce full circle.

When you study how this all works, you understand what is truly meant by Ponzi scheme.

Institutional investors all understand this game and go in with their eyes wide shut. But the little folk who got porked by Corzine hardly bargained for what they got.

And I did not down arrow you.