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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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Sat, 03/29/2014 - 09:52 | 4605225 crazzziecanuck
crazzziecanuck's picture

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

Sat, 03/29/2014 - 09:55 | 4605229 Arrowflinger
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."

 

Sat, 03/29/2014 - 09:57 | 4605235 CH1
CH1's picture

Fascism.

Sat, 03/29/2014 - 10:27 | 4605276 smlbizman
smlbizman's picture

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

Sat, 03/29/2014 - 10:51 | 4605310 kliguy38
kliguy38's picture

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

Sat, 03/29/2014 - 11:16 | 4605334 PT
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? 

Sat, 03/29/2014 - 11:18 | 4605341 HoofHearted
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 works...at least for the 0.01%

Sat, 03/29/2014 - 11:37 | 4605373 PT
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.

Sat, 03/29/2014 - 11:44 | 4605383 PT
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."

...

Sat, 03/29/2014 - 12:25 | 4605464 scraping_by
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.

Sat, 03/29/2014 - 12:40 | 4605499 RiverRoad
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.

Sat, 03/29/2014 - 13:02 | 4605535 PT
PT's picture

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

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

Sat, 03/29/2014 - 13:06 | 4605543 PT
PT's picture

Oh, hang on.  I forgot.

http://www.youtube.com/watch?v=GhBa12DobiM

Never mind ... 

Sat, 03/29/2014 - 13:11 | 4605551 DoChenRollingBearing
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.

Sat, 03/29/2014 - 14:01 | 4605640 seek
seek's picture

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

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

Sat, 03/29/2014 - 15:10 | 4605801 DoChenRollingBearing
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:

http://i.imgur.com/CzyO1yv.jpg

A confidence builder...

***

I joined https://bitcointalk.org/ 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.

Sun, 03/30/2014 - 01:03 | 4607157 Son of Loki
Son of Loki's picture

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

Sat, 03/29/2014 - 18:38 | 4606337 Ifigenia
Ifigenia's picture

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

Sat, 03/29/2014 - 12:12 | 4605430 KickIce
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.

Sat, 03/29/2014 - 14:01 | 4605642 zhandax
zhandax's picture

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

Sat, 03/29/2014 - 11:17 | 4605338 Troll Magnet
Troll Magnet's picture

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

Ooh..Was that in poor taste?

Sat, 03/29/2014 - 11:53 | 4605398 remain calm
remain calm's picture

Too soon

Sat, 03/29/2014 - 12:57 | 4605527 Troll Magnet
Troll Magnet's picture

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

Sat, 03/29/2014 - 17:51 | 4606194 Colonel Klink
Colonel Klink's picture

She's been RehyPOPicated.

Sat, 03/29/2014 - 13:01 | 4605534 Skateboarder
Skateboarder's picture

Jeff Corzine is turning in his grave.

Sat, 03/29/2014 - 13:20 | 4605576 Jayda1850
Jayda1850's picture

Thank you. That comment made my day.

Sat, 03/29/2014 - 16:09 | 4605928 willwork4food
willwork4food's picture

Sometimes it just pays to be an asshole.

Sat, 03/29/2014 - 12:05 | 4605412 Rafferty
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.

Sat, 03/29/2014 - 12:11 | 4605428 Rafferty
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.......

Sat, 03/29/2014 - 15:16 | 4605815 yogibear
yogibear's picture

Plenty of golddiggers around.

Sat, 03/29/2014 - 11:36 | 4605370 SilverIsKing
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.

Sat, 03/29/2014 - 11:47 | 4605387 PT
PT's picture

Just a gentle reminder to CYA - Cover Your Arse.

Sat, 03/29/2014 - 12:05 | 4605414 markar
markar's picture

Congress made "mark to fantasy" legal.

Sat, 03/29/2014 - 12:42 | 4605506 SilverIsKing
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?

Sat, 03/29/2014 - 14:15 | 4605668 seek
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.

Sat, 03/29/2014 - 19:57 | 4605780 Blankenstein
Blankenstein's picture

 

 

..but that is one smokin' hot babe....so i guess crime does pay

Not so sure about that....

 

http://www.nj.com/news/index.ssf/2010/11/former_gov_jon_corzine_marries....

http://dailybail.com/home/public-letter-from-the-office-of-the-hon-jon-s...

 

Sat, 03/29/2014 - 17:50 | 4605829 syntaxterror
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:

http://dancirucci.blogspot.com/2009/11/life-on-corzine-beach.html

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

 

 

Sun, 03/30/2014 - 06:50 | 4607356 Disenchanted
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.

Sat, 03/29/2014 - 15:09 | 4605800 jerry_theking_lawler
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.

Sat, 03/29/2014 - 20:29 | 4606612 Againstthelie
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.

 

Sat, 03/29/2014 - 10:27 | 4605275 Millivanilli
Millivanilli's picture

Jon Corizine HERE.

 

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

Frank Zappa

https://www.youtube.com/watch?v=WzzWEeiUf3Y

Sat, 03/29/2014 - 10:45 | 4605302 Murf_DaSurf
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 ?

Sat, 03/29/2014 - 11:47 | 4605388 Spore
Spore's picture

LOL! That was good.....got me dazzled!

Sat, 03/29/2014 - 10:38 | 4605286 ugmug
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'......

Sun, 03/30/2014 - 12:08 | 4607769 optimator
optimator's picture

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

Sat, 03/29/2014 - 10:35 | 4605288 TideFighter
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.

Sun, 03/30/2014 - 06:53 | 4607359 Disenchanted
Disenchanted's picture

re: " Yeah, they would eat her first"

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

Sat, 03/29/2014 - 10:40 | 4605298 williambanzai7
williambanzai7's picture

Sat, 03/29/2014 - 11:02 | 4605324 holmes
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.

Brilliant.

Sat, 03/29/2014 - 11:38 | 4605368 williambanzai7
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.

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