Congress Absolves Corzine

Econintersect:  A Congressional report has absolved Jon Corzine (pictured), former U.S. Senator and Governor of New Jersey, of any criminal wrong-doing in the collapse of MF Global.  But the House Financial Services Committee did clearly state that Corzine failed to maintain controls that were needed to protect customers.   The futures and commodities trading company was forced into bankruptcy just over one year ago, on October 31, 2011.  At the time it appeared that about $700 million shortfall in the company’s segregated accounts had prevented the closure of a bailout merger deal with Discount Brokers.  A year later the unaccounted for customer funds has swollen to $1.6 billion.  That’s some return on investment:  128% return on fraud.

Dan Reed dissects the Congressional report, written by a Republican-controlled committee.  He was not too flattering of the Capitol Hill action (or, maybe better, inaction):

The congressional report states, “Choices made by Jon Corzine during his tenure as chairman and CEO sealed MF Global‘s fate.” Turns out, these choices include the unlawful transfer of its customers’ money. Oh well. We all make mistakes.

This statement of responsibility, which carries no punishment, comes from the same institution we’re expecting to steer us away from a series of fiscal measures so extreme that neither party would be able to stomach their implementation. Good luck with that.

You’d think in this time of outrage against “too big to fail” institutions, members of Congress would be lining up to take their shots at Mr. Corzine, a former CEO of Goldman Sachs and poster child for crony entitlement. You’d also be vastly disappointed.

Republicans got first shot at Mr. Corzine. In an audacious statement of the obvious, GOP Rep. Randy Neugebauer of Texas stated, “We found that Jon Corzine contributed greatly to the demise of this company. … There was a breakdown in communication in the regulatory community.” And of course, neither of the above is considered a criminal offense, until you couple it with the $1.6 billion shortfall (i.e., vanishing into thin air) of customer funds.

After all, when all is said and done, “what we are talking about is theft” (Futures Magazine).

Dan Reed sums up the situation and the context pretty well:

The next time you hear a member of Congress start to lecture us on the need for economic fairness, ask yourself how any institution that oversees a farce of this magnitude can use the word with a straight face. This is the same institution that we’re counting on to steer us away from the fiscal cliff? I wouldn’t hold out hope.

There’s a scene in “Butch Cassidy and the Sundance Kid” where the two outlaws are backed into a position where they have to jump off a cliff and into a river, or face certain death at the hands of their pursuers. As they stare at the drop, and the water below, the Sundance Kid confesses that he can’t swim. Butch Cassidy assuages his fear of drowning by pointing out, “The fall will probably kill you.”

Democrats and Republicans are busy arguing over who can deliver a harder slap on the wrist. Meanwhile, it’s the fall that will kill you. Unless your name happens to be Corzine — in which case, you’re too-big-to-fall.

Former clients are not following the magnanimity of Congress toward their (Congress’) fellow felon.  There are many civil suits in progress and Jon Corzine will certainly be called to testify.  Just this week Reuters described one such action which is seeking to subpoena Corzine, Chief Financial Officer Henri Steenkamp, Chief Operating Officer Bradley Abelow among others, according to court papers filed in the U.S. Bankruptcy Court in Manhattan.

Econintersect should track down the depositions that have been made by Mr. Corzine.  It (they) may be document(s) that would rival the deposition by Bank of America CEO Brian Moynihan which Matt Taibbi has shredded with much ridicule. 

John Lounsbury

Sources:

• As we head for the cliff, Congress throws Corzine a lifeline (Dan Reed, The Baltimore Sun)

• MF Global customers to seek subpoenas for Corzine, others (Nick Brown, Reuters)

• MF Global:  Where’s the Money? (Daniel P. Collins, Futures Magazine)

• Bank of America CEO Brian Moynihan Apparently Can’t Remember Anything (Matt Taibbi, Taibblog, Rolling Stone)