PRISON WATCH 2012: Gasparino Reports MF Global CFO Told Investigators 'Corzine Should Go To Jail'
If GW can prosecute pal Ken Lay, why can't Obama go after Corzine?
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Charlie Gasparino with the scoop late yesterday.
In the days following MF Global’s stunning implosion last year, a senior executive at the firm made a startling concession to investigators looking into both the company’s demise and the loss of more than $1 billion in customer money, according to people with direct knowledge of the matter.
MF Global’s chief financial officer for North America, Christine Serwinski, told investigators that her boss, MF Global’s chief executive, Jon Corzine, was well aware of the use and possible misuse of the customer funds during the firm’s final days, and as a result, Corzine should end up in “jail,” these people add.
Serwinski’s initial account of MF Global’s bankruptcy -- and who might be to blame for the loss of $1.6 billion in customer funds -- has yet to be disclosed, and could add a new dimension to the year-long federal investigation into the firm’s implosion.
Several congressional committees investigating the firm’s bankruptcy and the possible misuse of customer money are also aware of Serwinski’s initial account of who might be responsible for the missing funds, these people say.
Records show that MF Global started dipping into the customer accounts in late of October of last year after disclosing that under Corzine’s direction the firm had made an outsized bet on the debt of troubled European countries, namely Italy and Spain. With that, lenders began pulling lines of credit and refusing to trade with the firm.
Within a matter of days, MF Global was forced to sell itself or face imminent bankruptcy liquidation. A last-minute sale to Interactive Brokers fell apart when MF Global couldn’t account for around $1 billion in customer funds, forcing its bankruptcy filing on October 31 of last year, and subsequent liquidation.
Such a loss of customer funds is a nearly unprecedented event at major Wall Street firms. When Bear Stearns suffered a similar fate at the beginning of the 2008 financial crisis, customer brokerage money was kept segregated and safe.
At least one regulator, Terrence Duffy, the chairman of the CME, has said the firm’s actions involving customer funds broke the law.
One potential witness, Edith O’Brien, MF Global’s assistant treasurer, is seeking an immunity deal in exchange for her testimony.
In July of 2011, she told senior management in a memo that “utilizing…the client asset (base) should not be a (broker dealer) working capital source strategy to be relied upon,” according to the Trustee report.
The report added that on August 3, Serwinski’s direct supervisor, CFO Henri Steenkamp, told Serwinski that he was addressing her concerns about the use of customer money. The report said Steenkamp said he “walked Jon [Corzine] through” the regulations involving the use of customer funds.
Related:
Now We Know Which Senior MF Global Employee Told Investigators That Jon Corzine Had Direct Knowledge Of Customer Funds Being Stolen
Sep 12, 2012 at 6:22 PM
Reader Comments (15)
http://dailybail.com/home/rick-santelli-on-jon-corzine-and-the-mf-global-customer-heis.html
1. “[F]ederal investigators are facing obstacles in bringing a criminal case against either Corzine or his senior management team.”
2. “Edith O’Brien, MF Global’s assistant treasurer, is seeking an immunity deal in exchange for her testimony.”
In other words, the biggest obstacle facing federal investigators is… the federal investigators themselves, who refuse, without explanation, to cut a deal with O’Brien. With an immunity deal, of course, O’Brien cannot plead the Fifth again as she did in the Senate. That would free her up to throw Corzine or Swerinski under the bus.
By refusing to hear O’Brien’s testimony, the so-called “federal investigators” are refusing to investigate. Not satisfied with being sham investigators, however, these same people have gone the extra mile and are functioning as Corzine’s attorneys (pro bono, it should be noted) with mealy-mouthed nonsense like the following:
“[I]nvestigators say much of the evidence concerning the missing funds suggests human error, rather than malfeasance.”
“Much” of the evidence “suggests”? Really? Whatever that means, it lacks the clarity that O’Brien could provide, for example, by unequivocally testifying that she told Corzine that to go ahead with the transaction would constitute a crime.
The federal investigators should be investigated themselves. Why is Congress not calling for a special prosecutor?
What say ye?
Second, since congress has yet to call Swerinski to testify, aren't they in a position where they cannot call for an extraordinary measure like appointing a special prosecutor? Whether you call that a lack of ripeness or a failure to exhaust their legislative remedies, the issue is the same: congress needs to grill Swerinski under oath in light of Gasparino's story to see what that yields.
Regardless, the Corzine episode has exposed the phrase "financial crisis" as a misnomer. "Legal crisis" or better yet "death throes of the republic" are more like it.
http://thecoloradoobserver.com/2012/05/colorado-gop-lawmakers-call-for-special-prosecutor-in-mf-global-case
The calls for a special prosecutor grew louder two months later when the GAO revealed that MF Global had been a client of Eric Holder's law firm, Covington & Burling--a classic conflict of interest that justifies a special prosecutor in the first place.
http://www.washingtontimes.com/news/2012/jul/25/no-justice-in-corzine-case (noting "that prior to going bankrupt, MF Global was a client of Mr. Holder’s former law firm, Covington & Burling.")
It seems to me that any investigation by a special prosecutor should NOT focus on MF Global per se. Civil litigation can do that. Instead, a special prosecutor is needed to investigate a far more troublesome dereliction: what lies at the root of Holder's DOJ (and certain agencies) in refusing to cut a deal with O'Brien so it can air out all the facts about Corzine's role in the undisputedly illegal transfer of client funds?
Fwiw, I can't locate the letter to Holder, but if accounts of its contents were relayed correctly, it missed the real problem here. Holder can make excuses for not going after a creep like Corzine all day long. Dancing around his own department's corruption and/or transparent ineptitude would be another matter.
Here's a question you or others may know the answer to....who exactly is in a position to grant O'Brien immunity? Is this being handled by DOJ or Southern District of NY or someone in the Chicago area...?
Umm...maybe once we figure that out we can forget a petition and perhaps a story could be run on the Bail....Open Letter to XXXX Attorney XXXX Office: Why Won't You Grant O'Brien Immunity? It could then be run every day. We could email it to them Every DAy. We could have people call them EVery Day...
I don't know, these are just ideas. I'm sure Yves Smith would run similar and/or concurrent posts on this issue. I'm also betting the Young Turks -- HUGE online audience -- would be willing to do a video on this.
Any thoughts?
U.S. attorneys--whether in NYC or Chicago--are part of the DOJ, so the ultimate decision maker on any deal is Attorney General Eric Holder. That's who a petition should go to. But such a campaign, to be effective, should also involve letters to congressmen, who should have an interest in calling Edith O'Brien back to answer questions substantively rather than invoking the 5th. (And yes, you were apparently correct that Serwinski testified already, though I haven't tracked down her testimony.)
Holder would resist such a petition, of course, just as he would resist a call for a special prosecutor. Ultimately, I believe Congress would have to impeach Eric Holder to get him to do his job. For that to happen, you'd need a majority of the House Judiciary Committee to sign off on impeachment, followed by a majority vote in the House as a whole.
But look. If Mitt Romney doesn't have the balls to go after Obama over Corzine and Solyndra in a political campaign, do you really think Congress members have the sack to impeach Holder?
No, we'll just have to wait until Congress learns the hard way that MF Global was just the tip of a very nasty iceberg for government officials to do their jobs. How massive THAT market crash will have to be is anyone's guess.
Yves Smith says:
September 12, 2012 at 8:55 pm
Spare me.
Obama had enormous latitude when he took office. The Democrats controlled both houses, the banks were actually cowed, and the country was desperate for new measures. He had an opportunity to change direction and he refused to take it. He threw his lot in with the banks.
Read more at http://www.nakedcapitalism.com/2012/09/more-evidence-of-failure-of-obamas-policies-census-data-shows-median-incomes-fall-income-disparity-rises.html#5pfYUyxZDuKWqbyt.99
As MF Global criminal probe nears end, civil cases become likely
* Criminal case still appears unlikely
* Move paves way for civil cases
more
http://in.reuters.com/article/2012/09/12/mfglobal-corzine-idINL1E8KBLQ120120912
More Evidence of Failure of Obama’s Policies: Census Data Shows Median Incomes Fall, Income Disparity Rises
Read more at http://www.nakedcapitalism.com/2012/09/more-evidence-of-failure-of-obamas-policies-census-data-shows-median-incomes-fall-income-disparity-rises.html#5pfYUyxZDuKWqbyt.99
Foreclosure Fail: Study Pins Blame on Big Banks
https://www.propublica.org/article/foreclosure-fail-study-pins-blame-on-big-banks/
America's Under Water: Debt Equals 103 Percent of GDP
http://cnsnews.com/news/article/americas-under-water-debt-equals-103-percent-gdp
This economy could be as good as it gets
http://blogs.reuters.com/great-debate/2012/09/10/this-economy-could-be-as-good-as-it-gets/
Time for Congress to Wean U.S. Banks From an Outdated Crisis Backstop
http://online.wsj.com/article/SB10000872396390443779404577643820937658782.html
Economic Stimulus as the Election Nears? It’s Been Done Before
http://www.nytimes.com/2012/09/12/business/economy/history-repeats-as-fed-is-expected-to-announce-economic-stimulus.html?_r=1&ref=business&pagewanted=all
http://media.futuresmag.com/futuresmag/article/2012/05/14/Signed%20Grimm%20letter.pdf
Rep. Grimm is a former FBI agent who investigated wall street fraud.
How long did it take them to charge the PFG boss and yet it took almost a year for the DOJ to interview Corzine in the theft of $1.6b. Incredible...
Let's not couch this in terms that try to underplay the criminal actions that took place at MFG. Money did not 'evaporate' out of my account -it was stolen and I want Jon Corzine and his henchmen to go to prison for it.
As if those circumstances weren't damning enough, we also have Terrence Duffy, the head of the CME, who testified before the Senate that Corzine knew the collateral belonged to customers. Duffy's information was based on statements from witnesses who, not surprisingly, weren't questioned or even identified before the Senate.
The Senate's ineptitude didn't end with Duffy, of course. Check out the abortive conclusion to this line of questions put to MF Global's CFO:
“Mr. Steenkamp, I’ve been watching your body language and you seem like the odd man out,” he told the executive, who had been questioned notably less than his two co-panelists. “Do you realize how incredible your testimony sounds to this committee?”
“I wish I could …” Mr. Steenkamp, clearly uncomfortable, began before tapering off.
Mr. Johanns then asked Mr. Steenkamp who was responsible, if not the chief financial officer.
“In MF Global Inc., my understanding is that there were numerous controls in place,” Mr. Steenkamp said.
“I want names,” Mr. Johanns boomed. “Who would authorize and who would have that oversight?”
Mr. Steenkamp paused for a long moment. “I don’t think anyone would have the authorization” to misuse customer funds, he replied.
“You’re dancing around with me,” the senator fired back. “I want a name.”
“I’m not trying to dance around the issue,” Mr. Steenkamp replied. “I am not 100 percent sure who the exact person is.”
http://dealbook.nytimes.com/2011/12/13/confusion-follows-claim-that-corzine-knew-of-funds-transfer
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It's a trivial matter to get to the bottom of who knew what when. You get names (unless you're a bloviating moron, like Senator Johanns), you start at the bottom, you exhaust each witness's knowledge (unless you're a tool, like Senator Johanns), and you move up to the next witness. A team of 3 competent first-year associates could put Corzine in jail.
But information and justice don't concern the DOJ or the government. All they want to do is to put on a passable show for the proles. And so far, it's worked.
Nice find on that letter.