Corzine avoids lifetime futures ban, for now
Tom Polansek, Reuters | Updated: 02/25/2013
A key U.S futures-market regulator said on Thursday it will block Jon Corzine, the former chief executive of failed broker MF Global, from the industry unless he clears an investigation into his fitness as a participant.
However, the National Futures Association, which oversees brokers and asset managers, rejected a proposed lifetime ban for Corzine for now.
Publicly available information "raises issues" about Corzine’s fitness for membership, NFA Chairman Chris Hehmeyer said in a statement after a board meeting in Chicago.
Corzine, whose NFA membership has lapsed, will not be granted membership "unless NFA, after completing its fitness investigation, resolves those issues to its satisfaction," Hehmeyer said.
MF Global failed in October 2011 after dipping into customer accounts in violation of industry rules, leaving a $1.6 billion hole in its customers’ accounts and shaking confidence in the futures industry.
No one has been charged in MF’s collapse, although U.S. congressional investigators have determined that Corzine failed to maintain the systems and controls necessary to protect customer funds.
NFA took a stance on Corzine after two newly elected members of its board proposed banning Corzine from the industry for life for failing to protect customers’ funds.
The board, at its closed-door meeting in Chicago, decided not to pursue the lifetime ban because members did not want to interfere with other agencies probing MF Global’s downfall, Hehmeyer said.
NFA could still slap Corzine with a permanent ban and fines later, he said.
The U.S. Commodity Futures Trading Commission, which oversees futures and swaps markets, is investigating the collapse. CFTC has declined to comment.
A spokesman for Corzine also has declined to comment.
"TOO LITTLE, TOO LATE"
The NFA, based in Chicago and funded by industry fees, has traditionally operated in relative obscurity, overshadowed by better-known market regulators like the CFTC and the U.S. Securities and Exchange Commission.
Its pledge to reject Corzine, if he applies for membership and fails the fitness test, struck some former MF Global customers as weak. They also said they did not understand why it took the NFA 15 months to act.
"It’s too little, too late," said Kansas cattle rancher Tim Rietzke, who had about $30,000 stranded in an MF Global account when the firm collapsed.
Rietzke said he has received back about 80 percent of his money but still lacks confidence in the industry because of MF Global’s downfall.
The NFA looks "gutless" for not taking stronger action sooner, said Doug McClelland, a recently retired commodities broker who worked with clients whose money was frozen in MF Global’s collapse.
The two new NFA board members, James Koutoulas and John Roe, had wanted NFA’s business conduct committee to hold a hearing for Corzine and ban him for life if he was found guilty of not properly protecting funds of MF Global clients.
Koutoulas and Roe co-founded the Commodity Customer Coalition in late 2011 to help MF Global’s former customers get their money back; they now want the NFA to take the lead as an advocate for customers.
Both declined to comment after the meeting, citing a board confidentiality policy.
Statistics: Posted by yoda — Mon Feb 25, 2013 11:38 pm
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MF’s Corzine Ordered Funds Moved to JP Morgan, Memo Says
By Phil Mattingly and Silla Brush – Mar 23, 2012
Jon S. Corzine, MF Global Holding Ltd. (MFGLQ)’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in a brokerage account with JPMorgan Chase & Co. (JPM), according to a memo written by congressional investigators.
Edith O’Brien, a treasurer for the firm, said in an e-mail quoted in the memo that the transfer was “Per JC’s direct instructions,” according to a copy of the memo obtained by Bloomberg News. The e-mail, dated Oct. 28, was sent three days before the company collapsed, the memo says. The memo does not indicate whether that phrase was the full text of the e-mail or an excerpt.
March 23 (Bloomberg) — Bloomberg News reporter Phil Mattingly and Seth Berenzweig, managing partner at Berenzweig Leonard, talk about a Bloomberg News report that Jon S. Corzine, MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. They speak with Trish Regan and Adam Johnson on Bloomberg Television’s "Street Smart." (Source: Bloomberg)
March 23 (Bloomberg) — Bloomberg News reporter Phil Mattingly, Jay Pelosky, consultant at J2Z Advisory, Bloomberg View columnist William Cohan, Robert Brusca, president of Fact & Opinion Economics, and Bloomberg Television markets correspondent Joshua Lipton talk about a Bloomberg News report that Jon S. Corzine, MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. They speak with Pimm Fox on Bloomberg Television’s "Taking Stock." (Cohan is a Bloomberg View columnist. The opinions expressed are his own. Source: Bloomberg)
March 23 (Bloomberg) — Jon S. Corzine , MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. Bloomberg’s Julie Hyman reports on Bloomberg Television’s "Street Smart." (Source: Bloomberg)
March 23 (Bloomberg) — Bart Chilton, a commissioner at the U.S. Commodity Futures Trading Commission, talks about the investigation into bankrupt commodities broker MF Global Inc. and prospects for regulations that would place tighter restrictions on firms’ use of investor funds. Chilton speaks with Scarlet Fu on Bloomberg Television’s "InBusiness With Margaret Brennan." (Source: Bloomberg)
O’Brien’s internal e-mail was sent as the New York-based broker found intraday credit lines limited by JPMorgan, the firm’s clearing bank as well as one of its custodian banks for segregated customer funds, according to the memo, which was prepared for a March 28 House Financial Services subcommittee hearing on the firm’s collapse. O’Brien is scheduled to testify at the hearing after being subpoenaed this week.
“Over the course of that week, MF Global (MFGLQ)’s financial position deteriorated, but the firm represented to its regulators and self-regulatory organizations that its customers’ segregated funds were safe,” said the memo, written by Financial Services Committee staff and sent to lawmakers.
Steven Goldberg, a spokesman for Corzine, said in a statement that Corzine “never gave any instruction to misuse customer funds and never intended anyone at MF Global to misuse customer funds.”
Vinay Mahajan, global treasurer of MF Global Holdings, wrote an e-mail on Oct. 28 that said JPMorgan was “holding up vital business in the U.S. as a result” of the overdrawn account, which had to be “fully funded ASAP,” according to the memo.
Barry Zubrow, JPMorgan’s chief risk officer, called Corzine to seek assurances that the funds belonged to MF Global and not customers. JPMorgan drafted a letter to be signed by O’Brien to ensure that MF Global was complying with rules requiring customers’ collateral to be segregated. The letter was not returned to JPMorgan, the memo said.
The money transferred came from a segregated customer account, according to congressional investigators. Segregated accounts can include customer money and excess company funds.
Corzine, 65, in testimony in front of the House panel in December, said he did not order any improper transfer of customer funds. Corzine also testified that he never intended a misuse of customer funds at MF Global, and that he doesn’t know where client funds went.
“I never gave any instruction to misuse customer funds, I never intended anyone at MF Global to misuse customer funds and I don’t believe that anything I said could reasonably have been interpreted as an instruction to misuse customer funds,” Corzine told lawmakers in December.
In his statement, Goldberg said Corzine did not specify which funds should be used to replenish the JPMorgan account.
“He never directed Ms. O’Brien or anyone else regarding which account should be used to cure the overdrafts, and he never directed that customer funds should be used for that purpose,” Goldberg said. “Nor was he informed that customer funds had been used for that purpose.”
The bankruptcy trustee overseeing the liquidation of the company’s brokerage subsidiary has estimated a $1.6-billion shortfall between customer claims and assets available.
Lawmakers and investigators from the Commodity Futures Trading Commission, Securities and Exchange Commission and Department of Justice have been reviewing events leading up to MF Global’s bankruptcy filing. Executives including Corzine, a Democrat who served in the Senate before he was elected governor of New Jersey, gave testimony on the collapse at three congressional hearings last year.
“If client funds were transferred at his direction, it raises new questions,” Seth Berenzweig, managing partner at Berenzweig Leonard LLP, a law firm in McLean, Virginia, said in an interview with Bloomberg Television. “This is a new storm cloud that is now headed for Jon Corzine and it raises a lot of issues.”
Representative Randy Neugebauer, a Texas Republican and chairman of the Financial Services oversight and investigations subcommittee, is preparing a final report on his investigation into the firm’s failure.
‘What Went Wrong’
“One of the goals of our investigation is not only to find out where the money went but to identify what went wrong in order to prevent this from happening again,” Neugebauer said in a statement.
O’Brien is scheduled to appear before lawmakers with Christine Serwinski and Laurie Ferber, two other MF Global executives named by Corzine as being involved in the transaction, according to the memo. Henri Steenkamp , the firm’s chief financial officer, is also scheduled to testify, as is a representative from JPMorgan who has not yet been identified.
MF Global and its brokerage sought Chapter 11 bankruptcy after a $6.3 billion bet on the bonds of some of Europe’s most indebted nations prompted regulator concerns and a credit rating downgrade. Corzine quit MF Global Nov. 4.
During his testimony, O’Brien was identified by Corzine as someone with knowledge of a transfer of funds from customer accounts before the firm sought bankruptcy protection Oct. 31.
Reid H. Weingarten, O’Brien’s lawyer, did not immediately respond to a phone call and e-mail seeking comment.
The memo’s account of the e-mail exchanges aligns with what Terrence Duffy, the executive chairman at CME Group Inc. (CME), told lawmakers during a December congressional hearing. Auditors at CME, which had authority to oversee MF Global, learned from an employee of the brokerage that Corzine knew about the loans involving a European affiliate, Duffy told committee members.
Statistics: Posted by yoda — Sat Mar 24, 2012 2:29 am
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Jon Corzine Hearing, Where Were The Tough Questions?
Jon Corzine, former CEO of bankrupt MF Global, was subpoenaed to testify before the House Agriculture Committee. Yesterday, he spoke for the first time since his resignation from MF Global on November 4, 2011…and honestly, I was in the camp that he would not speak (i.e. Take The 5th). However, Corzine had a 21 page statement (He only read a portion of it, skipping the part about his childhood and other meaningless facts) and answered every question that was put to him by members of the committee.
The questioning of Corzine by House members did not have many dramatic moments as other committee hearings that called corporate leaders to task. Compare yesterday’s hearing to Lloyd Blankfein‘s (CEO Goldman Sachs) ass-chewing he got for creating collateralized debt obligations (CDOs) for clients and then Goldman betting against those same investments (shorting) for a profit. Senator Carl Levin, asked Blankfein, “Do you think if your people (Goldman) think something is a piece of crap and then go out and sell that, then your company bets against that, do you think that deserves your trust?” Blankfein fired back with his own reasoning, but you get the point…darts were flying. Not so with the Corzine hearing. It was difficult for journalists and bloggers to find a tag line that captured the hearing (By the way, many thanks to Rod Blagojevich for his “Unbelievably Sorry” quote).
Why were the questions so easy? Here are the questions that I would have asked that, amazingly, were not asked at the Corzine hearing:
1) Why did you quit? Jon Corzine’s last minute deal to sell MF Global to Interactive Brokers fell apart at the discovery of missing funds and his solution was to quit. Ask any forensic accountant or FBI agent if they think a person “ quitting” is suspicious if they do so upon the discovery of missing funds.
2) Examiners from CME Group said that transfers at MF Global were made, “in a manner that may have been designed to avoid detection.” Should the person who attempted to avoid this detection be held accountable? It’s one of the “yes” or “no” answers that a good politician can avoid but it looks good on the record. It also sends a warning sign to the folks still back at the MF Global office that the boss is prepared to let someone go down for their actions…even if that action was meant to meet some short term goal of the CEO.
3) Who should we speak with at MF Global, besides you, that was directly responsible for segregating customer account funds from MF Global funds? We want a name….any name from MF Global. The commission needed to have Corzine go on the record by throwing someone who is still back at the MF Global office under the bus. It is a classic move to get the boss to blame someone, specifically, so that it gets the ball rolling to get people talking about who did what.
4) Would you say that Michael Roseman, MF Global’s former chief risk officer who resigned in March 2011, was correct in his assessment that the strategy the firm was undertaking was indeed too risky? Of course it was too risky, the company went BANKRUPT! However, Corzine needs to admit Roseman was right then we can dig into why MF Global sought to get rid of him.
5) Were you aware that the transfer of $200 million to JP Morgan in the final days of MF Global was suspected by JP Morgan bankers of having utilized MF client funds? Again, as in #3 above, the committee needed to get Corzine to throw other people under the bus to get some constructive dialogue, blame, started.
We all knew Corzine was not going to say much of anything that would incriminate him. In fact, in Corzine’s statement he insisted that the notes and papers back at his office could help him but he has not seen them since he left. So why not just get a few names out of him. It would have spiced up the hearing a bit more than the bore that it proved to be.
Statistics: Posted by DIGGER DAN — Fri Dec 09, 2011 5:38 pm
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