Today’s Thursday June 27, 2013’s announcement by the Commodity Futures Trading Commission that it charged former MF Global Holdings Ltd. chief Jon S. Corzine and Edith O’Brien, another former executive at the firm, with the unlawful misuse of nearly $1 billion in customer funds related to the firm’s collapse in October 2011 raises some serious questions as to why this is just a CFTC regulatory matter and not a criminal matter, both State and Federal. See the Wall Street Journal late today, and the excerpt taken and linked to below. In my opinion as a former Investor Protection and Financial Crimes prosecutor in New York under Spitzer and his predecessor, Mr. Corzine should be prosecuted criminally and not just civilly. It would appear that there is significant evidence of arrogance in the misappropriation of investor funds for his own company’s proprietary use, violations of New York’s Martin Act, apparently perjuring himself to the very Congress which is where he served as a member (from my home state of New Jersey ) and possibly even RICO. I understand that others may think that there may not be a lock down case against Corzine and his assistant just like my old office, the Manhattan DA, did not have a rock solid case against BCCI. However, that office chose to prosecute and let a jury decide rather than worry that it may not prevail or choose to roll over and simply play dead in the face of a powerful and influential defendant. White collar financial fraud cases rarely are rock solid and when they are, they result in a quick plea. Thus, if a prosecutor runs away from every case where the evidence is a close call rather than letting a jury decide, there would be few if any trials, this would be an unfortunate result and trials themselves have a deterrent effect. At the end of the day, the prosecutors should let a jury decide rather than send the wrong message to Wall Street — especially after 2008.
If Mr. Corzine is not prosecuted and the evidence below in fact turns out to be accurate, it would seem to me that this is just another example of people who are wealthy and powerful getting away with outright fraud, while the mugger on the street who steals a $2 bracelet is prosecuted in a New York minute. The same is true of comparing the prosecution of the boiler rooms like 1980s Stratton Oakmont vs. the big boys. It’s time for the powers that be to speak up and send the right message to Wall Street.
Speaking of which – How about Newark Mayor Corey Booker, who has taken hundreds of thousands of dollars from Wall Street for his current campaign to replace essentially what was Mr. Corzine’s seat in the Senate. I truly wonder what his position is on this. Does anyone have the guts to ask the Mayor this question while he runs for the Democratic nod and has taken in millions from Wall street and continues to seek those funds out? Inquiring minds would really like to know.
From the Wall Street Journal – draw your own conclusions as I have drawn mine:
Mr. Corzine told the firm’s treasury department they would “go negative” in customer accounts to avoid tapping that credit facility, the complaint alleges.
In a recorded conversation that month, the global treasurer told other employees that “we have to tell Jon that enough is enough. We need to take the keys away from him.” The CFTC complaint alleges that Mr. Corzine “disparagingly nicknamed the Global Treasurer ‘the Gravedigger.'”
A lawyer for Ms. O’Brien, Christopher Barber, said in a statement that the the CFTC case against his client was “meritless.”
The case features numerous recordings of internal company conversations that CFTC officials allege show Mr. Corzine was more than a “passive” actor in the customer fund violations.
At approximately 8:45 p.m. Eastern time on Thursday Oct. 27, 2011, four days before MF Global’s bankruptcy, one employee told Mr. Corzine on a recorded telephone line that some of the funds Ms. O’Brien had transferred from the unit representing futures customers to help satisfy MF Global’s proprietary obligations had not been returned.
According to the complaint, Mr. Corzine asked if she had received back enough money “to be in compliance,” and the employee responded, “no, she[‘s] indicating she’s net short $106 million.”
Mr. Corzine told the employee to “raise hell” with J.P. Morgan Chase, JPM +1.24% MF Global’s banker, to obtain funds to “cover up” the gap left . The CFTC alleges that Mr. Corzine didn’t receive assurances that the funds were returned.
In Congressional testimony, Mr. Corzine has said that he didn’t know customer funds had been misused and that Ms. O’Brien assured him that a separate transfer of customer money was proper.
Is anyone going to inquire of Mr. Booker, the purported leading candidate for the same US Senate seat that Mr. Corzine held in the same Democratic Party as Mr. Corzine, about this country’s critical issue of Wall Street influence on our prosecutors and lawmakers, and the obvious major conflicts of interest he will face if he were to be elected? Or does he just get coronated because he knows Opra Winfrey and Facebook’s Zuckerberg or saved someone from a fire, shoveled snow when someone tweeted they needed to be shoveled, and now is on his way to save a dog from a crate (although Booker should be applauded for stepping in to save dogs and people from fire and snow, his devotion and incestuous relationship to Wall Street is concerning. The financial future of our country is at serious risk without a senator willing to fight for our country’s financial future. Since Booker is funded by Wall Street, he will not step in to right the wrongs – period. )
Prosecutors are supposed to use opportunities like this to send a message to the public at large that no one is “too big, too powerful or too rich” to be criminally prosecuted. It seems to me that, without such criminal prosecution, based on even the limited evidence revealed already, the message to the public is the very opposite. Hopefully the next US Senator from New Jersey will be pushing Wall Street for reform, pushing prosecutors to pursue justice without regard to who the defendant is, and encouraging whistleblowers to come forward to avoid the next 2008 crises. It appears neither major political party can be trusted to do this.
Stuart D. Meissner Esq.
Investor Attorney, Securities Litigation/Arbitration/Regulatory Attorney;
SEC, CFTC and FINRA Related Whistleblower Attorney
Participant in SEC Dodd-Frank Whistleblower SEC Rule Making ;
Former Asst. D.A. Under Hon. Robert M. Morgenthau, Trial Division;
Former Asst A.G. Under Hon. Eliot Spitzer and Hon. Dennis Vacco, Financial Crimes, Investor Protection Bureaus