Authorities are winding down their criminal investigation of the failed brokarage firm, MF Global, and despite the lack of oversight and the loss of more than $1 billion in customer funds, it now seems unlikely that anyone at the firm will face criminal charges.
The New York Times is reporting this morning that after ten months of investigation by federal prosecutors, sources say there isn’t even enough evidence to charge any of the firm’s executives in a criminal probe. The company may have failed spectacularly when it came to oversight and risk management, but the losses cannot be chalked up to outright fraud.
The company placed a grossly outsized bet (more than $6 billion worth) on the health of the European debt market last year and when it went south, the firm “borrowed” money from the accounts of its customers to try and salvage its own losses. Most of the blame for those trades fell on its CEO (and ex-New Jersey governor) Jon Corzine, and while his reputation and firm are ruined, it seems he will escape any legal sanction. He could still face massive civil lawsuits or fines from regulators who have a lower standard than a criminal prosecution, but jail isn’t in the cards.
Being a mega-bundler for Obama has its advantages.
“Borrowing” from customer accounts to cover losses in the firm accounts is THE big no-no in any fiduciary relationship. There is simply no excuse for it, in any way, shape, or form.
Any financial fiduciary has, first and foremost, a duty to his clients, not his firm. If your firm goes broke, but the client accounts are untouched, you still have the honor (and lack of criminality) of having fulfilled your duty.
Watch any episode of CNBC’s “American Greed” and there’s a fair chance you’ll see exactly this type of ponzi-scheme featured. And since those folks aren’t mega-bundlers for Obama, they get sent to jail.
The failure of the SEC to bring charges (especially in the age of SarbOx) reeks of political corruption. Shame on Corzine, shame on the SEC, and shame on the Obama Administration.