As if the loss of customer funds wasn’t bad enough, we’ve had to spend the past year knowing that Jon Corzine, architect of MF Global’s collapse, was a free man. Conspiracy theories raged – why did this former Obama-bundling New Jersey-governing Wall Street insider appear to be immune to prosecution? And more than a few people we’ve talked to hold a serious grudge against this man…we certainly can’t blame them.
We don’t want to build our hopes up only to face disappointment, but we can’t help but feel a glimmer of anticipation now that a report from the House Financial Services Committee lays the blame for MFG’s fall squarely on Corzine (emphasis ours):
As MF Global’s chief executive, Corzine was responsible for ensuring that the company maintained integrated systems and controls for managing the company’s liquidity and protecting customer funds. However, under Corzine’s tenure, the company’s cash management, liquidity monitoring, and regulatory compliance functions remained fragmented among several of the company’s departments. MF Global lacked any formal liquidity management framework, and the company could not fully assess and anticipate its liquidity needs. Under Corzine’s leadership, the company failed to address concerns raised in an internal audit suggesting that MF Global’s liquidity tracking and forecasting capabilities lagged behind the firm’s evolving business needs. Consequently, MF Global was unable to coordinate its activities during the liquidity crisis in its final days of operation. As the company struggled to find additional liquidity, company employees identified excess company funds held in customer accounts. However, because they did not have an accurate accounting of the amount of customer funds the company held, they withdrew customer funds as well as company funds. Prosecutors and MF Global’s regulators will determine whether the company or its employees violated laws or regulations when these withdrawals were made. However, the responsibility for failing to maintain the systems and controls necessary to protect customer funds rests with Corzine. This failure represented a dereliction of his duty as MF Global’s Chairman and CEO.
Granted, it’s not much a revelation that Corzine is responsible for driving the company into the ground – and there’s a big leap between being a bad business person and being a criminal – but what gives us hope is the report’s conclusion that the responsibility for failing to guarantee the sanctity of segregated funds also lies with Corzine.
Does this mean we can expect a criminal case against Corzine? We’re not holding our breath, but we’ll gladly take this as a step in the right direction.