MF Global Looted Customer Accounts

MF Global Looted Customer Accounts

November 25th, 2011 

 

By Stephen Lendman

Wall Street's business model is grand theft. Jon Corzine was MF Global's CEO. Earlier he headed Goldman Sachs, America's premiere racketeering organization.

He also was one of legions of corrupt politicians as US senator and New Jersey governor. His extreme, longstanding criminality warrants putting him in prison for life. No restitution can reverse his harm. It's true also for many others like him.

Before its collapse, MF Global (MFG) faced a run on its holdings. On October 31, it filed for Chapter 11 bankruptcy protection.

On November 19, Reuters said the firm "moved hundreds of millions of dollars in customer money from its US brokerage unit to Bank of New York Mellon Corp. in August, just months before filing for bankruptcy...."

In other words, MFG lawlessly looted customer accounts. It used client money for its own purposes to speculate, as well as cover debt obligations and losses. At issue is grand theft.

In fact, it's one of the most brazen acts in memory in a business notorious for outrageous criminality. What ever's gotten away with incentivizes Wall Street crooks to steal more. Why not! At most, they're slap on the wrist punishments mock rule of law justice.

On November 19 on the Kaiser Report, Barry Ritholtz commented on the big lie, hyper-leveraged banks, the MFG scandal, and congressional political whores, saying:

People responsible for creating these problems shift blame to others. Facts say otherwise. Wall Street speculators take big risks. They use hyper-leverage that's only effective when it works.

"Their models were wildly optimistic. Banking is supposed to be very boring." Decisions are supposed to be made about who's credit worthy and who isn't. Instead, reckless speculation replaced investing and sound lending policies.

Wall Street's ideology is bankrupt, "and it's causing global damage to the economy. For investment banks, the five biggest houses got waivers on leverage rules."

SEC collaborators rigged the system for them. These banks also "happen to be the five biggest donors to Congress," or among the largest. Over time, successful lobbying removed everything affecting profits, no matter the risk. The SEC, Fed, FDIC and CME rigged the system for them.

Brazen fraud became standard practice. Criminals deserving prison keep stealing. The dirty game involves grabbing "whatever the hell you want and run for the hills. No one will prosecute you."

"MF Global is another order of magnitude. If anyone is going to jail over this whole period, it has to be" their top officials. Don't bet on it, especially a power broker like Corzine.

He's directly responsible for stealing $1.2 billion in client funds. He looted them brazenly. According to Bloomberg:

"Examiners from CME Group Inc., the world's largest futures exchange, found unexplained wire transfers" and $1.2 billion missing "during the weekend the failing broker was talking with possible buyers, a person briefed on the matter said."

Multiple investigations began, including by Justice Department lawyers. The Commodity Futures Trading Commission (CFTC) and Chicago Mercantile Exchange (CME) were responsible for overseeing MFG. They knew what went on but did nothing.

Huffington Post writer Daniel Dicker said the Koch Brothers were tipped off in time to get out safely. Others weren't as lucky.

MFG is America's eighth largest bankruptcy, the first major one the Eurozone crisis caused. Expect more ahead.

Practices cratering economies in 2008 continue. Nations teeter on bankruptcy. Corzine bet heavily that Spanish and Italian debt wouldn't collapse.

Using 40 to 1 leverage, he bet massively the wrong way. His second quarter $190 million loss drove investors away. Those remaining lost everything. Corzine and top executives pocketed millions.

In 1999, he was worth an estimated $400 million when he left Goldman Sachs. Perhaps its double that now, including funds looted from MFG. We may know more later on.

From 1994 - 1994, Corzine headed Goldman Sachs during the time banking became deregulated. Carter began it late in his tenure. Reagan did much more. Clinton completed unfinished business. James Petras calls the 1990s "the golden age of pillage," the decade of anything goes.

It persists in the new millennium because political Washington and regulators look the other way, profiting handsomely by doing it. Everyone feathers nests belonging to others. Self-sustaining corruption continues. Only little people and unknowing investors get scammed. Power brokers make out like bandits.

After losing his 2009 gubernatorial reelection bid, government regulators welcomed Corzine back on Wall Street. New York Fed president William Dudley (a fellow Goldman alumnus) made MFG a "primary dealer." Despite its size and a former trading scandal $10 million fine, it became one of a handful of firms marketing US Treasuries.

At the behest of Corzine and other power brokers, CFTC head Gary Gensler suspended implementation of new rules imposing limits on broker-dealer use of client funds, especially for foreign sovereign debt. In other words, they were freed to commit grand theft. MFG took full advantage.

Wall Street Journal Money & Investing editor Francesco Guerrera wrote about "Three Lessons From the Collapse." He quoted University of San Diego Professor Frank Partnoy, saying:

MFG's "failure illustrates how much financial markets are about trust and confidence. Once you lose those, you are done."

Guerrera's three lessons include:

* closing accounting loopholes and strengthening oversight;
* establishing lead regulators for nonbank financial firms; and
* writing new rules for "nonsystemic" firms as well as "too big to fail" ones.

Dodd-Frank financial reform left a broken system in place. The entire law needs rewriting. Better still, scrap it and start over. Stiff regulations with teeth are needed, including mandatory prosecution of crooks, especially those highest up to let others know invulnerability days are over.

When culpable CEO heads roll, it'll be a good start. However, game-changer differences won't happen until all high level Wall Street swindlers wear numbered striped suits.

Trends forecaster Gerald Celente lost $100,000 in an MF Global gold futures account. He told Russia

Today:

"I really got burned. I got a call," saying "I needed to have a margin call. (W)hat are you talking about," he asked? "I've got a ton of money in my account. They responded, oh no you don't. That money's with a trustee now."

His advice for everyone holding gold ETFs is cash out because "they are going to steal all our money." Angry about MF Global's theft, he called Corzine a "cheap SOB." He's that and much more.

"How come he's not in Jail," railed Celente. It's "because he's one of the white shoe boys from the Goldman Sachs crowd." He added that "the merger of state and corporate power" brought "fascism" to America.

The entire system's too corrupted to fix. Only tearing it down and starting over can work. It's high time the process started. Hopefully, OWS protests began it.

Rumor has it that JPMorgan Chase and perhaps other Wall Street banks are involved. Judge Martin Glenn is handling MFG's bankruptcy. HL Camp, Proprietor of HL Camp Futures, wrote him as follows:

"Our firm is a registered introducing broker with the CFTC. I have written to you previously on behalf of our customers."

"Here is a comment this morning from one of our former customers in Europe," saying:

"I will never do business in the United States of America again."

According to Camp, "(t)he system is to protect futures accounts is broken. And the whole world knows it."

"What started as a failure of one FCM (Futures Commission Merchant) that quickly gave a black eye to the CFTC and especially the CME has now made our United States of America a very bad joke to commodity futures traders all over the world."

"The problem this morning is not just excess margin equity."

"The problem this morning is the reputation of the United States of America."

"Thank you very much for your time and for listening."

Forbes staff writer Robert Lenzner said traders and clients didn't know about MFG's unscrupulousness.

He said a CFTC loophole lets firms speculate with segregated client accounts. Few know it without carefully reading contract fine print or getting sound legal advice.

Lenzner's lesson one is CFTC Rule 1.29 must be scraped. It lets futures commission merchants gamble with client funds.

Lesson two is knowing personal funds aren't safe in futures metals, energy, precious metals, or agricultural futures accounts.

Lesson three is resolving which regulator oversees firms like MFG - the CFTC or CME. One should have primary responsibility and be held accountable for fraud.

Lenzner added that Justice Department attorneys are determining whether federal crimes occurred. He expects a lengthy process because MFG's books "are in a state of chaos," deliberately no doubt.

Whether anyone ends up indicted isn't sure. At most perhaps, expect lower level patsies hung out to dry to let crime bosses like Corzine stay free to steal more. It's how it always works.

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Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.

Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.

http://www.progressiveradionetwork.com/the-progressive-news-hour/

http://blogs.alternet.org/speakeasy/2011/06/18/the-mayors-have-had-enough-of-these-useless-costly-wars/

Posted by Robert Greenwald at 1:11 pm
June 18, 2011

3 COMMENTS

The Mayors Have Had Enough of These Useless, Costly Wars

By Robert Greenwald and Derrick Crowe

The Afghanistan War costs American taxpayers more than $2 billion a week at a time when communities are falling apart, and our mayors are fed up. On Monday, the United States Conference of Mayors is expected to pass a resolution calling for a speedy end of the Iraq and Afghanistan Wars so we can use those funds here at home. The mayors are exactly right.

You can put the New York Times’ summary of the crises these cities are facing next to the National Priorities Project’s numbers and see how much these wars cost our hometowns.

• Citizens of Lansing, Michigan, paid $114.2 million on the Afghanistan War so far, and New York City paid $15.4 billion; these cities are about to have to close fire stations.
• Montgomery, Alabama paid $199.3 million and Philadelphia, Pennsylvania paid $1.7 billion; these cities are laying off teachers.
• Minneapolis, Minnesota paid $692.3 million; now they can’t fill potholes.

And here’s the big picture: “Local governments shed 28,000 jobs last month, the Department of Labor reported, and have lost 446,000 jobs since employment peaked in September 2008.”

These wars are killing our people, they’re killing our economy and they’re killing our communities. They’re not worth the costs. They’ve got to end.

The Defense Department is working overtime to stop any real drawdown from either country. They’re trying to fool us into thinking they’ve started a “drawdown” already by shuffling troops from Afghanistan to Kuwait (read: Iraq). They’re pushing for a fig-leaf withdrawal of a few thousand troops. That’s unacceptable.

Next week, President Obama is expected to make an announcement about his intentions for a troop drawdown from Afghanistan. He needs to do the right thing by our troops and by our communities and end these wars for good, starting with a major, swift and sustained withdrawal of troops from Afghanistan. Enough is enough.

If you’re one of the millions of Americans who want to end the Afghanistan War, join Rethink Afghanistan on Facebook and Twitter.

At Least We Still Can Go Broke: Alan Grayson

posted previous to the vote to cut $38 BILLION dollars from the US budget - services we NEED.  Here are some enumerated.  We cannot wait until 2012 to do something .. that's why we have US Uncut.org.  The arguments need reframing, but here are some "dots" to use.

byAlan Grayson

Alan Grayson

Unless you’ve been living in a cave recently – Osama, you can stop reading here – you know that the Republicans have blocked the passage of the appropriations bills that apply to all federal spending between April 8 and September 30, so we are facing a government shutdown.

And as the White House has patiently pointed out, that means no more government-backed mortgages, which now account for 95% of the housing market.

No more government student loans. No more government small-business loans.

No pay for the troops, who are now embroiled in three wars.  They still have to fight.  They just won’t be paid for it.  Despite the Thirteenth Amendment.

No tax refunds, just one week before taxes are due.

No federal grants for roads, schools, or pretty much anything else.

No new medical research at the National Institutes of Health.

And hundreds of thousands of federal employees added to the unemployment rolls.

But there is one thing that you can still do, if the government shuts down.

You can go broke.

I’m a licensed attorney, and yesterday I received this cheerful reminder from a bankruptcy court to which I’m admitted:

“The Court will continue to operate, business as usual, on Monday, April 11, 2011.”

The staff, the bankruptcy court explained, will be paid out of “fee revenue and other sources.”  Anyone who wants to petition for bankruptcy will be welcome to do so.

So there it is.  When the Republicans shut down the government, health and safety, housing and even transportation are all at risk.  But the one thing that you can be sure you can still do is . . . go broke.

For the bankruptcy courts, it’s “business as usual.”  And the bankruptcy business is booming.

But leaving that one exception to the government shutdown aside, it’s now official.  The Party of No is now the Party of No Government.  The Party of Anarchy.  The Party of Chaos.

And remember this:  The White House and the Democratic Leadership have agreed (rightly or wrongly) to what the Republicans originally demanded for the 2011 budget -- $30 billion in social spending cuts.  Yet now the Republicans are demanding twice as much:  $60 billion in 2011 social spending cuts.

But just three months ago, the Republicans insisted on $70 billion in 2011 in tax cuts for the rich.  I’m pretty sure that $70 billion is more than $60 billion, any way you look at it.  So except for those tax cuts for the rich, we wouldn’t be having this argument.

Please make a note on your calendar.  November 6, 2012.  Election Day.  That’s when it will be our turn to punish them, the way that they’ve tried to punish all of us.

Courage,

Alan Grayson