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TMFAleph1 (95.00)

Why Isn't Jon Corzine In Custody?

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March 26, 2012 – Comments (29) | RELATED TICKERS: GS , JPM , GLD

Why Isn't Jon Corzine In Custody?

[The title is a bit heavy-handed, if you ask me, but I didn't choose/ approve it.]

 

29 Comments – Post Your Own

#1) On March 26, 2012 at 7:28 PM, wolfman225 (65.43) wrote:

Political connections.

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#2) On March 26, 2012 at 9:58 PM, rd80 (98.18) wrote:

Because even a former Goldman CEO, NJ governor and US senator is innocent until proven guilty.

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#3) On March 27, 2012 at 1:15 AM, awallejr (81.20) wrote:

Agreed Rd80 but to be candid either he is an incredibly stupid person by not keeping tabs on his company or he is a complicit crook.  There really isn't any middle ground here.  His "legacy" has been completely destroyed.  That is probably worse than jail for him.

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#4) On March 27, 2012 at 8:59 AM, TMFAleph1 (95.00) wrote:

@awallejr

I don't agree -- managing a company doesn't mean being aware of every action of every employee. However, we could argue about whether management was sufficiently diligent in ensuring that the proper controls were in place.

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#5) On March 27, 2012 at 10:52 AM, OneLegged (< 20) wrote:

Because well connected bankers are truly above and beyond the law in this country. How many cases of unindicted fraud/corruption by bankers do we need to witness before believing this? Corzine isn't innocent until proven guilty. He is innocent no matter what.

TMF, what of the very recent allegation that Corzine personally authorized the transfer of customer money to cover a margin call?

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#6) On March 27, 2012 at 11:18 AM, awallejr (81.20) wrote:

TMF I am not talking about delegated routine matters.  The company was in crisis.  With his background you would expect him to have hourly meetings and monitoring of the financial situation and accounts.  Having 1.6 BILLION dollars disappear under his nose means, imho, that he was an incredible incompetent or complicit to some degree.

And OneLegged, absent any written proof that Corzine gave that authorization or other collaborative evidence I suspect his lawyer will use the "he said/she said" approach in the end.

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#7) On March 27, 2012 at 12:54 PM, TMFAleph1 (95.00) wrote:

@OneLegged

Read the NYT article (E-Mail to Corzine Said Transfer Was Not Customer Money, NYT, 03/25) -- there are no allegations that Corzine knowingly authorized the transfer of cutsomer funds to JPMorgan Chase. In fact, Corzine was told that this transfer was a "house wire" meaning that it originated from a MFGlobal house account (i.e. not a customer account.) However, that house account was had earlier been funded by $200 million in customer funds.

No-one is alleging that Corzine ordered or was even aware of this earlier funding transfer -- there is no evidence of this. If you know differently, I would be happy to look at your sources.

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#8) On March 27, 2012 at 12:58 PM, TMFAleph1 (95.00) wrote:

And OneLegged, absent any written proof that Corzine gave that authorization or other collaborative evidence I suspect his lawyer will use the "he said/she said" approach in the end.

Right now, it's more like "he said, she didn't say" -- O'Brien has refused to cooperate with investigators and will be taking the Fifth at Wednesday's hearing. The evidence increasingly suggests that misconduct took place with or around O'Brien, not Corzine.

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#9) On March 27, 2012 at 6:55 PM, awallejr (81.20) wrote:

Wouldn't surprise me that O'Brien would clam up since it is looking like Corzine might make her the fall "gal." I would suspect that she might turn evidence against him.  I find of particular interest the conversation Corzine had with a former employee, Barry Zubrow.  I am sure they will try to cover for each other but Corzine's actions calls his complicity into question.

We are to honestly believe that Corzine, after being told he had to cover an overdraft of $175 million asap, that he called in a person (O'Brien) who was basically standing in for his regular financial officer Christine Serwinski (who God knows why didn't cut her vacation short in light of the crisis), to urge her to just fix the problem?  That he wouldn't at least discuss HOW to fix it?

And then when it was "fixed" he wouldn't again at least ask HOW it was fixed?  And that O'Brien didn't tell him about the 2 transactions?  Please.

And of additional interest is JPM's insistence on getting some broad compliance letter to presumeably cover their butts.  Surely someone there must have had concerns, perhaps from Zubrow?

If Congress doesn't recall Corzine and do a better job at drilling him then the fix really is in.  And if they do recall him it wouldn't surprise me that he invoke the 5th.

 

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#10) On March 27, 2012 at 8:06 PM, TMFAleph1 (95.00) wrote:

@awallejr

We are to honestly believe that Corzine, after being told he had to cover an overdraft of $175 million asap, that he called in a person (O'Brien) who was basically standing in for his regular financial officer Christine Serwinski (who God knows why didn't cut her vacation short in light of the crisis), to urge her to just fix the problem?  That he wouldn't at least discuss HOW to fix it?

No-one was standing in for anybody -- you're confusing functions. CFOs are not responsible for arranging transfers to trading counterparties -- neither are CEOs, by the way. You seem to think that CEOs are by essence micro-managers -- that's not the idea.

And then when it was "fixed" he wouldn't again at least ask HOW it was fixed?  And that O'Brien didn't tell him about the 2 transactions?  Please.

He did ask her how it was fixed and she informed him that the transfer was a "house wire". If O'Brien did break the law by transfering client funds, I can easily believe that she didn't tell Corzine about both transactions. Use your head.

And of additional interest is JPM's insistence on getting some broad compliance letter to presumeably cover their butts.  Surely someone there must have had concerns, perhaps from Zubrow?

That JPMorgan had concerns is self-evident, but you can't conclude anything from that.

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#11) On March 27, 2012 at 8:35 PM, TheDumbMoney (48.27) wrote:

Somebody committed a crime.  But based on the limited evidence so far I tend to think it was not Corzine, however thematically attractive a target he might seem. 

I will posit another scenario, potentially more troubling. What really interests me is Barry Zubrow's CYA letter about "PAST, present, and future" transfers. 

I think there is a nontrivial possibility that MF and JPMChase had a long history of not worrying too much about, or disclosing, what money was what, because MF had in the past always had capacity to manage its books and make sure all client money was ultimately accounted for and returned to clients on time.  This was if my hypothesis is correct an institutional problem, and quite possibly senior management were not even aware of it at MF.   (And at JPM they had never bothered to ask.) 

So then the fit hits the shan and you get this CYA letter from JPMorgan, attempting to put all blame on MF for any and all past errors, which were under this scenario, actually mutual.  And O'Brien balks, etc. 

Under this scenario, commingling had gone on for years, and Corzine's big bad trade simply blew the lid off the relationship.  When you think about it, was the Maddoff scandal a one-off?  Was the financial crisis created in a day?  Did actions of LTCM on the day of its crsis cause its crisis?   No times 4.  I see the distinction here, at least based on known facts.  But all were the eventual public explosions that resulted from long-term negative structural situations.  I don't bet on things like this, but I suspect one day we will find that this was such a stuation as well. 

His Dumbness

http://dumbmoney.tumblr.com/

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#12) On March 27, 2012 at 8:38 PM, TMFAleph1 (95.00) wrote:

Excellent contribution, dumberthanafool.

I entirely agree -- the scope of the letter struck me as a bit odd and your explanation is plausible and consistent with the evidence we have.

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#13) On March 27, 2012 at 9:09 PM, awallejr (81.20) wrote:

He did ask her how it was fixed and she informed him that the transfer was a "house wire".

And you believe that was all that was said or ever discussed?  This has nothing to do with micro-managing.  This had to do with stopping massive bleeding on a collapsing firm.  $175 million gap that needed pluging asap and he just passes it off to another person and goes on with his day never to inquire into the details?  You don't think it more plausible that O'Brien's e-mail actually was truthful, that Corzine gave the OK? Man he would love you on his jury.

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#14) On March 27, 2012 at 9:34 PM, TMFAleph1 (95.00) wrote:

You don't think it more plausible that O'Brien's e-mail actually was truthful, that Corzine gave the OK?

You obviously have not read the reporting regarding the substance of this e-mail and are just filling the gaps with your fantasies about Jon Corzine's culpability. It's difficult to argue with someone who doesn't have the facts.

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#15) On March 27, 2012 at 9:57 PM, awallejr (81.20) wrote:

I am using your article. 

1.  Mr. Corzine learned of the overdraft from Barry Zubrow, the top risk officer at JPMorgan who worked for Mr. Corzine at Goldman Sachs and when he was governor of New Jersey, a person close to the case said. Mr. Corzine then called Ms. O’Brien to urge her to fix the problem, the person said.

2. The Congressional memo cites a another e-mail from Ms. O’Brien, who authorized the transfer, saying it was “Per JC’s direct instructions,” referring to Mr. Corzine.

3. Shortly after the transfer was made, JPMorgan officials again called Mr. Corzine — this time for assurances that the money did not belong to customers.

4. Mr. Corzine called Ms. O’Brien, who confirmed that the transfer was proper, according to his Congressional testimony last year.

“I had explicit statements that we were using proper funds, both orally and in writing, to the best of my knowledge,” he told a subcommittee. “The woman that I spoke to was a Ms. Edith O’Brien.”

4. Ms. Delloso, however, still wanted assurances in writing that the transfer was legitimate. “Send me the letter and we’ll have our people look at it,” Mr. Corzine told her, according to a person briefed on the conversation.

It's is difficult to discuss these matters with a person who chooses to wear blinders. During the above chain of events it is simply unbelieveable that Corzine at NO POINT asked about the DETAILS of the transaction, ESPECIALLY when he was being asked to give written assurances to JPM that the transfer was proper.  If we are talking a $5,000 transaction perhaps, but not a $175 million one that was absolutely necessary. 

Testimony is evidence.  People can and are convicted of crimes based solely on jury perceived truthful testimony. More people need to be questioned, such as Zubrow, Delloso and Ferber.  But O'Brien's statement that Corzine approved the transfers makes a hell of a lot more sense than him blithely delegating without detailed questioning a corporate "life or death" transaction. 

As I said either you believe him to be an incredibly stupid and incompetent CEO or he had some complicity.

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#16) On March 28, 2012 at 12:28 AM, TMFAleph1 (95.00) wrote:

@awallejr

I'm going to politely request that you refrain from commenting on my blog posts in future. I only derive frustration from our exchanges and I can't imagine that you feel otherwise, so it is the height of absurdity to continue them.

I consider  that articles are more of a public good than blog posts (legally spreaking, articles are entirely the property of TMF, of course), so I'll refrain from extending my request to comments on my articles.

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#17) On March 28, 2012 at 9:08 AM, awallejr (81.20) wrote:

Alex I am going to reply as politely as I can.  If you can't handle disagreements that is your problem not mine.  Generally you tend to use ad hominems.  But when you entitle an article "Why Isn't Jon Corzine in Custody" expect controversy.

In the future just write at the end "please only respond if you agree with me."  That would probably stop me from replying to your articles and blogs.

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#18) On March 28, 2012 at 9:38 AM, TMFAleph1 (95.00) wrote:

The problem isn't arguing with someone who disagrees with me, it's arguing with someone who isn't well informed about the subject of the discussion. By the way, that isn't an ad hominem attack, it's a fact -- another one you're free to ignore.

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#19) On March 28, 2012 at 12:07 PM, awallejr (81.20) wrote:

No one knows the facts yet.  So what was the point of the article then? I presented a plausible argument in #15 using your NYTimes link.  While not enough to convict, it is certainly enough to warrant further investigation against Corzine.   Mark my words, if he is recalled to testify before Congress he will at some point plead the 5th. 

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#20) On March 29, 2012 at 7:42 AM, TMFAleph1 (95.00) wrote:

The problem with your theory compared to dumberthanafool's, for example, is that his is consistent with all existing evidence and testimony -- yours isn't.

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#21) On March 29, 2012 at 12:41 PM, awallejr (81.20) wrote:

Alex you don't want me to respond to your blogs.  Simply stop replying.  Of course I would be happy to continue. 

DTAF and your article and my argument are all speculation at the moment.  It is basically based on hearsay to a large degree.  Until depositions are taken and records traced then we would have more complete evidence.

I am going to ask a straight forward question.  If you were running a company that was starting to fall apart financially and you get a call from your bank saying they need $175 million asap.  After you hung up wouldn't the very first question you would ask youself is "do we even have that." 

Bookmark this because I am making 2 predictions.  1) O'Brien will become a government witness and 2)  Corzine will invoke the 5th if recalled for questioning or not take the witness stand if he is prosecuted.

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#22) On March 29, 2012 at 2:35 PM, TMFAleph1 (95.00) wrote:

These are not stunning predictions; certainly not worth bookmarking:

O'Brien will become a government witness

That would hardly be surprising. We already know that her lawyers have offered a proffer in a meeting with prosecutors.

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#23) On March 29, 2012 at 2:50 PM, TMFAleph1 (95.00) wrote:

I am going to ask a straight forward question.  If you were running a company that was starting to fall apart financially and you get a call from your bank saying they need $175 million asap.  After you hung up wouldn't the very first question you would ask youself is "do we even have that."

During its final week of operations, cash transactions into and out of MF Global totaled more than $100 billion. In that context, $175 million is a drop in the bucket. Resolving MF Global's $175 million overdraft at JPMorgan was not that high Jon Corzine's list of priorities at the time. Let me remind you that he was the CEO -- his number one priority at that stage was selling MF Global.

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#24) On March 29, 2012 at 4:40 PM, awallejr (81.20) wrote:

Didn't say they were stunning.  You are pointing the finger at O'Brien as per this comment The evidence increasingly suggests that misconduct took place with or around O'Brien, not Corzine. Feds won't use her as a witness if she can't proffer anything useful against Corzine.

But you really didn't answer my question.  We are basically talking about the final day of MF's existence.  Being told to send JPM $175 million asap that day would have been on any CEO's priority list imo since you can't sell that which will go belly up if the transaction isn't made. I am sure he had a computer screen on his desk.  It isn't that hard to punch up house account balances.

I submit there wasn't a quick two word "fix it" conversation between O'Brien and Corzine because that just doesn't make sense at that juncture. It will remain to be seen what O'Brien may eventually tell the Feds.

 

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#25) On March 29, 2012 at 5:10 PM, awallejr (81.20) wrote:

And giving it further thought I suggest the Feds get the telephone records to see if they can isolate the calls between O'Brien and Corzine,  What I would like to see is how many minutes were used.  If there was a 15 minute initial call, that would clearly indicate Corzine didn't just tell O'Brien to fix it.  And if it was a 2 minute call that would be more supportive to Corzine.

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#26) On March 29, 2012 at 6:56 PM, TMFAleph1 (95.00) wrote:

But you really didn't answer my question.  We are basically talking about the final day of MF's existence.  Being told to send JPM $175 million asap that day would have been on any CEO's priority list imo since you can't sell that which will go belly up if the transaction isn't made. I am sure he had a computer screen on his desk.  It isn't that hard to punch up house account balances.

How old are you?

Have you ever worked at a company that is too large to fit in a garage?

Apparently, you have no conception of the complexity of a modern, global financial institution like MF Global. I've worked in the software industry selling software to global investment banks and brokers. I can guarantee that no CEO of a financial insitution of MF Global's size has access to the software systems of the Treasury function. Even if they did, it would be of no use to them whatsoever because they wouldn't know how to use them to get the information they want. This isn't an iPhone app we're talking about -- only experienced professionals know how to use these applications.

I keep trying to explain to you that CEOs don't waste their time trying to master every function in their organization and they certainly don't waste their time learning the operational details of making a funds transfer to a trading counterparty. This is what you (and many Congressmen) appear to be missing.

This is why it's so frustrating for me to discuss the matter with you and a complete waste of my time: It's very obvious you have no idea of the context or operational environment in which these events took place.

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#27) On March 29, 2012 at 7:12 PM, TMFAleph1 (95.00) wrote:

btw, I won't be adding any further comments to this thread. If you're going to respond to get a rise out of me, don't bother.

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#28) On March 29, 2012 at 8:20 PM, johaba (< 20) wrote:

Entertaining back and foth.

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#29) On March 29, 2012 at 11:04 PM, awallejr (81.20) wrote:

That is the whole point of this website Billmac84, except Alex takes disagreements personally and loves ad hominems.  But I am a big boy and can handle it and try to steer the discussion away from the insults.

And Alex I am not talking about what events might occur during a normal day at a large firm.  We are talking about the very last day when the walls were crashing down around MF.  There is an old truism, desperate men do desperate things.  I submit Corzine was desperate that day.  He was just told by JPM (a fact) that he had to come up with $175 million asap or his company basically collapses.

Now I will ask you the question again, if YOU were in that situation wouldn't the first thought be "do we have the money?"  And I submit if you took a poll 99% would answer it yes.

It is a fact that he had a telephone conversation with O'Brien.  It will become a possible fact that we can find out how long that conversation was.  The longer it is the more likely he discussed with her how to handle the situation, knowing that house funds weren't there.  Because otherwise it would have been a quick conversation. 

O'Brien said Corzine gave the ok to move funds from a customer account to a house account as per her written e-mail.  That is a fact that she wrote that.  Corzine uses the typical weasil line of "to the best of my knowledge" that the funds were proper.  Potentially a he said/she said as I stated earlier. And that is why he will never take the witness stand.  His lawyer will want to simply create reasonable doubt. 

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