Article Image
News Link • Economy - International

Mirabile Dictu! Someone (Bankruptcy Trustee Freeh) Finally Sues Jon Corzine Over MF Global

• http://www.nakedcapitalism.com, by Yves Smith
 MF Global bankruptcy trustee Louis Freeh filed suit against Jon Corzine and two other MF Global executives, Brad Abelow and Henri Steenkamp, for running the firm into the ground for breach of fiduciary duty of care, breach of fiduciary duty of loyalty, and breach of fiduciary duty of oversight. That’s legalese for doing a recklessly bad job of being in charge.
 
The suit does not include the issue that has many members of the investing public outraged: the appropriation of customer funds. But even though the specific failings are familiar to anyone who has been following this sorry affair closely, reading them together is a reminder of just how astonishingly irresponsible Corzine was as an executive. One of the basic requirements of a trading operation is you need to have solid controls and reporting. Yet Corzine instead entered into a outsided trading strategy that produced accounting earnings but drained liquidity. It’s frustrating that the suit misses this element, that the trade actually had a two day funding gap on top its other defects, including the fatal one, the risk of increased haircuts on a levered trade. That meant it drained cash even when it was showing accounting profits.
 
 

Freeh v. Corzine et al., April 23, 2013

Join us on our Social Networks:

 

Share this page with your friends on your favorite social network: