The Truth about Jon Corzine’s Defense

31 | By Shah Gilani

If it walks like a duck, quacks like a duck, and poops like a duck, it’s a duck.

Unless, of course, the duck is Jon Corzine, a man who knows how to duck being a duck.

As you may well remember, J.C. (not Jesus Christ, though there was a time…) took the helm of global financial derivatives broker MF Global in 2010 and oversaw the roasting and bankruptcy of the firm in 2011.

It took a while, but the Commodity Futures Trading Commission (CFTC) just filed suit in U.S. District Court in Manhattan this past June, claiming about $1 billion in customer money was transferred from segregated accounts at MF Global to try to prevent the company’s financial collapse. The CFTC’s 47-page complaint calls out Corzine for making decisions that put customer accounts at risk in violation of rules prohibiting such transfers.

Using customer money to essentially meet margin calls on your huge European sovereign debt bets is a regulatory no-no.

Unless you know just how to duck the charges…

On Tuesday, Jon Corzine, “The Duck of Death” (that’s how Gene Hackman reads the cover of a book being written about gunslinger Richard Harris in the Clint Eastwood film “Unforgiven”) had his lawyers spit back at the Commodity Futures Trading Commission’s charges.

The Duck’s lawyers said the charges should be dismissed because “there is no evidence demonstrating that Mr. Corzine knowingly directed unlawful conduct or acted without good faith.”

In their 30-page motion, Corzine’s lawyers said, “even if the facts alleged were established at trial, they still would not support liability on either count” and added the agency’s complaint is based on “irrelevant allegations calculated to sully Mr. Corzine’s character.”

The Duck is trying to duck the charges by saying he didn’t make the transfers, and didn’t make anyone make the transfers, and if the transfers were made, well, good luck finding his fingerprints on any keystrokes or notes to employees he wasn’t directly responsible for, on account of the fact that it was a big firm, you know.

The CFTC also charged MF Global’s Assistant Treasurer, Edith O’Brien, saying she aided and abetted the violations. She also requested on Tuesday that the court dismiss similar charges against her.

Her lawyers say the CFTC’s “theory” that O’Brien was complicit is “doomed” because it implies she couldn’t have “knowingly and intentionally” moved customer money.


It seems that on account of there not being any J.C. fingerprints anywhere on the transfers, the CFTC wants the Court to believe that O’Brien made the transfers based on instructions, directly or implied, or on account of knowing her boss’ bad bets were drawing unwanted attention and creditors were calling in loans, kind of like a margin call.

According to the Wall Street Journal, “The CFTC’s complaint detailed the chaos of the firm’s final days in October 2011 as executives scrambled to keep the firm afloat. Ms. O’Brien’s lawyers said the chaotic situation that the CFTC described proves she couldn’t have known she was moving customer money.”

Here’s what the lawyers said in the filing to dismiss the charges: “If MF Global’s employees could not distinguish customer funds from proprietary funds in real time, then it was impossible for them to know whether any particular withdrawal from the customer segregated accounts in fact dipped into forbidden customer funds, much less intend to do so.”

Now, in case you missed that, there’s the “duck.” O’Brien’s lawyers said she couldn’t have known, when she was transferring money to creditors, whether that money was the firm’s money or customers’ money, because all Hell had broken loose.


Money had to be transferred precisely because, according to a November 2012 House Financial Services Subcommittee on Oversight and Investigations, funds were taken after MF Global employees “identified excess company funds held in customer accounts.” Because they did not have an accurate tally for the amount of customer funds the firm held, employees “withdrew customer funds as well as company funds.”

The CFTC is accusing Corzine of overseeing the misuse of customer funds and with “failure to supervise diligently.” But the whole “failure to supervise” thing misses the point that Corzine’s risk-taking paved the way for the firm’s collapse.

Here’s what gets me…

As the New York Times says, “The commission did not accuse Mr. Corzine of authorizing the breach of the customer money, or even knowing that the wrongdoing had happened. Instead, the suit hinges on his supposed failure to ‘diligently supervise’ the firm as it raided the client accounts. The suit also argues that Mr. Corzine was subject to so-called control person liability, a legal provision that allows for the punishment of executives for the acts of lower-level employees like Ms. O’Brien.”

Corzine’s lawyers answered that he “did not direct anyone to determine whether” MF Global was raiding customer accounts, but stopped short of claiming that Corzine had “any reason to believe” that the money was in jeopardy.

Why would The Duck of Death have any reason to want customer monies transferred? Maybe it could possibly, allegedly, have had something to do with the giant off-balance sheet bets he was making on European sovereign debt that were going against him, and had gotten found out and were causing creditors to call in loans.

Not that this matters, but this wouldn’t be the first time J.C. had made some large bets that went against him…

Corzine reached the pinnacle of Wall Street success when he became co-CEO of Goldman Sachs in 1994, in spite of the fact that the trading he supervised had huge losses from shorting the British pound, at almost the same time he was appointed to succeed departing chairman Stephen Friedman. Those risky trades reportedly lost Goldman almost $2 billion.

The trading bets that went south back at Goldman in the mid-1990s failed to derail his rise. But those that he tried to oversee nearly two decades later proved his undoing.

According to the House subcommittee report, “Corzine kept these trades off the firm’s books, hiding the full extent of the risk it was taking on while maintaining an ‘authoritarian atmosphere’ that prevented subordinates from questioning his decisions.”  

The firm’s big European positions were publicly disclosed in May of 2011 in public filings. But in October, regulators asked the firm to hold additional capital because of the trades, bringing them to public attention and panicking the market. A Moody’s downgrade a few days accelerated the firm’s downfall.

As the company faced a liquidity crisis in its final days, the House report says, Corzine’s failure to implement “the systems and controls necessary to protect customer funds” led to transfers from these accounts and the eventual shortfall in customer funds.

When the firm folded, some 38,000 customers were left in the lurch. Customers who traded on U.S. exchanges have since received roughly 80% of their money back, but customers trading on foreign exchanges have recovered just 5%, according to the court-appointed trustee tasked with recovering the funds.

Some $1.6 billion of customer funds went missing, and hundreds of jobs were lost.

But it wasn’t Jon Corzine’s fault. If it was, or if there was any real proof it was his fault, surely there would be criminal charges filed somewhere.

Alas, there are only the CFTC civil charges. And even those are being threatened by legions of lawyers defending the poor wee Duck who got squashed trying to cross the road remaking his new firm into another ego-inflating Goldman Sachs wannabe contender.

Maybe I’m wrong. But if it looks like a duck and you-know-whats on everybody, I say it’s a DUCK!


31 Responses to The Truth about Jon Corzine’s Defense



    • Andy Schuck says:

      Instead of keeping tabs on EVERYONES’ phone calls in the US…how about just focusing on the sleazeball financial guys. Oh, add in the sleazeball politicians AND track all the calls back and forth between these two groups of sleaze balls !!

    • Harry Morgan says:

      I whole-heartedly agree with you Howard. Furthermore I think anyone who thinks Corzine is innocent is a crook (or at the very least needs to have their head examined).

  2. gerald hirsch says:

    The real culprits are the government “ducks” whose job it is to watch over the markets and the market
    makers–red flags were up all over–huge trades, short positions and wire transfers should have supplied
    enough leads for the government “ducks” to waddle after. Shame that no heads rolled at any gov
    agencies or do empty heads not roll?

  3. Frank Payne says:

    Boy do these slime balls do everything possible to wriggle out of complicity in doing wrong. Has he not heard of the saying “The buck stops here” One of his compatriots used the same “defence” strategy when he headed up Barclays in the UK. Looks like the American banking system is the undergraduate study class for all financial crookery at home and abroad. What a dog and pony show!!!

  4. Constance says:

    I agree with Gerald Hirsch. Organisations are put in place to watch for red flags. Why isn’t there any blame and punishments for those who dropped the ball and allowed this to happened. Those people were probably paid off as well. The IRS doesn’t seem to have any problems catching the little people who might gain a few hundred bucks by creating a deduction here or there. Greed never ceases to amaze me!

  5. Todd says:

    Apparently by reading the comments, a few people are aware which way the wind blows, down wind from the rich elite. Will we ever rise up as a people and create a true democracy and share all the resources this planet offers fairly? I don’t know but IMO it has never happened yet, and seems more unlikely all the time.

  6. L McDonald says:

    Corzine got his training at a place where they mastered the art of creating a financial product to be sold to fools and shorting it as they bought it. The use of segregated funds at MF Global was thievery and JC was the chief thief.

  7. johnathan says:

    By not taking a criminal action case against against Corzine, this probably blocks CFTC from access to all the calls/mails/texts/tweets made by the individuals involved, it’s all there on NSA records, if they really want the truth, the info is there,the willingness to go with procedures that would enable potential prosecutors to collect it, is not. ducking and diving, scheming and conniving, all part of the days work on Wall Street

  8. Benton H Marder says:

    A simple question here. How much did Corzine pay in protection money to whom to keep his thieving ass out of jail and still have some pocket change left over? He had to have paid off the regime. After all, he was a major bundler for our glorious leader. This is the New Africa, the Age of Obama. Oh, another point. How much has he paid the hard men to keep from getting wasted for his theft.

    • Tsee says:

      Here is why your “JC” is not going to be found responsible. Will the New York Fed and the accountability for its oversight or lack of oversight be made transparent? Has anything really changed since the six-month period between the Bear Stearns merger (March 2008) and the Lehman failure (September 2008)? If the New York Fed was “watching the store,” did they miss the clues for lack of skill, or were they deceived by MF Global?

      I like the way the government regulations require investing firms disclaimers, investors beware. Then when the crooks rob you, they charge them, fine them, keep the money and then leave the investing public with the notion that you were informed.

  9. Richard Waldren says:

    The govt. is putting on this mentality that we know what is best for you morons and moronetts. This is aptly demonstrated in our schools by turning out idiots who can not spell, compose sentences, do simple math or even think for themselves. Instead being told that the govt knows what is best. Our president, the republican party and the democratic party could give a squirrels rear end as to what is best for America and its people. This whole thing is about bringing America down to make a one world govt. This is done slowly so has to not cause to big a wave. I mean all you have to do is look at the stupid, moronic, dumb, incompetent, idiotic, dangerous policy our govt leaders are doing. For a starter, look at Uncle Ben with his wasteful use of taxpayer money. I am sorry people but you do know we have to pay this back. With what? And nobody is stepping in to say that this wrong. I could say a whole bunch more but I gotta go.

  10. MartinMayer says:

    If MF was run by a duck,
    It”s investors are now out of luck:
    Segregation deceived,
    Funds cannot be retrieved,
    No one did it, they just pass the buck!

  11. RDH says:

    Good information, as always, but this rather laborious attempt to connect with the line from Unforgiven is erroneous and tedious. And lame.

    The ‘Duck of Death’ line came from a mispronunciation of the book title/subtitle the ‘Duke of Death’. ‘Duck’ is connected to ‘Duke’ and thus has no connection to ducking a blow, ducking a charge etc etc.

    Given that nothing about Corzine or his ducking actions have anything to do with the word ‘Duke’, why is this rather silly connection being attempted?

    (This, of course, is far more important than the issue of mishandling billions of dollars’ worth of other people’s money … )

  12. terry l. thomas says:

    First of all, does anyone out there do THEIR OWN DUE DILIGENCE???

    My grandfather and father taught me, if you don’t understand the term and conditions, do not GIVE THEM YOUR HARD EARNED MONEY. If you do, live with the consequeneces. People will not be swindled and lose everything if they studied it before they invested.

    Promised higher returns without any regard to the actual market conditions is the well traveled path for these crooks. If you follow them, remember the adage “a fool is soon separated from his money”.


    I really do not feel to sorry for those that were “burnt” because they let one of the seven deadly sins interfere with their thinking – GREED!

    • dave says:

      Why bother? When the poop hits the whirly thing, those in charge can use any funds available and get away with it.
      Besides, the taxpayer will bail ’em all out, anyway. Corzine will walk.

  13. Kimbieson says:

    Watch he’ll get off scott free and it’s off to be President of the Federal Reserve Bank of NY…. next stop US Secretary of the Treasury!

  14. Phil Medway says:

    I recall that in testimony to Congress, Corzine admitted that he was receiving two margin calls per day (presumably on UK and US trading accounts). Corzine, O’Brien and anyone else at MF Global even remotely in touch with the action clearly new very well that they were “borrowing” customers funds. Maybe you could not reconcile a few thousand Dollars, but you would have had to be blind and stupid beyond belief not to notice $1.6B flooding out of the door.Unless maybe they thought that it was left by the tooth fairy.

    Just in case Biden decides to run for president in 2016, we should not forget that he famously claimed Corzine as the cleverest guy he knew. Takes one a**hole to recognize another!

  15. Peter Mothander says:

    During my 30+ yrs in international banking – I learned some basic “laws”
    that apply all the time….
    One is that the boss “know or should know” (no difference in applying the law)
    in de facto at all times the buck stops at the top. Sloppy oversight is no excuse.
    Secondly – Ms O’Brien, CFO – did not know what funds she was transferring
    – it was only $1B!!! – furthermore the ego boss was clearly aware of her transferring – stealing clients funds to save the sinking ship.
    Even if the firm was big(?) – only very very few executives are dealing in the
    $B league = CEO/Chm and CFO – the latter as called by ego CEO absolutely.
    The bank that executed the transfer should be questioned – also was not done
    by low level executives/VPs – but EVPs – especially as the firm was in distress
    In my “law book” – there is also something called “pater familiar” – we call it
    “common sense” – what a good father would use/do… – also applicable here.
    With so many lawyers in congress – maybe you all took a nap in law school
    or are so “impressed” by former colleague and GS executive – leaving others
    to pick up the tab…
    The twists and turns by lawyers and inability by old friends to indite JC is frightening for the American people 99%… insulting to all – and expensive.
    Who are responsible here again – or is it substandard Group Thank and the
    olde boys network…
    Maybe we should apply/use our common sense laws – and not letting white
    collar crimes and $1B disappearing….
    Maybe SEC, CFPB, etc… should do their job – including Banking Committee
    led by Senator Dr Warren suggesting plugging/identifying holes in legislation…

  16. Brad M says:

    Corzine’s trial will likely prove to be just another circus distraction. A billion lost here, a few billion sent there, who counts or cares anymore ? What about the 2 trillion Rumsfeld said could NOT be accounted for by the department of defense ( on Sept 10, 2001..the day before our country changed forever )? The deception, corruption, and circus of a collapsing once great nation.

  17. Rev4Q says:

    Why will JC not be charged by the feds? Who runs them? Eric Azzhol der. Who is his boss? BHO Who did Joe Biteme say was there go to guy on finace? JC. How much money did JC bundle for Obummer in 2008? A absolute s@#$t load. That was his get out of jail free card, and he used it.JC might be going to Hell but he won’t be going to any of Holders jails.

  18. Howard Walter says:

    It was Truman who said” “If you can’t take the heat stay out of the kitchen?”.
    The legal profession, has watered down that heat to the point, these people like all CEO’s, are well protected against it. l like the Japanese integrity model. If a CEO fails in his job… he is willing to spend time in jail, because he has lost his integrity….. this shows us there is no integrity in business or the legal profession……

  19. R3P3T3 says:

    I like your “Duck of Death” analogy. Those who don’t, take life a little too serious. Not good. Yes, SEC asleep at the wheel again, but JC has nothing to fear, Obama will probably pardon him.

  20. sheri says:

    Once again kudos for your sharp observations and willingness to share them.
    I have read a lot of Corzine’s recent “research” and frankly I think he is a financial buffoon or worse, i.e., a criminal.
    Thanks for confirming my instincts.

  21. John B says:


    Thanks for the insight and as usual there was excellent commentary thereafter.

    Do not worry folks our government is in hot pursuit of the restaurant workers (again) who allegedly are not reporting their tips. Easy pickings for the IRS as certainly they cannot afford a lawyer on below poverty wages. But you can rest assured that when all that escaped tip money is collected, we will be well on our way to eliminating that 16 plus trillion dollars of debt that is hanging over us like an “A” bomb

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