MF Global update: Bankruptcy trustee (& ex-FBI dir) Louis Freeh protecting investors over customers

An update on the ongoing MF Global story.

MF Global is the brokerage firm that Top 0.01% poster boy Jon Corzine tried to turn into a junior Goldman Sachs (with its own proprietary trading and investment operation).

Using MF Global’s own money, he ran the company into the ground (actually crashed it against the reef of the EU sovereign debt crisis by betting the wrong way). Then he and his friends appear to have covered the company’s bets with customer cash.

Then they voted themselves bonuses. Then they went bankrupt. Then ex-Senator ex-Governor ex–Goldman CEO Corzine totally failed to get arrested. It’s the old old story.

So, the latest:

The various forensics accounting operations are still looking for the money, specifically about $1.2 billion in unfound customer funds.

The investigation into MF Global is intensifying as federal authorities unearth new details and confront potential obstacles in their hunt for roughly $1.2 billion in customer money that disappeared from the brokerage firm.

While prosecutors and regulators have jointly conducted dozens of depositions with former and current employees, a senior official in the Chicago office of MF Global recently declined to meet with the federal authorities, people briefed on the investigation said.

That official, Edith O’Brien, a treasurer at MF Global, is considered a “person of interest” in the investigation, the people said. Federal authorities suspect that she transferred about $200 million to JPMorgan Chase in London on the eve of the bankruptcy of MF Global, money that turned out to be customer cash.

That “person of interest” item doesn’t mean they think Ms. O’Brien did anything wrong, but they need her testimony. She “balked at meeting voluntarily, asking first to strike a deal with criminal authorities that would excuse her from prosecution.” Maybe suspicious, maybe just careful. Either way, they need to find the MF Global money sent to JPMorgan Chase.

Be sure to notice JPM Chase’s fingerprints on the cash. There’s some indication that Jamie Dimon‘s bank is using the MF Global money they’re holding to pay off MF Global debts to themselves first, without involving that pesky court.

Ex–FBI director Louis Freeh, who was appointed “bankruptcy trustee” has refused to release some MF Global documents, claiming “attorney-client privilege”:

MF Global’s bankruptcy trustee, Louis Freeh, has refused to turn over some documents to the Commodity Futures Trading Commission (CFTC), which is investigating what happened to an estimated $1.2 billion (774.6 million pounds) in missing customer funds, the Wall Street Journal said.

Freeh, a former director of the Federal Bureau of Investigation and who represents MF Global’s parent company, has asserted attorney-client privilege in deciding not to release certain documents to the CFTC, according to his office and people familiar with the matter, the Journal said.

The dispute is complicating efforts to learn how the firm lost the customer funds and to return the money to its owners and could slow the investigation, the Journal said, citing people familiar with the investigation.

“Bankruptcy trustee” has a nice, innocent, even-handed sound. In fact, Freeh’s job is to protect the company (what’s left of it) and its investors.

Experts say it is common for trustees to assert attorney-client privilege in such cases to protect the interest of the company’s creditors and shareholders, whom the trustee represents.

As Atrios says:

The way the carcass of MF Global, led by Louis Freeh, is going to deal with the people it stole from should be a warning to everyone. Your money is not safe with these firms.

You can see why I use the term “retainer” for guys like Freeh, can’t you? He’s literally doing the bidding of some banks & investors, duking it out with other banks & creditors, against the interests of the 99%, in this case, actual customers whose property the dueling 1% organizations are trying to steal.

Freeh is a well-paid messenger boy, a hired gun. His ex-FBI past, in their minds, gives him cred, as does that bland “bankruptcy trustee” title. In fact, his role in all this reduces the cred of the FBI.

After all, if Freeh is a retainer now, to what extent was he a retainer before? Are they all “hired guns” — even the big guy? After all, he won’t get really rich until he’s out of office; and Thank You Street wants its hamburger today.

Will Jon Corzine ever be indicted? (Dumb question, I guess; is the Pope Catholic running a pedophile protection operation?)

More as it develops.


Gaius Publius is a professional writer living on the West Coast of the United States.

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