Jon Corzine, Victim

How dumb does Jon Corzine think we are?

The WSJ has this hanky puller on his struggles to move on from the wreckage of MF Global:

And the 65-year-old Mr. Corzine is struggling to figure out what comes next for himself, according to friends and former coworkers.

I can hardly type through the sobs.

Stand at LaSalle and Jackson or 10-30 S. Wacker and see how much sympathy you get, Jon.  I’d bring bodyguards.

But here’s where Corzine insults our collective intelligence:

Allegations from shareholders and bondholders that he hid problems or committed fraud at the brokerage firm make “no sense” because he had “no motive,” Mr. Corzine’s lawyers said in a court filing, citing his ownership of 441,960 shares in MF Global. The stake includes 50,000 shares bought shortly before the bankruptcy filing.

Uhm, equityholders in firms teetering on insolvency, or which are insolvent, have a huge incentive to hide problems or commit fraud or take huge risks.  It’s called gambling for resurrection.  Fraud or concealment permit the firm to survive-and maybe it will get lucky.  If things get worse-that hurts only the bondholders, who lose more when the firm loses even more value.  The stock was already worthless.  Ditto with taking on risk: if the insolvent firm’s bet turns bad, that just deepens the bondholders’ losses without hurting the equity holder, but if the bet turns out well the equity profits disproportionately.

Most frauds and concealment of losses are carried out by shareholders.  These are ways of stealing from bondholders.

The only thing that makes no sense is Corzine saying he had no motive.  And he expects us to believe that.

Corzine’s other defense is that MF Global’s failure was due in large part to its completely deficient accounting and control systems.  But that throws him into the Sarbanes-Oxley fire, for he signed off on the soundness of those systems.

Corzine is obviously ginning up the PR machine to try to build sympathy and lay the groundwork for a comeback. Don’t do the world any favors, Jon.  You’ve done quite enough already.

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About Craig Pirrong 238 Articles

Affiliation: University of Houston

Dr Pirrong is Professor of Finance, and Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business of the University of Houston. He was previously Watson Family Professor of Commodity and Financial Risk Management at Oklahoma State University, and a faculty member at the University of Michigan, the University of Chicago, and Washington University.

Professor Pirrong's research focuses on the organization of financial exchanges, derivatives clearing, competition between exchanges, commodity markets, derivatives market manipulation, the relation between market fundamentals and commodity price dynamics, and the implications of this relation for the pricing of commodity derivatives. He has published 30 articles in professional publications, is the author of three books, and has consulted widely, primarily on commodity and market manipulation-related issues.

He holds a Ph.D. in business economics from the University of Chicago.

Visit: Streetwise Professor

1 Comment on Jon Corzine, Victim

  1. What was Sarbanes-Oxley for? I thought for just this sort of situation. Companies spend millions because of this non-money making/unproductive set of rules. Let’s put it to use finally.

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