Broker exposes depth of Corzine theft from MF Global investors
By Jerry Mazza
Posted on December 9, 2011
What follows is a shockingly revealing interview conducted by James J. Puplava CFP, President and Chief Investment Strategist at PFS Group in San Diego. On his radio show, Financial Sense Newshour, he speaks with broker Ann Barnhardt, who pillories Jon Corzine for his unprecedented theft of MF Global investor accounts. She claims, and rightly so, that Corzine committed the most egregious financial crime when he comingled client monies with company monies in high-risk investments, without informing clients, literally stealing their money. This occurred while the Chicago Mercantile Exchange [the “Merc” duh] looked on and did nothing.
What is most interesting and hopeful is her level of passion for fair dealing and honesty in finance. When asked by Jim Puplava, “Why, after being a commodity broker for eight years and having formed your own independent brokerage for six years, did you make the painful decision to shut a couple weeks ago, to shut your doors because you felt your clients’ money and positions were no longer safe? What had led your to draw those conclusions?”
Barnhardt responded, “Well, obviously, it was the MF global collapse and more specifically the fall out after the MF Global collapse and the reaction by the CFTC [Commodities Futures Trading Commission], the SEC [Securities Exchange Commission] and most especially by the Chicago Mercantile Exchange [the ‘Merc’]. The actions,” she said, “specifically by the Merc after the MF Global collapse, were unprecedented, unfathomable and completely and totally intolerable. The Merc itself basically did the equivalent of sticking a nine millimeter in their mouth and pulling the trigger by not stepping forward, backstopping [covering] the MF Global client accounts and at the very least, the Merc should have allowed the MF Global customers to liquidate their accounts and then transfer to other firms.”
She explained, “What the Merc did was the worst possible thing—they froze those people out of their accounts and didn’t allow them to liquidate while the markets continued to trade. And I cannot over-emphasize the importance of that, the risk that those people were exposed to in the cattle business. My forte is cattle. I am actually a cash cattle person. My brokerage business was geared almost exclusively towards livestock and grade. I have a lot of contacts in the cattle industry who didn’t necessarily do their futures business with me but were contacts of mine who did do business through brokers that cleared through MF, and who lost tens of thousands of dollars on hedge positions that they wanted to get out of but could not get out of in the week and a half after the MF Global collapse.”
With a certain sense of moral outrage if not moral hazard she answered, “This has never happened before. This was a complete breach of fiduciary duty by the Chicago Mercantile Exchange itself to the point that it literally has destroyed the entire paradigm. I got to the point where I could no longer tell my clients that their free cash customer funds, not even exposed to the market place—just their cash sitting in their account, non-margined—was not safe. I couldn’t tell them that their money was safe. At that point it was morally incumbent upon me to get my client out of this completely dysfunctional, basically destroyed marketplace. Get them off of those railroad tracks and get them away from the risk.” It seems at last we have a secular saint in the stock market, though I think there are more.
She continues, “Now, I didn’t clear through MF, but with the European collapse and knowing what we know about how these financial entities are leveraged in European paper and the cascading nature of all of this I had to act before the proverbial poop hit the fan because if you sit around and you wait until after the poop hits the fan it is too late. You wouldn’t get anybody out. To me, it wasn’t really a painful decision. It was a complete no brainer.” For some, Ms. Barnhardt, for others an opportunity....
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