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Wednesday, August 15, 2012

Coverup Indicated By DOJ Rush To Exonerate MF Global


Criminal investigations are complex and can take a long time, particularly when sophisticated financial instruments are involved. When hundreds of millions of dollars in customer funds go missing and unaccounted for, and customer funds apparently go commingled with brokerage firm operating funds (a huge no-no, verboten), particularly when the firm was on the verge of insolvency, there should be a strong working presumption of negligence if not criminality. That is why it is so surprising that the Justice Department is indicating it is ready to close its criminal investigation into the commodities brokerage firm MF Global less than ten months after the firm's implosion without bringing criminal charges, not even against former CEO and former New Jersey governor Jon Corzine as to whom I surely thought perjury charges would be brought on account of his decision not to take the Fifth Amendment before Congress.

The complexity of the factual issues, never mind the legal issues surrounding the appropriate standards of proof for either civil sanction or criminal indictments, strongly argues for a lengthier investigation. Nine months is barely enough time for seasoned investigators to determine whether the information they have gotten from witnesses is genuine and credible. Sometimes the best test of a person's credibility is time. And it is by no means certain that everyone who was aware of what happened at MF Global did tell the truth and the whole truth to investigators.

Nine months is barely enough time -- no, in fact, it is not enough time -- for investigators to try to "flip" underlings to get them to "cooperate" against corporate officers and managers higher up the ladder of responsibility and presumed to have had knowledge of criminality. In other corporate fraud investigations involving insider trading or misrepresentations to investors, investigators have often spent nine months or more just working to flip one targeted witness to get him to cooperate. In one particular case in the Southern District of New York, investigators spent years building a case using some very suspect witnesses. One of these witnesses, the lead cooperator and in fact the probable prospective lead trial witness for the government, took a guilty plea in an unrelated matter and then spent years taping others in order to develop evidence, and while working for our federal government also spent time deceiving federal judges in simultaneous civil and bankruptcy courts and using multiple aliases in official court papers. And in that case, federal investigators were presumably very careful and took their time to make their case against the founder and a top broker of a securities brokerage firm.

For this and other reasons, the Justice Department's apparent reluctance to keep a criminal investigation open on MF Global is very puzzling and suspicious. Particularly when compared to its persistence on other and arguably far less significant cases, and further when considering the political prominence of the chief executive officer of MF Global, the former New Jersey governor Jon Corzine.

It seems that the Justice Department decided there was no criminality, but the absolute haste must suggest at least the possibility of political considerations trumping justice. Justice for victims. Justice for others wrongfully charged, like David Stockman who was charged with fraud but then exonerated prior to trial in 2009. Justice for others wrongfully investigated and threatened and intimidated, but never charged, like Mark Hatfield who was investigated in connection with the 2001 anthrax attacks. Nine months is not enough to close an investigation. Not unless you are being willfully blind. Or there is a coverup. Or there are two sets of justice, one for the connected, and one for everyone else. (Again, you might say, government is picking winners and losers, playing the corrupt game of crony justice.)

Someone needs to investigate the investigators. Attorney General Eric Holder needs to provide a solid, thorough explanation for why prosecutorial discretion is being used so quickly, so hastily, to close this investigation. The American people are owed answers as to the Great MF Global Whitewash.  

Eric Dixon is a New York investigative attorney.

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