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Corporation Fraud - Essay Example

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Corporation Fraud

MF Global and its parent holding company (MFGH) were forced by federal regulators to file for Chapter 11 bankruptcy protections on October 31, 2011 (Bunge 3). Within the span of less than a week one of Wall Street’s pinnacle trading firms was reduced to heap of broken promises and over one billion dollars in missing investor and client assets. After the MF Global bankruptcy was filed, investigators from the Securities and Exchange Commission discovered that a subsidiary of MF Global, MFGI, had improperly “booked” commodity trading transactions that exceeded the margin capability of MF Global to repay (Arends 14). The nature of this and how it was orchestrated and hidden by MFGI and MF Global executives is the focus of this paper. MF Global was in the business of facilitating futures trading (USCHC on Financial Services 81). If a customer opened a position on a commodity, MF Global was required to post the margin required to hold that position on the contract exchange. For the most part, the amount of margin required was determined using a standardized algorithm called the Standard Portfolio Analysis of Risk (SPAN) (USCHC on Financial Services 102). ...
In reality, the under currents that ripped the foundation from under MF Global were caused by a loop hole in accounting practices that allowed MF Global executives “to book” assets on both sides of the commodity and securities ledger (Orol 2). MF Global executives at some point in 2010 began co-mingling assets from the securities side into the commodity operation to cover massive short position losses on European bonds (Arends 9). The Chief Executive Officer at MF Global during the crisis was a former Governor and Senator from the state of New Jersey, John S. Corzine. John Corzine was first appointed as Chief Executive Officer (CEO) in 2010 by the MF Global Board of Directors (Bunge 9). Corzine envisioned turning MF Global into a dominant Investment Bank on Wall Street and embarked on an ‘aggressive”(Weidner 2) and risky management plan (Sandler 2). Less than eighteen months later the contrived plans of Jon Corzine to alter and reshape the much respected MF Global began to unravel. Through the SIPA process and the unwinding of MF Global commodity positions, it has been revealed that the shortfall in customer assets had two basic causes. MF Global by using a loophole in their “audited and regulated” (Orol 4). Accounting regimen had been depositing and moving customer segregated funds and securities through MF Global general accounts that were operated by company commodity traders and executives. The funds which were being transferred between “off-shore and domestic banks in the United States” were in the process deposited through MF Global corporate account’s (Orol 3). Customer money was re-routed by MF Global to “artificially inflate the companies deposit ...Show more

Summary

Name: University: Course: Tutor: Date: Finding Transparency in the MF Global Fraud MF Global was a commodities and securities brokerage firm that started operations in the late 1700s as a sugar trading and export company (Bunge 2). MF Global suffered a man-caused financial disaster during the last week of October 2011…
Author : jeffryaltenwert
Corporation Fraud essay example
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