Guest post by MFGFacts.com
All eyes will be on the Senate Agriculture Committee Hearings [today] at 10:00 AM (EST). We hope to be spared the spectacle of representatives using the opportunity for insipid questions or homespun stories on immigrant grandma’s advice to “Always do the right thing when no one is looking, or starting a question with a story: “I was recently at an Eagle Scout ceremony and…” And we also really hope these hearings will be conducted with real questions and follow up on the mysteries around the MF Global bankruptcy.
The first panel for questioning will be customer representatives from the Agricultural economy such as from the Mid-Kansas Cooperative Association, a Grain Broker and and an individual farmer. This will establish that is not the bankers and financial community deeply damaged by the apparent crimes around the MF Global bankruptcy, but the core of the agricultural economy and thousands of individuals very far away from New York or Washington who depend on the complete integrity of hedging services and brokering, regulators and the handling of client properties.
The second panel will host Mr. Corzine, Mr. Steenkamp, MG Global CFO and Mr. Bradley Abelow, COO and President. All have had weeks of drilling by an army of lawyers in the art of saying a lot but answering nothing. Will the Senate Ag. Committee spend their limited time thanking and appreciating them for appearance and telling us stories about themselves, or with ask questions in search of answers? For Messrs. Corzine and Steenkamp questions on, for example, who was the affiliate of the Euro debt repo-to-maturity trades performed by MF Global Inc? Or is it possible that outflows from MFGI are still being made to MF Global Holdings as approved by the court on October 31st?
The media will zero in on Mr. Corzine and the MG Global Board. And on first glance this seems to be what the bankruptcy is about: Errors or possible malfeasance inside MF Global. To this end, the Senate will ask questions to understand where the company failed and what regulatory oversights could be improved. But to restore faith in the futures markets, citizens must also be assured of the workings of the SIPC Bankruptcy procedure. After all, it was the CFTC and SEC decisions hurling MFGI into a SIPC receivership that ultimately resulted in the sequestering and freezing of customer property.
Right now MFGI and all its assets and much client property remain frozen and under the control of the SIPC Trustee, Mr. James Giddens, who will be on the third panel. And just as the Senate hearing goes on, the court will be exploring if there has been a violation of Federal Rules of Bankruptcy Procedure. The Senate cannot ignore this background development.
By Monday afternoon, Giddens must, under recent court order, have already disclosed more details of his work for JP Morgan Chase & Co. and PricewaterhouseCoopers LLP, along with any other possible conflicts [update: posted below]. Judge Glenn will determine if the SIPC-appointed Trustee can handle the case disinterestedly, or even at all. With the possibility of court removal – if even remote – this appearance of grave conflicts will be hanging over Mr. Giddens head during the Senate hearings. Will the Senate dare ask about the basis of ongoing confusing public information released by Mr. Gidden’s office? Will they ask about his experience and understanding of the futures industry? Will the Senate ask why customer positions were liquidated, and then re-opened with a new broker, but with inadequate margin? Or how it is that customers with long options (often used in crop hedging) were forced to liquidate or re-purchase the position? Will the Senate ask if Mr. Giddens understood the implications of the court orders that resulted in market disruption? Will they ask the exact dollar amount of the work his firm billed to PcW, MF Global’s auditor, over the last five years? Will we hear if Mr. Gidden’s provided the court a full and proper 2014(a) disclosure as required? Will we learn about his 30 years working closely with SIPC?
For a full understanding of the MF Global bankruptcy, these and many other questions must be answered.
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EB: And now, from the lengthy statements filed by the liquidation trustee James W. Giddens and his counsel James B. Kobak, Jr., both of the law firm Hughes Hubbard & Reed LLP (HHR), where many pages are spent revealing the firm's limited exposure to JP Morgan, glossed over is the most relevant fact: that MF Global's auditor, PriceWaterhouseCoopers, is not only a material revenue center for HHR ($21 million over two years), but HHR's very auditor! If this is not grounds for a determination of "interestedness", then we don't know what is, especially in light of the MF Global offerings that were conducted backed by PwC opinions. (See Teri Buhl's "Jefferies Bond Trader Claims MF Global Lied to get Bonds Issued".)
Statement by Giddens:
Statement Corrected Trustees Statement - Mg Statement
Statement by Kobak:
Declaration of James B Kobak Jr in Sup - Main Document
And the memorandum of law filed by the completely useless SIPC, where we learn that the entity (whose sole mandate is to resolve failing brokers) had done exactly nothing until the day of the MF Global bankruptcy itself. Citing exigency as cause for selection of a liquidation trustee (Giddens) on the heals of an OIG report that found his fees in the Lehman liquidation were excessive, will not fly. Exactly why Giddens would then be placed on the SIPC reform committee is another question to be answered (presumably so he could recommend his hourly rate be lowered from $891 to $819).
Response Memorandum of the Securities Inves - Mg Response
Fin.