With Hurricane Sandy dominating the news, quite a few business stories from early in the week got only cursory notice. In some ways, that’s not a bad thing.
The Wall Street Journal had a bizarre sequence of reports on Jon Corzine. On the 28th, it ran a damning story on MF Global’s controls, or more accurately, the lack thereof:
U.S. rules set tight controls on the accounting, oversight and movement of money that belongs to customers or firms themselves…
As regulators and lawmakers plow ahead with investigations that began when MF Global tumbled into bankruptcy a year ago this week, yawning gaps in the New York company’s procedures for moving and keeping track of money are getting new attention…
Internal documents reviewed by the Journal show that the problems were chronic and deeper than previously disclosed.
An April 2011 spreadsheet called “Outgoing Wire Approved Individuals” lists nearly three dozen back-office employees with authority to move money, sometimes with no limit on the size of the transfer as long as a higher-ranking official approved.
Two people working on the case said the number was unusually large for a brokerage firm of MF Global’s size.
The spreadsheet also shows that MF Global set no “dollar threshold” on how much employees could move from accounts used to invest the firm’s own money and certain customer funds. In contrast, only two employees were allowed to move more than $500,000 at a time out of an account used to pay commissions owed by MF Global. It isn’t clear if the same procedures were in place when MF Global collapsed.
This is the stunning part, emphasis ours:
Some people close to the investigation or who worked at MF Global said the firm failed to shore up internal systems that officials knew were weak. One explanation offered by these people is that MF Global had to prioritize what needed to be fixed first, since it had limited resources and was still overhauling systems in response to a 2008 rogue-trading loss.