Unstructured Finance

UF Weekend Reads

Here’s to getting out exclusive stories fast when need be. This week, pay close attention to Jamie Dimon, who will be on the congressional hot seat as he deals with questions over JPM’s $2 billion plus trading loss. And without further ado, here’s Sam Forgione’s weekend reads:

 

From Fortune:

Peter Elkind and Doris Burke add more arc to the “human drama” of MF Global’s collapse.

From The New York Times:

Ron Lieber has some tips to resolve the fear of falling behind on finances.

From Institutional Investor:

JP MorganChase’s trading loss could signal big changes for investment banks, writes Charles Wallace.

From Bloomberg Businessweek:

Matthew Philips brings the U.S. closer to the reality of European debt crisis contagion.

From The Washington Post:

Public workers and their unions could face the brunt of budget cuts, Sandhya Somashekhar and Krissah Thompson write.

The taxman cometh for MF Global

By Matthew Goldstein

You can add the U.S. Internal Revenue Service to the long list of creditors and customers looking to get their money back from MF Global, the failed futures brokerage firm.

The IRS slapped a lien on what’s left of MF Global, seeking to recoup some $395,000 in unpaid taxes stemming from 2006 and 2007. The tax lien was filed with New York State’s division of corporations on Nov. 16, about three weeks after MF Global filed for bankruptcy.

The unpaid tax bill predates the period during which former New Jersey Governor Jon Corzine took over the helm of MF Global.

MF Global: gross negligence or intent

By Matthew Goldstein

There was plenty of theatrics Thursday when Jon Corzine returned to his old stomping ground–Capitol Hill–to offer an apology and a mild defense for the events that led to the collapse of MF Global. But in the end little light was shed on just what happened during those final days of October, as Corzine’s firm spiraled towards bankruptcy and hundreds of millions dollars of supposedly protected customer money went missing.

Corzine said many times he didn’t know what happened to the money and was shocked as anyone to find out the money was gone. But there is one thing Corzine said that will prove to be the most critical part of his testimony and that’s his assertion that he never intended to do anything wrong. Or more precisely, he never intended to have customer money maintained in segregated accounts transferred to the firm’s own bank accounts.

As anyone who has been following the MF Global saga now knows, the one inviolate rule of the futures industry is that a firm cannot commingle its money with its customers, or take customer money in a segregated account to pay the firm’s bills or debts.

MF Global a month later and still a mystery

By Matthew Goldstein

It’s been about a month since MF Global began spiraling towards bankruptcy and still there’s no clarity about what happened to the missing customer money that was supposed to be kept in untouchable, segregated accounts. It’s not even clear how much money is missing.

When the Jon Corzine-led firm filed for bankruptcy on Halloween, it was believed some $900 million in customer money couldn’t be accounted for in MF Global’s segregated accounts maintained at Harris Banks and other institutions. That sum was quickly revised downward to about $600 million. And the number remained at $600 million until the court-appointed liquidation trustee surprised everyone last week by saying more than $1.2 billion in customer money might be missing.

But now even that $1.2 billion figure is in doubt. Officials with the CME quickly questioned the much higher figure and so did other regulators. A law enforcement source tells me federal investigators also doubt the $1.2 billion figure and believe the missing money is still about $600 million.

MF Global and the rubber check

By Matthew Goldstein

With the mystery of the missing $600 million in customer funds at MF Global Financial still unresolved, a lot of customers of the failed futures firm are starting to complain about getting bounced checks.

It appears that 10 days ago, with speculation swirling that the Jon Corzine-led firm would soon file for bankruptcy, a good number of customers started to put in requests to pull their money from the New York-based outfit. But instead of simply wiring that money back to their customers, it seems MF Global tried to buy some time for itself by sending that money back via snail mail in the form of an old-fashioned check.

Those checks cut by the folks at MF Global began arriving in customer mailboxes this week, several days after the firm filed for bankruptcy on Oct. 31 in New York federal court. And by the time customers started depositing those checks, they were rejected as having insufficient funds.

M & A wrap: The man at war with Olympus

Michael Woodford asked too many questions. That’s the reason the 51-year-old Englishman gives for why he lost his job as the first-ever foreign-born CEO at Japanese camera maker Olympus a mere two weeks after he was given the role in early October.

Woodford tells Reuters investigative reporters Kirstin Ridley and Alexander Smith in a new special report that it was his inquiries into a series of questionable takeover deals and advisor payouts the company made over the past half decade, including the biggest mergers and acquisitions fee ever, that led to his ouster. Board members insist instead it was Woodford’s failure to grasp the company’s management style and Japanese culture that cost him the job, but Woodford says allegations of a “power grab” by him are not the “real story”. Now, Woodford is on a one-man campaign to “cleanse” Olympus with the goal of removing its entire board.

Giving in to pressure from many corners, Olympus on Tuesday named six men, including a former Japanese supreme court justice, to investigate the past M&A deals at the core of the scandal in a bid to stem an exodus of irate investors. The all-Japanese committee will look into $687 million in payments made to a financial adviser for the $2 billion purchase of British medical equipment maker Gyrus in 2008  and the acquisition of three companies in Japan that Olympus, under chairman Tsuyoshi Kikukawa’s decade-long reign at the company, later largely wrote off.

MF Global gets a taste of the Guv

MF Global’s new CEO would have had a far harder time slashing costs this way at his last job. As Governor of New Jersey, Jon Corzine faced huge budget deficits, an unwieldy management structure and stagnant income – arguably far worse conditions than exist at the futures and options trading brokerage he is running now.

While it might be nasty, if not cynical, to suggest he was happy about putting up to 15 percent of his workforce out on the street, he would have certainly enjoyed an immediately satisfying impact. “We are weeding out low-performing businesses,” he said on a conference call with investors, enjoying the power of voters being shareholders rather than employees. MF is also freezing new hiring, reducing compensation, and eliminating or postponing initiatives that are not central to the company’s direction.

MF Global could see net benefits of $59 million to $75 million, or 22 cents to 28 cents per share, from cost-cutting in 2011, according to an analyst note from Ticonderoga Securities. The stock was up by late morning, reversing a sharp early loss and defying the gravity of a sharp retreat in the overall market. Even if it took traders an hour or two to decide the decisive action outweighed surprising news of a first-quarter loss, at least he didn’t have to wait for a poll.

Morning line-up

Hedge fund stories from the past 24 hours from Reuters and elsewhere:

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Fuld says being “dumped on” for Lehman failure – Reuters

MF Global starts Japan brokerage – Bloomberg

Despite UK taxes, funds stay in London – WSJ

US hedge fund locks horns with Chinese tycoons – South China Morning Post

Pushing back against energy speculation limits – Institutional Investor

Job Bank – Oct. 29

The following financial services industry appointment was announced on October 29, linked where possible to personal profiles on LinkedIn. To inform us of other job changes, please e-mail moves@thomsonreuters.com.

Goldman Sachs
Goldman Sachs Group Inc on Wednesday promoted 94 employees to partner, the firm’s highest rank and one offering lucrative bonuses. Every two years, Goldman names a class of managing directors to the exclusive rank of “partner managing director.” The system offers about 400 employees the chance to share a fifth of the firm’s total compensation pool.

Credit Suisse
Credit Suisse AG hired a former Lehman Brothers banker for a newly created investment banking position as it continues to refocus its business. Colin Welch will join the Swiss bank in November as head of investment banking for retail and luxury goods in Europe, Middle East and Africa, according to an internal memo provided by Credit Suisse. Welch headed retail investment banking for Europe and the Middle East at the collapsed Lehman.

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