MF Global - Mahony Partners

Nov

2014

Jefferies: Good Memo, Bad Strategy

Crisis, Financial Services, Media, Taking & Managing Risk

What’s a company to do when one of its top employees is accused of wild partying, excessive drug use and having sex with a client’s girlfriend? If you’re Jefferies, the investment bank, you fire back with a bold memo from the CEO. It was a good memo but a bad strategy. Read More

Jun

2013

An Echo from Refco

Financial Services, Taking & Managing Risk

Law firm Mayer Brown LLP has quietly settled claims it aided a $1.5 billion fraud at Refco, the brokerage that collapsed in 2005. Unlike Refco’s spectacular fall, the news brought no front-page headlines, only a modest report in a Read More

Mar

2012

A Damage-Control Weekend for BATS and Jon Corzine

Crisis, Financial Services

It was a busy weekend for damage control, with two examples of executives who tried to regroup after enduring very bad news. First, there was an effort by former MF Global CEO Jon Corzine to counter a memo that emerged late last week that said Corzine authorized the transfer of client monies to J.P. Morgan. The memo’s contents, first reported by Bloomberg, would appear to contradict Corzine’s sworn testimony before Congress that he did not approve such actions in the chaotic, final days of the firm. Corzine’s team (presumably led by his lawyers) pro... Read More

Jan

2012

More on Refco and MF Glboal

Crisis, Financial Services

Years after its collapse, Refco continues to make news. Yesterday, an appeals court overturned the conviction of an attorney, Joseph P. Collins, who had been the chief outside counsel for the futures brokerage and was found guilty of aiding the company's scheme to hide millions in debt and mask its true financial condition. When the fraud was discovered, Refco filed for bankruptcy, and its assets later were sold to Man group, which later spun them off as MF Global. Collins was convicted largely on the basis of testimony from a former Refco executive who cooperated with fe... Read More

Dec

2011

The Irony of MF Global: The System Worked

Crisis, Financial Services, Taking & Managing Risk

Were it not for the missing customer funds, the collapse of MF Global would be hailed as an example of how well the financial system worked. That’s a very big “if,” of course, and the loss of customer funds is a scandal all its own. But the market worked - and that's an important lesson. The accountants, the regulators and the board of directors did their part - not perfectly and perhaps not quickly – but they asked the right questions, demanded disclosure of the firm’s trades and forced management to defend its strategy. Customers, shareholders and counterparties then concluded MF Global had too much risk and abandoned the firm – exactly the sort of rough justice that’s at the core c... Read More

Dec

2011

Refco’s ghost haunts MF Global

Financial Services

It’s impossible to read about the demise of MF Global and not think about Refco, the futures brokerage that collapsed in scandal in 2005 and whose remains were later bought by MF Global. Like Marley’s ghost, the weaknesses that played a part in Refco’s downfall returned to haunt MF Global. Refco’s problems came to light just a few months after it completed an initial public offering in August 2005 that valued the company at $3.5 billion. A short time later, the firm discovered that CEO Phillip Bennett had maintained control of a separate entity that wasn’t consolidated with Refco’s books and held $430 million in Refco debt. When Refco disclosed the debt in October 2005, just eight w... Read More

Nov

2011

On air crashes and financial failures

Crisis, Financial Services, Friday Risk Reading

I happened to be reading Malcom Gladwell’s excellent book, Outliers, just as MF Global was collapsing, and I came across Gladwell’s discussion about another kind of crash – those involving airplanes. Gladwell offers an interesting observation about the causes of air disasters that could apply to the failures at financial firms, like MF Global, or the whopping trading losses reported two months ago at UBS. Gladwell shows that air disasters aren’t caused by a sudden, dramatic mishap but an accumulation of small errors rooted in poor communication: “The typical accident involves seven consecutive human errors. One of ... Read More

Nov

2011

The 4 reasons Jefferies beat the rumors

Crisis, Financial Services

Sure, the positive comments today from Meredith Whitney helped, but give Jefferies (NYSE: JEF) credit for handling its communications well in a very challenging environment. At one point the stock was down 20 percent as rumors swirled about the firm’s exposure to European sovereign debt and a downgrade by Egan-Jones. By day’s end, however, the stock had recovered nearly all its lost ground. Here were the four reasons Jefferies was able to beat the rumors: 1. They m... Read More

Oct

2011

MF Global’s Fatal Mistake

Financial Services, Taking & Managing Risk

At this hour, executives and MF Global are huddling with bankers and lawyers, trying to come up with a deal to sell the firm. It must seem like a surreal exercise, since just days earlier the firm held a solid investment-grade credit rating and a market cap of $620 million. Now, as its clients turn away and its cash evaporates, CEO Jon Corzine is running out of time and options.Selling a financial firm isn’t an easy process, particularly in an edgy market. Doing it in a couple of days is only for the foolhardy or the desperate. For MF Global,... Read More