Getting Busted for the Cover-Up — Not the Crime
I have no idea — based on the handful of stories I’ve read — if MF Global broke any laws, and if so, whether it will face prosecution.
But if so, here’s my guess what the company and/or its principals will ultimately be charged with: not engaging in the ruinous, numbingly complex financial transactions that ultimately brought the company down.
Accounting fraud is much too costly to prosecute — and too complicated to explain to a jury.
Plus, something called “the business judgment rule” gives management broad discretion trying to make money for themselves shareholders.
Cue Enron
So, what are Jon Corzine, et al likely to be charged with?
Just like with Enron, misrepresenting the company’s true financial picture in the days and weeks leading up to its collapse and bankruptcy filing this Monday.
In a word: lying.
Telling regulators and investors that everything is hunk-dory as you’re headed over the cliff — perhaps even as you’re selling your own shares — is much easier to prove, and something that juries readily understand.
P.S.: the same logic explains why Al Capone got sent up on tax evasion charges rather than murder, extortion, racketeering, larceny, etc.
