Sargeant Schultz Plays the Capitol

On "Hogans' Heroes", an old television show, there was a German prison camp guard named Sgt. Schultz who saw the American POWs doing all sorts of things, but who always said "I know nothing...I saw nothing!" when asked what happened. Yesterday's appearance by former senator and governor Corzine before the House Agriculture Committee reminded me of Sgt. Shultz. Jon Corzine was until very recently the chairman of MF Global, a commodities trading firm that is now bankrupt. After that bankruptcy, it has been determined that about 1.2 billion dollars has been looted from the customers' accounts. Corzine told Congress yesterday that he has no knowledge what happened to that money. I do not believe him. The Congressmen did not believe him. No sane person could believe him.

A brokerage firm has to keep records of its customers' accounts at all times. Every day, the accounts have to be updated and all corporate positions have to be reconciled. For 1.2 billion dollars to be taken or invested improperly, there would have to be records of each transfer and each transaction. Otherwise, the chaos in the companies records would have surfaced long before the bankruptcy. Corzine was in charge of that company and I am certain that he got daily reports of its cash and investment position. That is just how a Wall Street firm works. No head of a Wall Street firm would approve investments or other transactions without knowing the status of the firm's holdings as well as its cash. Corzine had to know what was going on.

For Corzine, channeling Sgt. Schultz by denying all knowledge about the enormous sum that is missing will just not work. Indeed, Corzine may be just digging himself a bigger hole than he was in before. Just think of it this way. Let's assume that the federal government indicts Corzine because the records at MF Global show that the clients' money was illegally taken by that firm. Corzine now can no longer appear at his trial and offer an explanation as to what happened. He has already told us that he just does not know. If he suddenly gives information at his trial, then he was lying under oath to Congress. That means that if the records and witnesses put Corzine in trouble, he will be hard pressed to defend himself.