Tag: know

Dude, you lost my 1.2 billion!
By Ryan Long

Dude, you lost my 1.2 billion!

It appears the previous title of our blog entry, which was “Dude, where’s my $1.2 billion?,” is no longer apt. The Journal recently reported in Money From MF Global Feared Gone that the $1.2 billion has been lost and will not be found. So we have aptly changed our tune in this blog entry’s title. In addition, we have a new main character in the debacle in addition to Mr. Corzine, and that is former FBI director Mr. Louis Freeh. He recently claimed attorney-client privilege to shield the gaze by the Commodities Futures Trading Commission (“CFTC”) into MF Global’s affairs. Can he do that? Probably so.

Of course, separate and apart from the suspicions that the claim of privilege raises under these circumstances, there is also the question as to its legitimacy. Whether it is not legitimate really depends on the circumstances, the contours of which we don’t know at this point.

In the garden variety case, the privilege applies to protect private communications between an attorney and a client in the rendering of legal advise. So if Jack the Ripper tells Clarence Darrow, his lawyer, in private about murders Mr. Ripper previously committed and wants to know how to best defend himself in the court of law, that conversation is protected. It is still protected if Mr. Darrow’s paralegal or other advisor he hired is present. If, however, Mr. Ripper tells Mr. Darrow about a murder he is in the process of committing or is about to commit, then Mr. Darrow could tell authorities to prevent the harm.

In this case, Mr. Freeh is not a lawyer but he may have been assisting MF’s lawyers in the investigation, and so the privilege could still apply. We don’t know if the $1.2 billion has in fact been lost or is in the process of getting lost. If the money is currently being absconded, then Mr. Freeh — or one of his assistants — could divulge the protected conversation under some state’s ethical rules, but not others. For example, in California, there would need to be the threat of serious bodily harm in order for Mr. Freeh to have the option, whereas in New York it is enough for the client to have the intent to commit a crime, even if there is no bodily harm. Of course, if the money is already gone, then Mr. Freeh may not divulge the information.

Regardless if the CFTC is able to have any luck overcoming the attorney-client privilege here, there have been several class actions filed by sophisticated class action firms against MF Global. These firms employ forensic accountants who can find things out about the money even without Mr. Freeh’s assistance. In the end, we may eventually see if there is an answer to our original question: “Dude, where’s my $1.2 billion?” We hope so.

Dude, where’s my 1.2 billion?
By Ryan Long

Dude, where’s my 1.2 billion?

“Dude, where’s my car?” This was the famous question asked by the stoners in the 2000 movie called Dude, Where’s My Car?We ask the same question of Mr. Corzine: “Dude, where’s my $1.2 billion?” According to the USA Today, he recently testified that “I simply do not know where the money is” in front of Congress. Of course, this may be true. But the question is whether that will be enough to get him off the hook for civil and/or criminal claims that may arise from the downfall of MF Global.

Embezzlement is the first crime that comes to mind. In New York, there is no civil cause of action for embezzlement. But the state could bring a criminal case against Mr. Corzine if it could prove: (1) the $1.2 billion involved belonged to investors; (2) the money was converted or used for Mr. Corzine’s purposes; (3) Mr. Corzine was in a position of trust and possessed legal possession of (or access to) the money; and (4) the Mr. Corzine knowingly defrauded the owner of the property.

Of course, we don’t know the full factual picture of the situation with MF Global. But assume for the purpose of discussion that Mr. Corzine did not know where the money went, which roughly covers elements (2) and (4). Certainly some of his underlings knew. The issue in the case would then be whether their knowledge could, under the circumstances, be imputed to Mr. Corzine. After all, intent is generally a mental state that juries infer from the circumstances, since folks rarely state point blank: “now I know I am embezzling money and that what I am doing is illegal.” But it might be difficult to show that he knew or should have known what his underlings were doing, depending on how far down the totem pole they were and where the money ended up.

Regardless, it seems to run afoul of common sense that MF Global could not trace such a large amount of money as though they forgot in which parking spot they put the car at the shopping mall. Certainly, Mr. Corzine will face additional questioning from authorities. But what remains odd in the whole scenario is how they are approaching him with kid gloves. It seems if either dude in Dude, Where’s My Car? were overseeing an institution that misplaced such a large amount of money, they would likely be sitting in jail until the money was accounted for.

The gut is sometimes more reliable than the mind.
By Ryan Long

The gut is sometimes more reliable than the mind.

As reported in U.S. Rolled Dice in Bin Laden Raid, the green light to eliminate Mr. Osama Bin Laden eventually came down to “gut instinct.” While we all understand the role of numbers and rational thought in business decision making, we think that the West sometimes places too little emphasis on what can oftentimes be your best friend in uncertain times: your gut.

As we all know, there are times in business when the numbers tell the whole story. There is no gray area. There is no need to use your intuition to make a decision. And yet many decisions in business are not so black and white. For one thing, the numbers may be cooked by the seller of the stock you are thinking about buying. You may not know this by looking at the numbers, but may intuit it by feeling out the underwriter or broker. Like the Navy SEALS in the picture to the left, your eyes may not see anything behind those trees in your midst, but sometimes your intuition will tell you something is lurking there. Unfortunately, the West sometimes places too much emphasis on rational thought, and not enough on the value of intuition, a point that Mr. Nassim Nicholas Taleb makes in The Black Swan: The Impact of the Highly Improbable. Perhaps this is because of a reductionistic approach to studying decision making taught by many schools in the West, including the Economics Department at the University of Chicago, which oftentimes attempts to reduce the complexity of human decision making into mathematical equations. While this may be a helpful crude tool to understand a complex system, it is is not sufficient. Due consideration also needs to be placed on the role of intuition — the gut — in making good decisions.