Jon Corzine is not a crook. No, really.

The Jus­tice Department’s inves­ti­ga­tion of the for­mer Wall Street titan, New Jer­sey Gov­er­nor and U.S. Sen­a­tor con­clud­ed last sum­mer that he’d done noth­ing wrong. Or at least noth­ing crim­i­nal.

That despite the fact that the firm he once head­ed, the iron­i­cal­ly named “MF” Glob­al, improp­er­ly siphoned near­ly $1 bil­lion from its cus­tomers’ accounts – mon­ey it could not legal­ly touch – to cov­er its bad bets on Euro­pean sov­er­eign debt, then prompt­ly lost it all when those bets con­tin­ued to sour. The mon­ey is gone. Those who entrust­ed Corzine and his col­leagues with it are, as the firm’s name sug­gests, F’d.

In defend­ing him­self against civ­il actions, Corzine claims to have had noth­ing to do with the deci­sion to raid his clients’ so-called “seg­re­gat­ed accounts” – seg­re­gat­ed because the law required that they be kept sep­a­rate from the firm’s own pro­pri­etary invest­ments. It was mon­ey entrust­ed to MF Glob­al, not put at its disposal.

Los­ing near­ly $1 bil­lion of oth­er people’s mon­ey is no big deal for a for­mer Gov­er­nor and fed­er­al law­mak­er. It takes the fed­er­al gov­ern­ment a lit­tle more than 2–1/2 hours to spend that amount and gov­ern­ment bean­coun­ters years to fig­ure out what is was spent on. Even the most scrupu­lous inspec­tors gen­er­al can only guess at how much may have been squan­dered.

So, Corzine might right­ly ask, what’s all the fuss about?

The Com­modi­ties Future Trad­ing Com­mis­sion (CFTC), which is pur­su­ing civ­il (as opposed to crim­i­nal) charges against Corzine and his for­mer firm, put it this way:

MF Glob­al Inc., … on the brink of fail­ure and in des­per­ate need of cash to sur­vive, invad­ed its cus­tomer funds and vio­lat­ed … fun­da­men­tal cus­tomer pro­tec­tions on a scale nev­er pre­vi­ous­ly seen in the U.S. futures mar­kets, harm­ing thou­sands of peo­ple (CFTC com­plaint, para­graph 1).

The sto­ry began in March 2010 when Corzine joined the firm, just months after los­ing his bid for a sec­ond term as Gov­er­nor. The com­plaint says that he imme­di­ate­ly set out to make MF Glob­al a major play­er in Euro­pean sov­er­eign debt. As a result of his actions, CFTC alleges, these invest­ments grew sub­stan­tial­ly, even as they turned “increas­ing­ly risky” (para­graph 3).

The risk grew because Corzine was plac­ing out­sized bets on debt issued by such coun­tries as Greece, Spain and Italy, just as mar­kets woke up to the fact that those gov­ern­ments were in over their heads. Corzine, who seems to have had a child-like faith in gov­ern­ment that is char­ac­ter­is­tic of the cen­ter-left, thought there was a for­tune to be made in bet­ting in favor of these gov­ern­ments just as oth­er investors start­ed to doubt their cred­it­wor­thi­ness. As it turns out, there were for­tunes to be lost – not only his firm’s, but that of its clients.

“By late Octo­ber 2011,” the com­plaint states, “the fir­m’s sources of cash were dry­ing up, and the firm was in des­per­ate need of fund­ing to sur­vive” (para­graph 4).

Fran­tic for mon­ey to pay off its bad bets and shunned by oth­er banks because of its par­lous state, MF Glob­al crossed a legal line, accord­ing to the CFTC.

Dur­ing the last week of Octo­ber 2011, in vio­la­tion of U.S. com­mod­i­ty laws, with vir­tu­al­ly no oth­er sources of cash to keep it afloat, MF Glob­al unlaw­ful­ly used near­ly one bil­lion dol­lars of cus­tomer seg­re­gat­ed funds to sup­port its own pro­pri­etary oper­a­tions and the oper­a­tions of its affil­i­ates. Thou­sands of cus­tomers were direct­ly and indi­rect­ly harmed by these unlaw­ful acts (para­graph 5).

The des­per­ate and alleged­ly unlaw­ful ploy failed. MF Glob­al filed for bank­rupt­cy pro­tec­tion on Octo­ber 31, 2011. The CFTC places the blame square­ly on Corzine.

Corzine bears respon­si­bil­i­ty for MF Glob­al’s unlaw­ful acts. He held and exer­cised direct or indi­rect con­trol over MF Glob­al and Hold­ings and either did not act in good faith or know­ing­ly induced these vio­la­tions (para­graph 6).

The com­plaint also sin­gles out Edith O’Brien, the firm’s Assis­tant Trea­sur­er, say­ing that she “direct­ed, approved, and/or caused numer­ous ille­gal trans­fers of cus­tomer seg­re­gat­ed funds to the Film’s pro­pri­etary accounts, and oth­er­wise aid­ed and abet­ted MF Glob­al’s cus­tomer seg­re­gat­ed fund vio­la­tions” (para­graph 7).

Corzine, accord­ing to the com­plaint, plunged MF Glob­al almost imme­di­ate­ly into com­pli­cat­ed and risky trans­ac­tions involv­ing Euro­pean sov­er­eign debt. The firm bor­rowed heav­i­ly to buy these bonds. To finance their pur­chase, it entered into con­tracts with coun­ter­par­ties, pledg­ing the bonds them­selves as col­lat­er­al, and promis­ing to pay back the mon­ey when they matured. On paper, this was a win­ning propo­si­tion for MF Glob­al, in part because it could record prospec­tive inter­est pay­ments on the bonds as a gain on its books.

As with the over­heat­ed mar­ket for mort­gage-backed secu­ri­ties on which investors reaped prof­its so long as hous­ing prices con­tin­ued to rise, MF Glob­al pros­pered so long as mar­kets believed in the sound­ness of the bonds that it had bor­rowed mon­ey to buy. The risk was that MF Glob­al had to make mar­gin calls relat­ed to these trans­ac­tions. Should faith in Ital­ian, Greek and Span­ish bonds (which the firm had used as col­lat­er­al) weak­en, MF Glob­al would have to come up with cash from anoth­er source to sat­is­fy its coun­ter­par­ties (para­graph 33).

MF Glob­al was aware of these risks. Just months after Corzine embarked on his dicey strat­e­gy, the firm’s Chief Risk Offi­cer warned of the dan­gers and rec­om­mend­ed lim­it­ing these invest­ments. His advice was ignored and Corzine replaced him the fol­low­ing March (para­graphs 34 and 35).

Not long after, that risk became real as Euro­pean sov­er­eign began to go south. Dur­ing the sum­mer of 2011, the firm need­ed to find hun­dreds of mil­lions of dol­lars to meet its oblig­a­tions to coun­ter­par­ties. Des­per­ate for cash, Corzine direct­ed his sub­or­di­nates to “explore all poten­tial sources of funds and assets” that could be used to cov­er its bets. “All poten­tial sources,” accord­ing to the com­plaint, includ­ed mon­ey from its clients’ seg­re­gat­ed accounts (para­graph 44).

By ear­ly Octo­ber, the firm’s Trea­sur­er con­clud­ed that it was “skat­ing on the edge” with­out “much ice left” (para­graph 48).  But there was a life­line: a $1.2 bil­lion line of cred­it with JP Mor­gan Chase. Corzine, how­ev­er, decid­ed against tap­ping that line, fear­ing that it would reveal the firm’s frag­ile state to Wall Street. Instead, he told an employ­ee that they would do every­thing pos­si­ble to avoid using the cred­it line, even if that meant siphon­ing mon­ey from client accounts (para­graph 49).

Despite the increas­ing­ly risky behav­ior, Corzine brushed aside warn­ings from his sub­or­di­nates. One employ­ee warned him that “the sit­u­a­tion is grave.” MF Global’s Trea­sur­er said, “We have to tell Jon that enough is enough. We need to take the keys away from him.” Corzine refused to relin­quish the keys and dis­parag­ing­ly nick­named the Glob­al Trea­sur­er “the Gravedig­ger” (para­graph 50).

By that point, MF Global’s grave already was dug. Corzine just didn’t real­ize it. The com­plaint alleges that he “remained deter­mined to squeeze the MF Glob­al’s cus­tomer seg­re­gat­ed accounts and cus­tomer secured accounts for cash” (para­graph 52).

Despite repeat­ed warn­ings about the liq­uid­i­ty cri­sis, and despite his knowl­edge of the defi­cien­cies in MF Glob­al’s sys­tems and con­trols, Corzine did not take suf­fi­cient steps to ensure that the Fir­m’s dai­ly draws of cash from … cus­tomer accounts did not result in an unlaw­ful use of cus­tomer funds (para­graph 57).

Dur­ing the last week of Octo­ber, MF Glob­al received a rat­ings down­grade from Moody’s (para­graph 58) and report­ed neg­a­tive earn­ings for the pre­vi­ous quar­ter (para­graph 59). By this point, Corzine had begun using the firm’s line of cred­it, draw­ing down all but about $300 mil­lion by Octo­ber 25 (para­graph 61).

The walls were clos­ing in. Coun­ter­par­ties were demand­ing more mon­ey and cus­tomers were pulling their accounts (para­graph 60).  By that time, the firm had become addict­ed to using mon­ey from these accounts to sur­vive (para­graph 62).  A pan­icked O’Brien, des­per­ate to restore mon­ey to cus­tomer accounts before reg­u­la­tors caught on, told a col­league in a taped conversation:

It is a total clus­ter­fuck .… They have to move half a bil­lion dol­lars out of [Bank of New York] to pay me back .… Tell me how much mon­ey is com­ing in and I will make sure it gets post­ed. But if you don’t tell me, then tomor­row morn­ing I am going to have a seg prob­lem .… I need the mon­ey back from the bro­ker-deal­er I already gave them. I can’t afford a seg prob­lem (para­graph 62).

That “seg prob­lem” – leav­ing cus­tomer “seg­re­gat­ed” accounts short mon­ey — was nev­er resolved. It grew worse by the day. By Fri­day, Octo­ber 28, cus­tomer accounts were $900 mil­lion short (para­graph 64). MF Glob­al “filed a false seg­re­ga­tion report” for Thurs­day, Octo­ber 27, to con­ceal this fact (para­graph 64), then refused through­out the week­end to file its Fri­day report (para­graph 68).

With its debt no longer man­age­able and its cus­tomer accounts deplet­ed, the firm filed for bank­rupt­cy pro­tec­tion that Mon­day. Corzine need­ed just 19 months to take a suc­cess­ful firm into insol­ven­cy, drain­ing its resources and that of its clients, and dam­ag­ing his own rep­u­ta­tion in the bar­gain. But none of this, the Jus­tice Depart­ment says, was in any way criminal.

Corzine claims not have known any­thing about the raid on seg­re­gat­ed accounts that cost the firm’s clients near­ly $1 bil­lion. And though fed­er­al pros­e­cu­tors decid­ed not to pur­sue crim­i­nal charges against him, the CFTC isn’t con­ced­ing his inno­cence. His behav­ior, their civ­il com­plaint alleges, if not will­ful­ly crim­i­nal, was will­ful­ly neg­li­gent. He knew, or should have known, that his firm was flout­ing the law, improp­er­ly dip­ping into its clients’ accounts and hop­ing against hope that it would be able to regain lost ground and replace the mon­ey before its reg­u­la­tors learned of its mis­deeds (para­graphs 69 and 70).

Corzine’s defense essen­tial­ly amounts to this: that he was noth­ing more sin­is­ter than an incom­pe­tent man­ag­er, unaware that his col­leagues were unlaw­ful­ly vio­lat­ing their clients’ trust, as he plunged his firm into the abyss. He didn’t real­ize how much trou­ble his firm was in and the extreme steps that his sub­or­di­nates were tak­ing to con­ceal it from reg­u­la­tors, clients, investors and, pre­sum­ably, its own chief executive.

The incom­pe­tence defense is cer­tain­ly plau­si­ble. Being a Sen­a­tor requires no par­tic­u­lar man­age­ment exper­tise, as our Pres­i­dent demon­strates dai­ly, and Corzine’s tenure as New Jer­sey’s Chief Exec­u­tive was dis­as­trous enough to ruin what once had been a decent polit­i­cal reputation.

His pri­or expe­ri­ence as a Gold­man Sachs exec­u­tive sug­gests that he might have learned to be more scrupu­lous about fol­low­ing the law and meet­ing fidu­cia­ry oblig­a­tions to clients. But a firm of that size like­ly del­e­gates such tech­ni­cal­i­ties to less­er lights, who are paid to keep the firm out of legal trou­ble but whose warn­ings are not always heed­ed. Corzine laid bare his con­tempt for such peo­ple when he sacked his Chief Risk Offi­cer and lat­er referred to his Glob­al Trea­sur­er as the “Gravedig­ger,” even as Corzine him­self dug the firm’s grave. Com­pli­ance offi­cers don’t become Wall Street CEOs; risk-tak­ers do. Those who bet big where oth­ers shrink back out of pru­dence or fear make for­tunes for peo­ple at the top. And when they bet wrong, some­body else often cleans up the mess.

That some­body else is often the gov­ern­ment, par­tic­u­lar­ly when the bank is, in the lan­guage of the Dodd-Frank bank­ing “reform” law, “sys­tem­i­cal­ly impor­tant.” The rela­tion­ship between big gov­ern­ment and Wall Street giants, though some­times super­fi­cial­ly adver­sar­i­al, is gen­er­al­ly quite cozy, regard­less of which polit­i­cal par­ty is in charge. Five years after Wall Street’s most recent melt­down, crony cap­i­tal­ism thrives. The Pres­i­dent flat­ters the mid­dle class with rhetoric about its impor­tance, even as it wastes away on his watch. He has nev­er uttered a word, to my knowl­edge, to note (much less protest) that the Fed­er­al Reserve’s unprece­dent­ed mon­e­tary pol­i­cy has enriched investors while leav­ing behind those whose stan­dard of liv­ing depends on their own labor.  His appar­ent will­ing­ness to appoint Janet Yellen, who has been instru­men­tal in shap­ing this mon­e­tary pol­i­cy, as the next Fed Chair­man sug­gests that he is more com­fort­able than he lets on with grow­ing inequal­i­ty.

The Corzine case seems unusu­al even when one acknowl­edges the close rela­tion­ship between the investor class and the gov­ern­ing class. There is noth­ing ter­ri­bly com­pli­cat­ed about it. Its core facts are clear: MF Glob­al stole near­ly $1 bil­lion of its clients’ mon­ey in a failed attempt to cov­er its chief executive’s dis­as­trous bets.

To a naïf like me, that sug­gests crim­i­nal­i­ty and guilt. But pros­e­cu­tors at the Jus­tice Depart­ment despaired of mount­ing a crim­i­nal case and the CFTC may not pre­vail in its civ­il action. Per­haps this is just too com­pli­cat­ed for a sim­ple man like me to under­stand. Per­haps Jon Corzine is no poster child for crony cap­i­tal­ism, but a gen­uine­ly inno­cent man caught by hap­pen­stance in an unfor­tu­nate sit­u­a­tion.  Fail­ure, even one as spec­tac­u­lar as Corzine’s, is no crime.

Still, I can’t shake the notion that some­thing else might be at work here. Could it be that the polit­i­cal class can’t bring itself to accuse one of its own of a crime?