Ex-MF Global Broker Pleads Guilty in Unauthorized-Trade Case
A former MF Global Inc. (MFGLQ) broker pleaded guilty to federal commodities act violations after the U.S. accused him of making unauthorized trades that caused the now-defunct futures company to lose more than $141 million.
Evan Brent Dooley, 44, who worked in MF Global’s Memphis, Tennessee, office, entered his plea today before U.S. District Judge Robert M. Dow in Chicago. A federal grand jury indicted Dooley in 2010 over trades he made in 2008.
MF Global Holdings Ltd., the brokerage’s parent, filed for bankruptcy in October 2011 after making a $6.3 billion wrong-way trade on its own behalf of the bonds of some of Europe’s most indebted nations.
Dooley, of Olive Branch, Mississippi, pleaded guilty to two counts of violating Commodities Exchange Act speculative- position limits. Each count carries a maximum five-year sentence. He also faces a potential $1 million fine, acting U.S. Attorney Gary Shapiro said in a statement.
Dooley declined to comment after the hearing today.
He was charged with 16 counts of wire fraud, each punishable by as long as 20 years in prison. He had pleaded not guilty in May 2010 before U.S. Magistrate Judge Nan Nolan, and was released on a $4,500 bond.
Dow set a March 8 sentencing date and allowed Dooley to remain free on bond. After sentencing, the U.S. will ask Dow to dismiss the remaining counts in the indictment, according to the plea agreement.
Dooley also agreed to pay restitution to the collapsed firm, totaling $141,024,294, according to the agreement.
Dooley was associated with New York-based MF Global from September 2006 to February 2008 and was permitted to trade on his own account and for clients, prosecutors said when announcing his indictment in April 2010.
Patrick Fitzgerald, the Chicago U.S. attorney when the charges were announced, said Dooley “allegedly induced MF Global to open a trading account and act as his financial guarantor by providing false information about his financial condition on his account application.” The case was brought in Chicago because the transactions were conducted through CME Group Inc.’s Chicago Board of Trade.
In an overnight session in January 2008, Dooley allegedly executed a series of large buy and sell orders for about 1,500 wheat futures contracts, according to the indictment. Each contract comprises 5,000 bushels, according to the indictment.
While lacking the funds to cover potential losses, he liquidated his position that night for a gross profit of about $37,000, prosecutors said. Confronted by an MF Global supervisor the next day, Dooley allegedly said the activity was inadvertent, according to the indictment.
A month later, with a negative $3,000 balance in his account, Dooley allegedly executed buy and sell orders for almost 32,000 contracts, including more than 24,000 for May 2008 wheat futures and, in the course of trading that night, exceeded positional limits set by the Commodity Futures Trading Commission. He was unable to successfully liquidate his position.
“On or about Feb. 27, 2008, MF Global authorities learned of defendant’s overnight trading, deactivated defendant’s account and then liquidated the remainder of defendant’s position,” according to the indictment. “A loss of $141,021,489 was realized. Defendant was financially unable to cover the losses created by his trading.”
The lost money was equivalent to 6 percent of MF Global’s equity at the time, Chief Executive Officer Kevin R. Davis said in a Feb. 28, 2008, teleconference.
The case is U.S. v. Dooley, 1:10-cr-00335, U.S. District Court, Northern District of Illinois (Chicago).
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