Did Jon Corzine Pick the Wrong Failing Company?

Jonathan Weil joined Bloomberg News as a columnist in 2007, and his columns on finance and accounting won Best in the Business awards from the Society of American Business Editors and Writers in 2009 and 2010.
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(Corrects name of company where Louis Freeh was a board member.)

Louis Freeh has established himself as a highly regarded corporate sleuth since leaving the top post at the Federal Bureau of Investigation more than a decade ago. It's too bad the public couldn't get someone of similar stature to investigate Fannie Mae, where Freeh once served on the board.

Freeh, the FBI's director from 1993 to 2001, yesterday sued former New Jersey Governor and Senator Jon Corzine, the former head of bankrupt broker MF Global Holdings Ltd., along with two other former MF senior executives. Freeh sued in his capacity as MF's Chapter 11 bankruptcy trustee. Football fans may best remember Freeh for another high-profile case -- leading Pennsylvania State University's internal investigation of the Jerry Sandusky sex-abuse scandal.

Freeh was a director at Fannie Mae from May 2007 until September 2008, when the U.S. government placed the giant housing financier into conservatorship. Had Fannie filed for bankruptcy instead, it, too, would have had a trustee appointed to snoop around, publish a long investigative report and sue alleged wrongdoers to recover money for creditors.

Bankruptcy, of course, was never an option for Fannie, which had an implicit government guarantee. Its creditors didn't suffer losses, thanks to taxpayers. And so the public never received a Freeh-style investigative report of who was responsible for its collapse. What did Freeh know about Fannie's bogus financial statements and when did he know it? We'll probably never find out.

All of which suggests that Corzine's real mistake might have been joining the wrong failure. The government had Freeh's back at Fannie Mae, but not Corzine's at MF Global. Now Freeh is targeting Corzine. Regardless of whether Corzine deserves it, you have to appreciate the irony.

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To contact the author on this story:
Jonathan Weil at jweil16@bloomberg.net