FORTUNE -- On Thursday, Louis Freeh, one of the two bankruptcy trustees for MF Global and a former head of the FBI, released a report that for the first time squarely places the blame of the demise of the commodities trading firm on one person.
Back in March 2010, MF Global's board of directors created the position of global head of capital and liquidity risk, a response to an earlier trading blunder that had cost the firm more than $100 million. The position was created the same month CEO Jon Corzine, the former Senator and head of Goldman Sachs (GS), was hired to run the firm. So basically Corzine's first assignment from the board was to hire this person.
The job of the global head of capital and liquidity was to be the ultimate guard of MF's cash, alerting the board if there was any chance the firm would run out. Basically, the buck was supposed to stop there on whether MF had enough bucks. As anyone familiar with the MF Global story will tell you, this person clearly failed, horribly.
EARLIER: The last days of MF Global
According to Freeh's report, over the next year and a half, Corzine embarked on a trading strategy that systematically drained the company of its cash, created phony one-time earnings gains, and regularly violated the firm's risk controls, which Corzine and the rest of management knew were horribly flawed anyway.
And not once did MF's global head of capital and liquidity risk speak up. The person never wrote a single report to the board or even called a meeting.
The logical response at this point should probably be, "Bring me this guy (or gal)." We need to question this person or put him in jail or haul him in front of Congress or whatever it is we do to financiers who have screwed up this bad. And that would be a good thing to do, except for the fact that the person the company's board mandated to be put in place to keep MF Global in check was never actually hired. Corzine didn't fill the position.
Freeh's report places more blame on Corzine for MF Global's undoing than any of the numerous other reports and investigations that have been produced since the firm collapsed in late 2011. The 124-page report was filed in bankruptcy court on Thursday, ahead of hearing on the firm's liquidation on Friday. But that's probably not the end of MF's legal saga. Freeh's report seems to be setting things up for a possible suit against Corzine.
But he doesn't accuse Corzine in a direct way. Freeh doesn't claim that Corzine gave permission to use customer money to fund his bet on European debt. He doesn't even say Corzine knew customer funds were missing, a key issue in the wake of the firm's collapse. (Much of the money has since been found.)
Instead, Freeh says MF Global's accounting systems were so bad executives probably were unaware that they had illegally tapped customer accounts to fund the company's prop trade. Nor do they know how close they were to running put of money. But Freeh does say that Corzine knew or should have known how weak the firm's risk controls were. He and other executives were instructed to fix the problem, for instance making the key hire the board had mandated, but never did.
Why didn't they? Freeh's report paints the picture that Corzine preyed on those weak risk controls to build up his $6.3 billion bet on European debt, which eventually led to cash shortfalls of as much as $2.1 billion, bankrupting the company.
Corzine structured his bet on Europe using "repos-to-maturity," a way that would generate upfront one-time profits. The only way to keep that profit machine going was to make the trades bigger and bigger. Throughout 2010 and the first half of 2011, Corzine repeatedly asked the board to up the size of his trade, and then he blew through his limits anyway. That can still work if the trades go your way or if you have a Goldman or TBTF-sized balance sheet. But that's not the league Corzine was playing in anymore.
Instead, as the situation on Europe gpt worse, all those trades required MF Global to put up more and more in its margin account. Eventually MF Global had no more to give.
Any individual, or system, tasked with evaluating the risk of those trades should have been able to see the ultimate folly in Corzine's position. The Freeh report leaves you with the feeling that Corzine understood the benefit, at least short-term, of not having someone look over his shoulder.
Here's how Freeh's report put it: "As these events unfolded, Corzine and his management team failed to strengthen the company's weak control environment, making it almost impossible to properly monitor the liquidity drains on the Company caused by Corzine's proprietary trading strategy."
But what's also curious is why the board didn't do more. Why didn't they ever ask why the position they mandated never got filled? Board members that Freeh questioned said they relied on the assessment of the company's CFO, who was clearly willing to stretch the truth. On Monday, October 24th, the beginning of the week that MF collapsed, Henri Steenkamp wrote an e-mail to S&P saying that MF Global's "capital and liquidity positions have never been stronger." If it's so easy to duck corporate boards and lie to ratings agencies, what are those checks and balances for exactly?
Jon Corzine has some decisions to make.
FORTUNE -- Jon Corzine is "weighing whether to start a hedge fund," according to a NY Times article that also says the former MF Global boss is unlikely to face criminal charges for his role in the brokerage firm's collapse. Somewhere, the ghost of P.T. Barnum must be smiling.
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Today Jon Corzine shows his face in public.
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As the questions and conflicts in the MF Global bankruptcy pile up, investors are pooling their resources to get a seat at the table.
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