[ISN] Wheat trader for MF Global loses $141.5 million in unauthorized trading

From: InfoSec News (alerts@private)
Date: Fri Feb 29 2008 - 01:19:49 PST


By Michael M. Grynbaum
International Herald Tribune 
February 29, 2008

For nearly two decades Evan Dooley quietly made a living trading 
commodities like wheat in his home state, Tennessee, far from the 
hurly-burly of Wall Street.

But on Thursday, Dooley, 40, became the talk of the financial markets 
when MF Global, the giant commodities brokerage, accused him of making 
unauthorized trades that led to $141.5 million in losses for the firm. 
Dooley, the firm said, wagered on wheat futures with money he did not 

Dooley, who worked in the firm's Memphis office, had bought as many as 
15,000 wheat futures, the equivalent of about 10 percent of the market 
for these contracts for any given month, company officials said. MF 
Global discovered the trades early Wednesday morning and ran up the 
losses as it desperately unwound the positions in a volatile market.

"This is a very disappointing situation for us," said Kevin Davis, the 
chief executive of MF Global, on a conference call with investors and 
journalists Thursday. Shares in the company plunged nearly 28 percent.

It was the second high-profile case of a single trader's bad bets 
causing losses for a global financial firm. MF Global's troubles, 
however, are small compared with the multibillion-dollar hole left in 
Socit Gnrale after Jrme Kerviel secretly wagered the bank's money on 
stock futures.

Like Socit Gnrale, MF Global has an electronic system designed to 
prevent brokers from trading beyond their means. The French bank has 
said that Kerviel circumvented its controls for more than a year with a 
complex scheme involving computer hacking. But MF Global's safeguards 
failed for a simpler reason: The firm had deactivated them for certain 
traders, including Dooley, because the controls slowed transactions. 
Dooley, who is known as Brent, was dismissed by MF Global after his 
trades were discovered. He could not be reached for comment on Thursday.

The losses may have been exacerbated by a spell of volatility that has 
affected the wheat market in recent weeks, spurred by droughts that have 
suppressed supply even as demand spiked.

"You've seen moves in a day that you'd expect to see over a month," 
Davis said, referring to the wheat market. "The size of the market has 
grown quite dramatically."

Wednesday was a particularly bad day to sell off the unwanted positions. 
Wheat futures plunged in the morning and then spiked in the afternoon.

"Throwing someone into a lions' den is about what it's like," said Vince 
Boddicker, manager of Farmers Trading in Mitchell, South Dakota.

Friends and colleagues said they were surprised to hear Dooley's name in 
the news. He grew up in a small town in central Tennessee, they said, 
and has spent most of his life in the state.

"I certainly wouldn't want anyone portraying him as a shady guy, because 
he wasn't," said Chris Cornell, a corporate bond trader who pledged the 
Sigma Alpha Epsilon fraternity with Dooley at the University of Memphis.

"He is friendly, outgoing, he was good fraternity brother. I would sure 
like to know the rest of the story."

Dooley graduated from the university's business school with a bachelor's 
degree in finance in 1991. Former classmates said he played intramural 
basketball and football and held several officer titles at his 

He began his career in finance working part-time at McVean Trading and 
Investments, a commodities brokerage firm based in Memphis, while still 
an undergraduate.

"He was just an average kind of kid," said Llewellyn Hall, the firm's 
vice president of compliance. "He didn't leave under bad terms, or I 
would have remembered it."

Dooley left McVean in 1994 and then went on to work at a half-dozen 
financial firms, according to regulatory filings. He had been working on 
commission at MF Global since November 2005, according to a company 

"He sort of lucked into it more than anything," Cornell said.

James Whitehead, a partner at Shoemaker Financial, a Memphis firm, who 
was in Dooley's college class and fraternity, said they last spoke over 
breakfast two weeks ago.

Dooley had recently discussed some of the stresses that come with middle 
age, Whitehead said.

"I think as a businessman, family man, you go through stresses, just the 
stress of life," Whitehead said. But Dooley's worries did not strike 
Whitehead as out of the ordinary. "Nothing that would throw up a red 
flag to me."

Copyright 2008 the International Herald Tribune All rights reserved

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