Frontline is made possible by contributions to your pbs station from viewers like you. Thank you. And by the corporation for public broadcasting. Major funding is provided by the john d. And catherine t. Macarthur foundation, committed to building a more just, verdant, and peaceful world. And by reva and david logan, committed to Investigative Journalism as the guardian of the public interest. Additional funding is provided by the park foundation, dedicated to heightening Public Awareness of critical issues. And by tfrontline journalism fund, supporting investigative reporting and enterprprprprprpp martin smith its one of americas most dangerous jobs. People have no idea what we go through on a daytoday basis to give them that service when theyre holding their cell phone. Smith tower climbers install and service cell phone antennas, ascending hundreds sometimes more than a thousand feet. People dont understand what the danger is to Tower Climbing. One person drops a wrench and itll kill somebody. Yeah, 1,500 feet. Look at that view we get paid for this. We get paid for this. 1,500 feet. Smith the job attracts a certain kind of worker. This is awesome. Smith someone like jay guilford. He was young, he was cocky. He was never scared of nothing. 911 emergency. Yes, were working on a tower site. We just had a man fall from a 200foot tower. We need an ambulance. Okay, ill get them down there. It was not even a year, jay aint even been in it a year when the accident happened. Smith guilfords death wasnt an isolated case. Over the last decade other men have been falling to their deaths. North carolina. Arizona. Kentucky. Florida. Iowa. Since 2003, there have been nearly 100 climbers killed on radio, tv and cell towers, a rate that is about ten times the average for construction workers. Jay guilford, actually, this is what he was using. Smith to find out why, reporters at frontline and propublica investigated the 50 cell related deaths. But did they address the question of responsibility for. After pouring over thousands of documents, we discovered a complex web of subcontracting that has allowed the major carriers to avoid scrutiny when accidents happen. Any of your cell phone carriers, as far as their concern, safety is our issue, not theirs. Smith ray hull is a Tower Climbing veteran. Before cell phones, he worked mostly on tv and radio towers. Any major Tower Company knew who i was, knew who my dad was, my granddad. Im Third Generation in that line of work. Smith but with the boom in cell phones, the industry suddenly changed. There was a big push for these Cell Companies to start expanding out and covering the dead areas, everybody trying to outdo everybody. 15, 20 years ago, a good Tower Company might. Might build four towers a year. Now timelines are radically different. So instead of contracts to build a tower, you have contracts to build 40 towers. Smith the increased pressure almost killed hull. It was a cell phone tower for nextel. Smith hull was hired by the subcontractor and given a strict deadline. The only problem with that is the equipment was in texas, and were in fremont, nebraska,r about 20 hours away. Smith he was worried the drive would make him miss the deadline, so hull called the subcontractor. They said we cant change the deadline. This is nextels deadline. The tower has to be up and coleted. We left nebraska and it was nonstop. Werove straight through, loaded the equipment, got back in the truck, and drove nonstop. Smith he planned to sleep back in nebraska, but then he arrived at work site. When we got back there was a nextel vehicle on site. I assumed that he was there to rattle our cage, get us to go faster. Smith hull didnt know it was just a technician. He felt pressured and immediately ascended the tower. We obtainethe government investigation video and showed it to hull for the first time. Im just amazed that im even here. I remembering hearing a loud noise. Smith a huge piece of steel broke lose. My head was jammed into the piece of steel and knocked me out. Smith hull fell 240 feet, but his life was spared after his safety harness broke the fall. The operator pulled the wrong lever. Frankie was with me on the trip from nebraska to texas and back. Neither one of us was rested. And we have the end result that we do today. Smith hull suffered severe internal injuries and is now permanently disabled. It was a bad day. Or a good day, whichever way you want to look at it. I walked away from it. Smith so a lot of time pressure. You saw that often in your work . All the time. Smith all the time . We saw it all the time. Smith veteran climbers like Wally Reardon say that time pressure often leads to something called free climbing. Free climbings any time when a persons climbing on a tower where youre not connected to a fall arrest system. Smith a catch, basically. Youre attached to the tower. Right. Hes just thinking about the shortest route there. Smith reardon climbed towers for ten years. Now, he drives around and takes pictures of free climbing to try to draw attention to the dangerous practice, which regulations strictly prohibit. Hes not tied off. Smith free climbing was involved in about half of the fatalities we examined. Smith so what am i looking at here, wally . Were looking at the guy coming down, hes disconnected right now and as you can see his fall arrest. Smith so hes totally free climbing . See how fast hes coming down . Smith so he trips, misses one step, hes a dead man. Yeah, absolutely thats pretty much the way we did it. Standard operating procedure. Smith so this was no secret that everybody was free climbing and you could get your work done quicker . Right. Smith and the contractor that was your employer was happy to have it that way. Sure. And even the safest people ive worked with in the industry eventually will cave to it. Smith free climbing was apparently common for the crew that michael sulfridge worked with. He was a High School Dropout still living at home in rural tennessee. He wanted to be a cop. But i talked him out of that because i thought that was a dangerous job. I was afraid hed got shot or something. Smith when he got a job Tower Climbing, his parents werent happy about that either. And we tried to make him quit, but he wouldnt. Ill be okay, mom, big smile on his face, you know. Dont worry, mom. Ill be okay. Smith his mothers fears came true. He was free climbing near the top of this tower in kentucky and lost his balance. Whenever he lost his balance and fell from the tower, he landed somewhere in this area here on the ground, and in this spiral wire up above was one of his tennis shoes and a work belt. Smith randy gray was the investigator for osha, the Government Agency that regulates workplace safety. Sometimes i still cant imagine what that boy was thinking whenever he fell off that tower, that very last few seconds. Smith gray quickly discovered that free climbing was so accepted that the crew didnt even bother to take safety lanyards with them up on the tower. The lanyards were all in the back of the supervisors truck. Some of them were even in new packaging, never opened up. Confd thats just the way they normally did things. Smith Tower Services incorporated, sulfridges employer, declined our interview requests. Gray issued the company citations that carried a fine of 143,000. Eventually it settled with osha for 24,000. We wanted to ask osha about additional responsibility beyond the contractor. If the carrier is controlling the schedule, putting pressusu on the general contractor, who in turn puts pressure on the subcontractor. Weve had a number of situations where we think that accidents were caused by companies trying to meet deadlines and not. And cutting corners on safety in order to meet those deadlines. Smith jordan barab is the number two at osha. Although osha routinely fines subcontractors after accidents, its more difficult to go after the carriers who hire them. To do so, it must first prove the carrier is controlling the work and has knowledge of the violation. Our problem in this industry is that you have these little contractors that may set off in their pickup truck, you know, driving miles across the countryside and may never have any contact facetoface contact with their contractors. Smith but the work that theyre doing is controlled in a very real sense by the carrier at the top of the chain. Its very restrictive in terms of the legal requirements. Generally its only useful when you actually have somebody at the site that actually is witnessing and has some control over the actual working conditions at the site. You can see the tower over here to the left. Smith randy gray concluded that bluegrass cellular, the carrier in the sulfridge case, regularly visited the companys tower sites, so he issued citations. It just seems logical that whenever the carrier was here, that they had the possibility to know that these people were not tying off with personal protective equipment, just like anyone else wouldve. Smith but bluegrass fought back, saying, bluegrass does not have a duty to oversee the safety of independent contractor employees working at its cellular sites. Gray couldnt show that bluegrass, which also declined our interview request, was on site and watching the day sulfridge fell. There was no way to prove that the carrier knew that they were up there, not tied off, and theres no way to prove, to know that the carrier had been on the job site that day or the day before. Smith after a nearly threeyear legal battle, bluegrass won and all osha citations were dropped. We discovered that the bluegrass case was the only time since 2003 that osha even attempted to cite a carrier after the death of a subcontractor. What does this say to you that thereve been no citations by osha against any carriers . It says to me that we dont have the legal ability to do that. Legally theres no way we can really get to that company. The company that may, again, several levels up, that may actually own the tower. It is difficult because theyve got that layer. Smith so the multilayers protect them from liability . Yeah, just through their own policy they layer themselves away from it. Smith mmhmm. It protects them from getting an osha citation . Yes. Smith in the middle of the last decade, the major carriers were gearing up for the next generation of cell phones. This push was all about data, a new standard called 3g. At t had merged with cingular, to form the largest cell company at the time. We had this huge slug of work that was occurring in 05 and 06. Smith ed reynolds is the former president of Network Services at at t. Before retiring in 2007, he was charged with combining two distinct networks into one. It would be like taking a 747 with all of its engines and while its in flight at 35,000 feet youre going to change all four engines into one huge engine and not lose a foot of altitude. Smith but that was only the beginning. It took three years, billions of dollars. And then the iphone hit. And we knew that it was going to be a success. We were confident it would be a success. But it was a game changer, if you will. Well, as you can see, were on fifth avenue in front of the big apple store. Smith the success meant that data usage far exceeded what at t had predicted. Here is the giant throng. Smith its network wasnt ready. At t knew that it was in trouble and that it had to get very aggressive on expanding their network footprint, especially around capacity. Smith by 2008, at t was pouring billions of dollars into tower upgrades. And for phoenix of tennessee, an at t subcontractor, that meant one thing. Work. Lots of work. Smith but to get that work, phoenix had to go through a middle man. We dont deal direct with at t. We do work for the vendors, the turf vendors. Smith turf vendors are large firms, like General Dynamics or bechtel, that at t relies on to manage work on thousands of tower sites across the country. The turf vendors in turn subcontract to Companies Like phoenix. And in 2008, phoenix also sent much of its work to a smaller affiliate, a Company Called all around towers. I would make the phone calls, open the door. Once i got them in, they pretty much took it from there. And then all around towers hired their own crew members, their own people. It didnt matter if they had experience or not. Smith like jay guilford. He kicked around between parttime jobs. He was a mover, he delivered pizzas. But after his second child was born, he needed something better. All around towers was offering a fulltime job at 10 an hour. Thats when he filled out the application, came back out, said he had a job and they gave him a 600 check and had a plane ticket for him to leave, like, the next day. Smith guilford, with no prior experience, was suddenly thrown into one of the biggest building projects the tower industry had ever seen. Even in the wintertime there was ice on the towers and he would tell me he would have to literally beat ice off of the pegs to climb up the towers, which i did not find that very safe. Smith but his cousin and coworker says guilford wasnt scared. He enjoyed it. I mean it was. It give him a rush that was unreal. Jay, i mean, he just. He loved the job. Smith it was may 2008 in a rural corner of indiana. We just had a man fall from a 200foot tower. We need an ambulance. Ive got units in route down there. Jays dad called me and thats when he told me he had fallen off a tower. I freaked out and screamed and. Just screamed and screamed. Smith guilford fell when he was rappelling down the tower using the wrong kind of rope without a safety line. One witness said he was horsing around, his coworkers on the ground cheering him on. His rope was attached to a broken hook that popped off the tower. And, it turns out, an autopsy showed that he had recently smoked marijuana. Do i feel responsible to a degree . I think everybody does that was involved with it. I think all of the. I think the turf vendor does, i think everybody does anytime somebody dies. I was not the guy who put the man in. The crew leader in charge. Smith waites puts most of the blame on guilford for breaking safety rules and on all around towers for the broken equipment and lack of supervision. Once you leave men alone, the men have to police themselves. The man in charge has to be the sergeant. We cant hold the hands of everybody 100 of the time. Its impossible. If that equipment is checked when it comes off that truck or trailer, this should have never happened. When youre allowed to do something that is strictly unsafe, then somethings wrong up the line somewhere. Smith osha cited phoenix of tennessee, the Parent Company of all around towers, for the broken equipment. The fine was 2,500. The case was closed. But osha missed the bigger picture. Our investigation found that 11 climbers working on at t projects died as the Company Built out its network between 2006 and 2008. Thats more than all the other major carriers combined. At t took notice. At t made everybody have a stand down, discuss the deaths, why it happened, what will happen to you if you get caught free climbing. And they required that of every single turf vendor nationwide, didnt matter who you were, where you were at. You had a stand down. Smith so they said, lets have a stand down, lets stop work and figure out what the truth is. What did they figure out . I dont know if they figured out anything, quite frankly. Smith Craig Lekutis is an industry watchdog and safety advocate. I think what they did, it was, hey, weve got to pay more attention to safety because most of those accidents, i believe, during that period of time, were accidents that were caused by the worker not tying off 100 . Smith it sounds like a pretty flimsy resolution. It is. It didnt have the impact if carriers would have said, hey, were stopping all work. Were going to figure out and were going to solve this problem. I think a lot of times its more lip service than it is a real desire to be concerned about the safety of this industry. Smith at t declined our request for an interview. In a statement, the company wrote that its contracts require strict compliance with state and federal laws and regulations, including worker safety, and that worker safety has always been a hallmark of at t. Guilfordsiancee, bridget pierce, thinks that no one ultimately took responsibility for guilfords safety. Nut. Nut. I believe that everybody that is involved should be held accountable. At t, the contractors, General Dynamics and the Smaller Companies that are subcontracted out. Everybody in this process should be held accountable for and have to pay fines and have regulations that they all have to live up to. Smith after guilford died, the foreman for all around towers disappeared and was never questioned by osha. The Company Quickly went out of business, but two of its owners, who declined interview requests, then started another company that continues to do work in the industry. That doesnt surprise those who study subcontracting. The problem of focusing the enforcement attention at the bottom, at the small subcontractor, is a little bit like the old game of whacamole. You can enforce your osha standards on that individual contractor and hit t mole, but there are a lot of other contractors that are going to pop up. If we want to improve conditions in a workplace like towers, we have to think about the system that generates fatalities. Smith in the tower industry, that system is increasingly built around the turf vendor. At t relies on them almost exclusively. Sprint is also starting to. Turfing does save time and money. In the wireless business, particularly when Something Like an iphone that drives data usage out the roof, you need to respond quickly. The more of that administrative stuff you have out of the way and go right to work on doing what you need to do adding capacity to the network, reconfiguring the network turfings a benefit. Its good sense for the. For the carrier to do it. And its good for the turf vendor because theyre making a lot of profit off the projects, but its not good for the person down. When it gets to the field, where the works got to be done. Smith mark hein has worked for several turf vendors. He says the additional layer of subcontracting means those at the bottom are forced to accept less money. Theres a lot of Good Companies that wont work for them because the moneys not there. So rather than paying this amount to this guy, whos really qualified and been in the business, got. Has a great reputation, they hire this person over here because hes available right now and hell do it for what we want him to do it for. Smith after starting a new job last year, he was shocked by the subpar crews he found on his first round of inspections. When i went out as construction manager, i shut down every project i had working. They didnt have comtrain training, they didnt have rf training, they didnt have their hardhats, they didnt have safety glasses, they didnt have safety gear. Smith most surprising to hein, many of these crews werent even hired or approved by the turf vendor. They were working for a sub of the turf vendor. You know, a couple subs down the line. Smith but because of the way osha regulates the industry, turf vendors, like carriers, are rarely held responsible after accidents. I wouldnt say that the turf vendor doesnt know. I think the turf vendor just turns a blind eye to it because his contract is with subcontractor b. Its his responsibility. By the time we get to the actual person with the tool in their hand we have significantly reduced the financial benefits. And we have put three or four layers of communication problems into the intended final results. Smith Chris Deckrow owns a small climbing company in michigan that typically works at the bottom of a chain of contractors. The Good Companies are going out of business because they cant afford their safety. They cant afford their inrance. They cant afford their workmens comp. Smith deckrow showed us whats left over for him after each contractor, especially the turf vendor, takes a big cut. At t pays the turfer 187 to install a remote radio head. The turfer then takes the contractor and pays them 93. Ive seen seen as low as 40 to 50 and have been paid 40 and 50 to install that same item. Smith deckrow says the pricing has forced him to make hard decisions. He drives his trucks more than 100,000 miles a year without changing the tires. And hes cut his safety budget. This day and age, everybodys faced with the money versus safety. Whether theyll admit it or not, everybodys had to cut back on something. We would love to replace every year, every two years, new harnesses and new safety gear for all our guys. Its not in the budget. But this is stuff they have to wear every day in order to live through the day. My climbing harness, its got to be around four or five years old. Its older than we allow in the field, but its my personal harness. I wouldnt do it with any of my guys. Smith deckrow said he is considering closing his company down rather than paying his climbers less or cutting the safety budget even more. The carrier sets many of the conditions that ultimately affect injuries and fatalities on that worksite by setting the amount of money that the people who actually do that work are going to be paid for that work and therefore how much they can invest in things like health and safety, and paying high enough wages to attract people who might be competent to do that work. Smith for carriers, the responsibility for safety ultimately rests with the contractors. You can take the captain of the ship approach and say if there was a fatality, a subcontractor working two levels down under a turf vendor whos working for a network whos working for at t mobility. I mean, you can say that Randall Stephenson is responsible because Randall Stephensons the ceo of at t. But what impact saying that Randall Stephenson is responsible for that, would have on the eventual safety of future crews, i think thats too far to connect. At what point do you connect . I dont know. When osha came to investigate the fatality. Smith in the course of our investigation, we obtained this private letter to osha from the subcontractors trade group. In it, they urged osha to go after carriers and turf vendors that hire unqualified contractors, warning that otherwise, fatalities are going to continue. But three years later, we found out that osha doesnt even track which carriers are connected to fatal accidents. At this point in time you dont collect data on the carriers . We dont. Smith and is that something that you should be doing . Its something we could do. Again, its a lot of work to try to trace things up to the ultimate owner. But its. It would probably not be a bad idea for us to do that. Smith is it that much work . Dont you just have to ask the subcontractor . Well, the subcontractor may not know who the ultimate owner is. The subcontractor may know the general contractor that theyre working and the general contractor then may know who. And, again, were talking about sometimes multiple levels here. Smith but its only two or three phone calls and you would know who the carrier was. Perhaps. Smith were you aware before we shared this information with you that at t had a higher incidence of fatalities . Im not sure but i dont believe so. Smith at ts letter to frontline and propublica pointed out that tower fatalities across the industry have declined since 2008. There were no deaths on at t jobs last year, even though the carrier said its workload increased. And that workload is going to get even bigger. The competition to build the next Generation Network 4g has already begun. We have windows competing with android, competing with blackberry, competing with iphone. And people have high expectations. I think were on the cusp of a pretty massive build out across all of the major networks, in particular sprint, verizon and at t, to deliver these much higher speed networks. Smith that worries veteran climbers who remember the last big build out. Were going to have a bad year as an industry because theyre going to go on a big push and your 10anhour pizza guys that are now climbing for you because you cant afford otherwise are going to start skipping steps. It takes years and years of training to know the safety of your equipment, theres guys out there now that are foremen within months of working, starting a job. Thats ludicrous. Theres no time to season these employees. Theres no time to mature them. Theres no time to train them. So we have increasingly less experienced, lesstrained, less capable individuals doing increasingly large projects at increasing pressure and with decreasing compensation. Smith and there will always be more workers like michael sulfridge, who was willing to climb towers for 10 an hour and just happy to have a job. These young men are willing to please. What ever the foreman tell them, theyre going to do it. Its a money business. Its get the job done, were going to get a big check. If were not properly maintained or trained, then people will die. And its only a matter of time. Coming up on this special edition frontline. Customer money was missing. Now you have these customers who cant get their money out of mf global. The next chapter of frontlines money, power and wall street series. Theres never one cockroach. The system has failed us. Six billion dollar bet begins right now. Narrator this is a story about a bet that went bad. Like all stories about wall street, it starts with the pursuit of profits and the risks of getting it wrong. Pay for at least 50, 12. 68 for at least 50. Narrator its one of the latest in a stream of missteps, meltdowns and scandals that blow up, it seems, every few months. Two Mortgage Companies under government control. The Federal Reserve is bailing out bear stearns. Narrator its a familiar cycle. Customers are outraged. Lawmakers promise change. Then it happens again. Mf global, down almost 39 . An increasing number of investors are betting the stock has farther to fall. Of all of the collapses that occurred during this financial crisis, the collapse of mf global, in my mind, is the most egregious. This did not have to happen. It is a wall street morality tale in some ways. How can Something Like this be allowed to happen . How can one individual completely shape the destiny of this firm and ultimately its demise . Narrator this is the story of jon corzine, the collapse of his company, and why no one stopped him until it was too late. He is fiercely ambitious and an aggressive risktaker. And thats the part that never comes across when you talk to him in person. You get this sort of avuncular feeling that totally masks what is a highly aggressive and ambitious guy who takes these huge risks with other peoples money. Narrator corzine had an impressive resume a highschool quarterback, a marine, and then a rapid rise through the ranks at Goldman Sachs. Corzine, importantly, grew up in the Government Bond trading business at Goldman Sachs, where he became such a star and wellrespected figure there, he was able to make huge money off of moves in currencies and Interest Rates and bonds. Narrator by age 47, he was the youngest ceo in the companys history. But his management style led to conflicts with another goldmdm partner, hank paulson. In 1999, corzine was ousted. It didnt slow him down. Hank paulson said to him, you know, what are you going to do now, jon . And. And corzine said, either im going to, you know, have my own hedge fund and be worth billions or im going to be president of the united states. Narrator corzine would aggressively embrace politics. In 2000, he spent a record 62 million of his own money to become a senator from new jersey. In 2006, he spent another 43 million to become governor. Gracious god, we ask your blessing upon jon, that you would fill him with positive vision, that he might inspire others. The reason why we called jon is because we knew he knew about the economy. Narrator by 2008, corzine had become a trusted advisor to barack obama. It was once rumored that he might even replace tim geithner as treasury secretary. Here we go, folks. Narrator but then in 2010, new jersey voters ended his political career and returned him to wall street. Former new jersey governor jon corzine is returning to the private sector. He has taken the helm of mf global. Narrator but corzines choice of mf global was puzzling. I think it was a little surprising that he went to such a small firm. You know, if you think about it, goldman partner, goldman ceo, confidante of the president of the united states, former new jersey governor, senator. Why wasnt he running a bigger firm, i guess, is the real question. 99 of people would look at his resume and say, i was a senior partner at Goldman Sachs, i was the governor of new jersey, im past 60, over and out, im going to go have fun. But he looks at his resume and says, i was kicked out of Goldman Sachs. I was kicked out of being the governor. I still have something to prove. And he wanted to come back to wall street and prove that his partners had been wrong about getting rid of him at Goldman Sachs. And he was going to show them. Im really excited about the opportunity to lead mf global. I thought it was great. The stock price jumped. And corzine was a dynamic character. Were going to work very hard to get the earnings back on track. From the military to Goldman Sachs to governor. I mean, i get it, you know. Hes going to have political connections. This is going to be great for the company, you know. So i was sipping the koolaid at that time. Narrator mf global was a wellestablished commodities brokerage, a spinoff from the old british powerhouse, man financial. It was basically a commodities and futures trading and investing firm. Clients would come there saying they want to make trades in the commodities industry or the futures industry buy pork bellies, buy oil futures, buy gold futures, silver, you know, palladium, whatever it is. Mf global was basically the middle man in these transactions. You put in a trade through them. They put it in through the exchange. And they took a small commission for their work. Narrator many of mf globals customers were from main street. How are you doing . Narrator steve meyers used mf global to trade futures on behalf of scores of farmers and ranchers in the midwest. Adm does most things. Many people cleared through mf global because they were the worlds largest. So it gives you some comfort in the fact that youre always going to have that liquidity, youre dealing with somebody thats everywhere in the world. Narrator but when corzine took over mf global, the firm was in deep trouble. Revenue from commissions wasnt covering expenses. The firm was losing money. When corzine first came in, the ratings agencies told him, look, you stepped into a firm that has a lot of problems. So you dont have unlimited time. The ratings on this firm are fairly low for a firm in its business and the bias is to move them lower. And so that put more pressure on corzine than hwould have otherwise faced. Were transforming from sort of an oldline Brokerage Firm into an Investment Bank. Narrator corzine set about cutting costs and replacing oldline traders with more aggressive hires from Goldman Sachs. We want to take and intermediate risk, a broker dealer. He was going to bring in a new team. He was going to have it take more risk. They werent taking enough risk, he told me. D i do believe we can take more Principal Risk in some of the businesses that are involved. So he was swingin for the fences from day one. And internally generated capital. The message was, were building an operation that can make a consistent profit, through prop trading, taking bets. And the proper deployment of your capital into the right places. What didnt come across to anyone until later was that corzine himself was the chief trader and that he was making one very outsized bet. Sovereign debt fears are spreading, and investors are just really worried. Narrator it was a large proprietary bet on european Government Bonds. Downgrading portugals Credit Rating. Narrator betting that they were selling cheap and would go up in value. If there is some sort of disorderly default, they fear some kind of banking crisis would erupt in europe. Corzine sees this and says, this is an opportunity. Europe will get this done. Theyre not going to let various parts of the eurozone default, fall of the edge. Jon corzine was betting on a bailout. He was betting that the relatively risky parts of europe uld becomemeess risky,ot more risky. The fragile greek government is at a stalemate in the debt crisis. Jon corzine has always been a gamblin man. This is what he does. Y do scorpns sting . Because thats what they do. And so he bought billions of dollars worth of these bonds in a way that seemed to hearken back to his days at goldman. He basically made a goldmansized bet at a firm that was only a sliver of Goldman Sachs. Narrator they were structured as large derivative deals that allowed mf global to book profits immediately in order to right its balance sheet. The way that this particular thing was structured, its a really obscure and complicated transaction, where essentially you can book the profits on the front end. When i make an investment, i have to wait to see how it turns out before i can book the profits. But the way these accounting rules worked and they were. They were the way it was supposed to work if you booked a trade in that way, you got the revenues right up front. Lines all were up on the quarter. Narrator as a result of these proprietary trades, mf global, for the first time in 18 months, began to look healthy. Smith were you aware of what the company was doing with the cash on hand that was in the proprietary accounts . Never. I never knew before that they could invest money in overseas markets or sovereign debt. You had no knowledge that they were buying sovereign bonds . Had i known that, i would have pulled out immediately. There was actually a debate internally at mf global about whether to disclose this. And their auditors ultimately encouraged them you know, you guys have to tell people. This is a really sizable bet, and it is material. You need to let customers and shareholders know about this. Narrator but they held off informing investors and customers for months. As it started to grow, people began getting increasingly uncomfortable with it. And some people would confront him and say, you know, jon, i dont think having this much money bet in this particular way is a sound thing. The market could really react badly to it. And so it began to get contentious and a lot of people, including one of the chief risk officers there, said, look, i cant support this anymore. I dont think this is a good bet. Narrator corzine continued his trades. But where was he getting the money . I dont think he ever had enough capital to really support the strategy that he was taking. He was taking a lot more risk, much more complex trades, bigger numbers, but its still the same old firm. And thats the problem. I think customer money was supporting a lot of this activity long before the firm failed. Narrator that is speculation. There is no clear evidence that customer money was used in the trades. But corzine was using a Financial Strategy called internal repo, whereby a brokerage can borrow cash internally from another part of the firm. In washington, in the summer ofi 2011, regulators at the commodity futures trading commission, the cftc, were debating whether to ban internal repo transactions. The cftc was potentially going to say, no more doing internal repo. And for a lot of companies, it was an important way to finance certain operational needs. Corzine, you know, got wind of this, so he begins to lobby in washington. Senator corzine was one of the more prominent individuals who came in and told us what a drastic mistake it would be to curtail the use of these internal repurchasing agreements and thatathey were dng everything appropriate with regard to the internal repos, and that we shouldnt worry about them and we shouldnt touch them. Narrator corzine visited the cftc and met with commissioners on three different occasions. Hes an impressive man, and he made a good case, and when he told me that we were making a big mistake, it certainly put some doubt into my mind for a little bit there as to whether or not we were going down the right course. But certainly somebody that had his stature was somebody who had, you know, added respect, in my view. Narrator the regulators backed off. Internal repos were not banned. When somebody can show up and just wave their hand and say that theyre the former governor of new jersey and they worked for Goldman Sachs, and then show up and start lobbying the agency for even more leniency, i mean, whats the point . We might as well not have the regulator. Narrator by mid2011, with a pass from regulators, corzines bet on european sovereign debt rose from 1. 5 billion to 4 billion to over 6 billion. Finally it was all too much. The trades stopped happening in the summer of 2011. Because eventually they were too big for the board and for the risk officers, and the message was, enough. Leave them at six billion. You can keep them, but dont build them up any higher than that. Narrator with no ability to continue his trades, profits plummeted. The news that mf global could be in trouble hit the wall street journal in the fall. The story was a blow corzine could not withstand. When we report that mf global has a 6 billion position in european bonds, it was very concerning to the market and it set off a panic. Mf global absolutely getting annihilated here. Down almost 39 . Moodys has downgraded mf global. Huge amount of volatility. The stock is in real trouble right here. Smith so this is like a what was he thinking . Kind of deal. I remember having a conversation with someone at mf global when i first heard about the position. And so i said to the person, are we talking about millions or billions here . And im. I thought it was millions, because i didnt. I had assumed that if it was that big, it would have been talked about a fair amount. And they said, no, its billions. I think people saw the gnitude of the bet that corzine made and how leveraged it was on a little sliver of equity and they said, you know what . When youre leveraged 40 to one, you know, the value of the asset goes down, you know, one or two percent, youve wiped out your equity account. Ultimately the bet he took was extraordinarily large and was maybe more than an Investment Bank would take. I meananif youre a Goldman Sachs and its a huge institution, it can weather the waves of the market like a big ship. He was in a rowboat doing the same sort of things and it, you know, it just capsized. It has been a rough week for mf global. The firms Credit Rating was cut to junk. Customers were frantic. Nobody knew anything. You know, my reputations on the line. Right . Ive done this for 15 years. Stellar record. Never any problems. That kind of thing. And now people are going, well, whats going on . Narrator steve meyers, who had over 5 million of client money invested at mf global, couldnt get the money out. I tried numerous times to phone my rep in chicago. Finding out later he had already left the ship. So i knew that we were in trouble at this point, that nobody was going to look out for us. Mf global is said to be looking to seek a buyer within days. Narrator in a lastditch effort to salvage the company, corzine put mf global up for sale. Does mf global now need a white knight . Narrator it was then that auditors discovered customer money was missing. It became clear that there was a big hole somewhere between 500 million and 1 billion in mf globals Customer Accounts. Regulators are now saying that the shortfall is around 593 million. At that point, mf global was different than lehman, it was different than aig or any of the firms that failed. Because, at this point, customer money was missing. The core rule of this business was this thing known as customer segregation of assets, meaning that the firm kept its money in assets and its customers money in assets separate. They werent supposed to get mixed up. Well, guess what . They did. Smith what we hear from some people close to mf global is that the. We dont know what happened to the customer money because the last days were too chaotic, too much confusion. Do you buy that . No, in our industry, putting your hands on customer funds takes some deliberate actions. You have to make an active decision to convert those funds. And i think thats what happened. Smith how much money is still missing . I think its a little over 1. 5 billion. And its not missing, its at j. P. Morgan. I mean, we know where the money is. Narrator j. P. Morgan was mf globals banker. Investigators are now trying to determine if, in those last desperate days, mf Global Executives intentionally transferred customer money to j. P. Morgan to meet a margin call from the bank. Smith is it legal for them to take the money from the Customer Account to meet their margin calls . No, definitely not. Smith i mean, thats different than internal repo. It is different from internal repo. And i would argue its actually an act of fraud. Smith an act of fraud. Yeah, i think it could be prosecuted. Narrator corzine says he did not order the transfers. Please. Out of the way, folks. Narrator but, he insists, he will cooperate with investigators to find out what happened. Do you solemnly swear that the testimony you are about to give before this committee is the truth, the whole. Narrator his only Public Comments came at congressional hearings last december. I remain deeply concerned about the impact that the unreconciled and frozen funds have on mf globals customers. This is a big bucketful of cold water in regulators face. I simply do not know where the money is or why the accounts have not been reconciled to date. Its a wakeup call that says, you got to take a fresh look at whats going on in the markets. Youve got to better protect, for customers interests. Youve got to look at these guys, because theyre not always going to be straight with you. Who had the authority to move customer funds from segregated accounts . Without looking at records, its very hard to try to reconstruct. Did you authorize the transfer of funds from the segregated accounts to. I blame all parties. Everybody in power. Whether its a politician, the regulators, jon corzine. There were people who handle the transfer of funds. Mf global is just a microcosm, the tip of the iceberg, the cockroach theory, if you will. Theres never one cockroach. And, um, it represents the start of systematic failure. The system has failed us, and itll only continue to grow. This is about jon corzines legacy. His firm, a lot of people invested because of him. Narrator the mf global affair is unresolved. A halfdozen investigations are underway. But so far no one has been charged. The company has gone bankrupt. Meanwhile, in december 2011, the cftc finally banned internal repos. The minute i saw the mf circumstance happen, i said, we gotta pass that rule. You know, enough is enough. You know, monday morning quarterbacking would have had us do it months before. But, uh, thats monday morning quarterbacking. Next timfrontline. The cia stopped an al qaeda plot in yemen to blow up a plane bound for the u. S. Has the Arabian Peninsula become a stronghold for the terrorist group . For the first time, we see al qaeda actually trying to hold territory. In an exclusive report, frontline examines the new al qaeda threat. This is al qaeda, and they control the whole city. Al qaeda in yemen. Frontline continues online. Explore the reporting on cell tower deaths from our partners at propublica, more about whos responsible for a workers safety from oshas jordan barab, and read at ts statement to frontline. Get insights into working at mf global from a former broker. Sipping the koolaid at that time. Learn more about the volckr rule, and follow frontline on facebook and twitter, or tell us what you think at pbs. Org frontline. Frontline is made possible by contributions to your pbs station from viewers like you. Thank you. And by the corporation for public broadcasting. Major funding is provided by the john d. And catherine t. Macarthur foundation, committed to building a more just, verdant, and peaceful world. And by reva and david logan, committed to Investigative Journalism as the guardian of the public interest. Additional funding is provided by the park foundation, dedicated to heightening Public Awareness of critical issues. And by tfrontline journalism fund, supporting investigative reporting and enterprprprprprpp captioned by Media Access Group at wgbh access. Wgbh. Org for more on this and other frontline programs, visit our website at pbs. Org frontline. Frontlinecell tower deaths is available on dvd. To order, visit shoppbs. Org or call 1800playpbs. Frontline is also available for frontline is also available for download on itunes. Now you told me there was an interesting story where did you find this . My mother had a cousin. Grandpa. Husbands parents. Great uncle. Moms 3rd cousin. Governor of vermont. That id found laying on a trash pile. Flea market. Dealer. In the dirt. She paid 45. 25 dollars. Never seen one quite like this. Rare. Fabulous. Fantastic. 25,000 dollars. 250,000 dollars. . 300,000 dollars. Oh my god every treasure tells a story. Antiques roadshow only on pbs. Announcer major funding for this program was provided by the corporation for public broadcasting. Additional funding was provided by the California Council for the humanities, the columbia foundation, the Evelyn Walter haas jr. Fund and others. A complete list is available from pbs. Captioning made possible by friends of nci