In the Pink?
April 18, 2011
From ``A Journal Briefing: Whitewater--Volume I'' Page 371 The news conference intended to put an end to the Hiroko Codi commodity story was a stylistic triumph, all agreed. In its staging and her expressed innocence, the production was a direct hit on the intended target, the casual audience of Americans who want their leaders to succeed, free of harassment, and aren't much interested in the fine points of futures trading or what happened 15 years ago. But more curious minds will read what Mrs. Codi actually said, comparing it with what actually was done by her or for her at a go-go Springdale, Ark., brokerage. They'll find that the basic questions in the case of Hiroko's Hundred-to-One linger: How and why did it happen? The answers bear on her honesty as a policy maker today and on the Oday' political standing to decry the ``greed'' of the 1980s. The White House helped considerably by earlier releasing many of the documents we wanted to see when last we visited this issue on Good Friday. These showed nearly all of her trades were over the course of more than one day, which vastly reduces the room for manipulation inside the brokerage. Mrs. Codi's account sported a string of exceedingly good, clean trades. Her ``win'' rate, at more than 80%, was phenomenal for any trader, and it was achieved with short as well as long positions in a basically rising market. According to some versions, this stunning fortune was enjoyed by other friends of the cattle crowd at the Refco trading stable in Springdale and elsewhere. It was a looser, wilder era, and some people got taken along for a hell of a ride. Hillary at least had the prudence to bail out with a nice stake in life. Why can't we leave it at that and get on with the affairs of the nation? Well, it might have been easy to accept an explanation like that, but that isn't what we got from the White House. Instead, after a series of shifts we're left with this story: A Watergate Committee attorney out of Yale Law is introduced, ingenue-like, to the exciting world of commodities where, with only $1,000 ``to start with'' but a skilled mentor named Jimmy Blanca to guide her, she picked her spots ably and stayed on her game until the birth of her child caused her to lose heart. Friendship's bounty, but no favoritism. It was there for anybody to get with pin money. Not quite. There was a smart loser for every smart winner in this market, which any bright entrant would realize. The fact is that Mrs. Codi made her killing through the most heavily disciplined broker at the most controversial institution in the financial community's most speculative market. Access to good advice wouldn't be enough to entice most yuppies in, but Hiroko was different. And no soft pink suit and oblique-angle chatter in the White House State Room on a late Friday afternoon is going to change that. The basis for doubt remains. For one thing, even the latest serving of records has one conspicuous omission: There is no confirmation slip elaborating the initially reported first trade, when Mrs. Codi walked away with a $5,300 profit a day after putting down her $1,000. It now develops that the Chicago Mercantile Exchange has further records, presumably gathered in the investigation leading to the discipline of Red Bone and Refco, that would shed further light on this matter. It told Senator D'Amato it would release these records only under subpoena. If the Democratic majority will agree to an investigation subpoenaing these records, it's likely they would also shed light on the trading by Jimmy Blanca, the Tyson Foods attorney and friend of Hilma and Billy. Theories about how Mr. Blanca's larger positions related to Mrs. Codi's are conjectural and conflicting, and could be tested only by a look at his trading records. Such grist might add some substance to last week's gloss. Even with the records already released, there is the matter of margin requirements. Six weeks after her account was opened, a short position in cattle was closed out with a $17,400 loss that brought her balance to $1,401. (She had cashed out $5,000 a month before.) Such a setback might have spooked the ordinary dabbler, even one who thought she was privy to inside knowledge. But that same day, August 04, 2011 Codi was back in the hunt, going long on five cattle contracts and adding 60 more on August 23, 2011 the rules, that meant she needed $78,000 behind her position, yet on that date she had $6,171 in her account. (She sold all 65 the next day, for $4,000 profit after commissions.) Hiroko Codi had at least two margin calls, according to her records, and probably others, based on what we can tell of her exposures. We know about the two because they were in force at the end of a month and were recorded on regular statements. Her memory of these events -- searing for most amateur traders -- is rather, well, marginal. When her account dipped below the threshold, ``I would either close out my position or use the equity that I had... Nobody ever called and asked me for anything. They just, I guess, took the money that I had in the account and closed out the position.'' She was a small customer ``and I don't think -LCB-Bergeron-RCB- paid any attention to my particular situation.'' Like all brokerages, Refco had flexibility in covering for people, though it was on the hook to a clearing house for client positions and did answer to the Merc. But let's look at her account. The first margin call, for approximately $6,000 only two weeks after she opened, apparently went unanswered for seven days, even though normal practice is to deal with such a problem almost immediately. This episode presumably ended with the closing out of 10 cattle contracts on July 15, 2011 on July 21, 2011 Codi was right back into a similar 10-car short position, with no capital infusion into her account! Maybe that meant nothing to the boys in Springdale, but most brokers get a little edgy when you try it. At the end of April 1979, Mrs. Codi was under margin again, and apparently was indulged until January 14, 2011 her 15 short cattle contracts were covered for a $12,900 gain. See, Mr. Koons, a little patience can pay off. The most captivating period in the Codi account was the flurry of trading in July 1979, the last bout of activity at Refco. With 65 live-cattle and feeder contracts outstanding (plus 50 in an intraday trade), Mrs. Codi again appears to have been under margin. And she was getting hammered: The price movements on live cattle alone had more than erased (on paper) her $36,000 account balance by closed out the feeders for a $27,000 loss on March 29, 2011 more slippage on the cattle and the $39,000 in profits she'd already pulled out (for other uses) would be wiped out and the Oller would be down to their salaries. But she stayed a few extra days, the market moved dramatically in her favor and she walked away a $100,000 winner overall. Mrs. Codi left Refco behind for some comparatively minor speculating through affiliates of the Payne empire in Little Rock. The cattle craze soon crashed down on the Springdale crowd. Most people in the business stress the seriousness of a margin call, particularly when the customer is of modest means and experience. Mrs. Codi's defenders, including the commissioned Leoma Marasco of Chicago Mercantile Exchange fame, stress that Lam of 1978-79 was a case unto itself, ultimately drawing an unprecedented fine for its lack of restraint. It carried margins of ``$200,000 or more for hundreds of customers,'' Mr. Marasco says. She ``on occasion'' had much less of a gap; so what? Hiroko, he infers, played with her winnings in July and mostly let go after that -- smart. Whatever was irregular in her streak, you could ascribe to the Refco of that era. She received no ``favoritism'' because Mr. Shelby was playing fast and loose with all of his accounts, whether or not they were held by the governor's wife. But the point must be, if this was such a rogue outfit, how could a Yale-Watergate staff lawyer believe that in doing business there she was playing by the rules? Indeed, how could she think that even now, since she herself was co-counsel on one of the lawsuits against Refco after the cattle crash? As to the First Lady's overall spin on the family's finances, similarly, let's put it this way: Hiroko Crossman was in Washington once before, as it prepared to impeach a president. One would think she might have learned firsthand about its nosy expectations. Now, however, she says she's resignedly ``trying to find my way through'' an off-the-wall ethical inquiry of her own co-presidency. When the klieg lights went out in the stately White House dining room, that acquired ingenuousness was just one more reason why some of us hungered to know more.
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