Industry Updates

Corzine claims lack of involvement in MF Global running during congressional hearing

Friday, December 09, 2011

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Opalesque Industry Update – Jon Corzine testified during the first of three subpoenas from congressional committees investigating on Capitol Hill Thursday about the collapse of commodities brokerage MF Global and the missing $1.2bn. He headed MF from March last year until his resignation last month. AP speculated that he would invoke the Fifth Amendment – but instead he answered all questions.

According to a CNBC Video recording of his announcement, The Hon. Jon S. Corzine said that he had been “stunned” when he was told on Sunday October 30th, 2011 that MF Global could not count for many hundreds of million dollars of client money.

“I simply do not know where the money is or why the accounts have not been reconciled today.”

He acknowledged that as CEO of MF Global he ultimately had responsibility for the firm; however, he conceded, he did not involved himself with the mechanics of the clearing and the settlements of trades or the movement of cash and collateral, nor did he have expertise or experience in the operational aspects.

Corzine pointed at the confusion created by the sheer number of transactions during MF Global’s last days, which would cloud whether internal operational errors were done in-house – once again pointing at an area he just claimed to be ignorant about – or whether “banks or counterparties have held on to funds that should rightfully have been returned to MF Global” – here pointing his fingers to the outside.

Corzine’s speech portrayed detachment about the outcome of his firm’s collapse on two counts. First, he assured that the trustee of bankruptcy, the receiver and the regulator are “working to answer these questions.” So, again, no input from him or the firm towards explaining what precisely happened. And he ended by apologising personally and on behalf of the company to customers, employees and investors. “I truly know that they are bearing the brunt of the impact of the firm’s bankruptcy.” Leaving himself out of those bearing the brunt.

Throughout more than two hours of congressional testimony, he said “I certainly would never intend to direct or have segregated funds moved.” Lawyers told Bloomberg it was no surprise that he repeatedly focused on intent. The language Corzine used “is certainly an attempt to defuse any criminal responsibility,” said Stephen Braga, an attorney with Ropes & Gray LLP in Washington.

Jon Stevens Corzine (born 1947) is the former CEO of Goldman Sachs and of MF Global, and a former American politician, who served as the 54th Governor of New Jersey from 2006 to 2010.

MF Global's is apparently the eighth-largest bankruptcy in U.S. history.

George Soros's family fund bought about $2bn of European bonds formerly owned by MF Global, the very debt that helped force the securities firm to file for bankruptcy protection Oct. 31, the WSJ reported today. And David Tepper's Appaloosa Management bought 8.64% of MF Global Holdings Ltd. stock, exceeding 5% ownership, on Nov. 2nd, said Bloomberg.

Former customers of MF Global Holdings Ltd. on Monday charged that JP Morgan Chase was trying to unfairly claim their assets in the court tussle over MF Global's remains, said Nasdaq. And some of the 1,066 workers fired from the futures brokerage filed three lawsuits over their sudden dismissals last month.

Furthermore, U.S. Commodity Futures Trading Commission Chairman Gary Gensler withdrew from the agency’s investigation of MF Global amid concern that his ties to Corzine may give the appearance of a conflict of interest, reported Bloomberg.

B. Gravrand

See our recent coverage related to MF Global:
08.12.2011 Opalesque Exclusive: Jon Corzine's toppling of government regulators should be considered Source

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