Gerald Celente (not only) on MF Global:
– Corzine: ‘Don’t know’ where MF Global customers’ $1.2B went (USA Today, Dec. 8, 2011):
Former MF Global chief executive Jon Corzine apologized “to all those affected” by the brokerage’s collapse Thursday as he told a congressional committee he doesn’t know what happened to $1.2 billion in missing customer funds.
Testifying under subpoena at a House Agriculture Committee hearing, Corzine, a former Democratic U.S. senator and ex-Goldman Sachs chief, portrayed himself as stunned about the massive shortfall that emerged as regulators and federal investigators began probing MF Global’s Oct. 31 bankruptcy.
“I simply do not know where the money is, or why the accounts have not been reconciled to date,” said Corzine, 64, in his first public comments since his resignation was announced four days after the bankruptcy filing.
Committee Chairman Rep. Frank Lucas, R-Okla., voicing concern for ranchers and farmers and other former MF Global customers whom he said are “looking for answers” about financial losses and uncertainty caused by the bankruptcy, asked Corzine if there was a shortfall in customer funds.
“I know only know what I read,” said Corzine, who added later that he first learned that “there were unreconciled accounts” on the night before the bankruptcy filing.
In a longer, written statement submitted to the committee, Corzine said he could not be more precise on some MF Global issues because he has not had access to company records and many of his own notes since his resignation.
Asked by Lucas whether he had authorized or directed that money be moved out of customer accounts that are required to be kept segregated, Corzine testified “I never intended to break any rules, whether it dealt with the segregation rules or any of the other rules that are applicable.”
“I am not in a position, given the number of transactions, to know anything specifically about the movement of any specific funds, and I will repeat, certainly would never intend to direct or have segregated funds moved,” Corzine replied when Lucas asked if there had been any “authorized or unauthorized transfers” of customer funds.
While several committee members thanked Corzine for opting not to cite his Fifth Amendment right to avoid testifying, others appeared somewhat irritated by his carefully chosen answers. Several described the financial jeopardy now faced by farmers and other agriculture constituents who were MF Global customers.
“People who live in the real world, as you do, a lot of people have suffered dramatically, and will suffer, because they won’t be able to buy seed, they won’t be able to buy equipment, they won’t be able to invest for the future year,” said Rep. Timothy Johnson, R-Ill. “I’m concerned … that a lot of individuals, all over the country … are going to wind up holding the bag because of what is either negligence, and or commingling (of funds) and or abdication of your responsibility as a fiduciary.”
The proceeding was the first of three Capitol Hill hearings for which Corzine has been subpoenaed to testify.
The MF Global bankruptcy implosion, Wall Street’s largest since the 2008 bankruptcy of Lehman Brothers, was triggered in part by $6 billion in bets on European government debt.
Challenging public criticism that has focused on those investments, Corzine’s written statement said the brokerage’s decision to seek bankruptcy court protection was largely due to a $119.4 million write-off of tax benefits that could no longer be classified as assets.
Corzine called the European debt investments “prudent” in the written statement and said he advocated them last year as one way to improve MF Global’s flagging profits and commissions amid increased competition from online brokerages and high-frequency traders.
During hours of questions-and-answers with the committee, Corzine told the House panel “I accept responsibility” for that investment strategy. But he noted that the transactions were approved by MF Global’s directors and were disclosed to the brokerage’s senior officers and accountants, as well as to investors.
“As of today, none of the foreign debt securities” involved in the European debt transactions “has defaulted or been restructured,” Corzine said.
The Financial Industry Regulatory Authority directed MF Global last summer to increase the brokerage’s net capital with regard to the European debt. Acknowledging in his written statement that he tried, unsuccessfully, to change that decision, Corzine wrote that the brokerage “promptly complied” in August.
Addressing criticism since the bankruptcy that MF Global took on too much risk in European debt and other deals, Corzine said the brokerage’s level of leverage, the use of borrowed capital for investment relative to equity and preferred stock, was consistently around 30 to 1 during his tenure.
“In fact, MF Global reduced leverage,” he wrote.
Rep. Collin Peterson, D-Minn., the House committee’s ranking minority member, told Corzine he was concerned about such Wall Street practices. “It just seems pretty risky,” said Peterson.
Until the bankruptcy, New York-headquartered MF Global had been one of the world’s leading brokers in markets for commodities and listed derivatives. The brokerage, most of whose 2,870 employees have been let go since the collapse, was also a broker-dealer in markets for commodities, fixed-income securities, equities and foreign exchange.
MF Global’s collapse has caused particular hardship for ranchers and farmers who used the brokerage to make commodities market trades as financial hedges intended to protect them against swings in agriculture prices.
Many have had thousands of dollars tied up as a court-appointed bankruptcy trustee tries to transfer and distribute $2.1 billion in MF Global funds frozen by the bankruptcy. A bankruptcy judge in New York is scheduled to consider that issue Friday.
Darwin Rieck, 64, a Luzerne, Iowa farmer and MF Global customer, said in a recent interview with USA TODAY he had to send more money to the Chicago Mercantile Exchange to meet margin calls on several pending commodities futures trades. Although his brokerage account held sufficient excess funds, that money was frozen by the bankruptcy, he said.
“If I hadn’t sent the money, they would have liquidated the trades,” said Rieck, who works with his son-in-law raising corn, soybeans and feed cattle. “It just doesn’t seem like the way it’s supposed to be.”
Addressing such concerns, Corzine did not directly respond to a question about whether he and other MF Global officials would commit their personal fortunes to repaying the brokerage’s customers. But he repeatedly struck a penitent note during his testimony.
“I sincerely apologize, both personally and on behalf of the company, to our customers, our employees and our investors. I truly know they are bearing the brunt of the impact of the firm’s bankruptcy,” he said.