Corzine's testimony is 'height of disbelief,' says Congressman

Michael P. Tremoglie Dec. 9, 2011, 1:00pm


WASHINGTON (Legal Newsline) - Jon Corzine, the former CEO of the bankrupt brokerage firm MF Global, has testified before Congress about his role in the company losing nearly a billion dollars.

His responses were tentative, claiming ignorance of events. This prompted committee member, Rep. David Scott, D-Ga., to remark that it was the "height of disbelief" for Corzine not to know.

Testifying before the House Agricultural Committee, the former Democrat U.S. Senator and Governor of New Jersey, seemed to be unsure about what occurred in the company he ran. Several times he responded to direct questions about what actions he ordered to be taken by saying he "never intended" to give an order. However, he allowed for the possibility that an order he did not give was performed because of a misunderstanding.

Corzine, also a former Senior Partner of Goldman Sachs, often responded to questions by saying he could not be sure. He replied that since he did not have his records in front of him he could not confirm or deny an action or inaction.

Ultimately, Corzine said he does not know where approximately 1 billion dollars of missing customer funds is. He also does not know why it is missing. It has been estimated by the bankruptcy trustee that as much as $1.2 billion may be missing

Scott expressed his dismay that Corzine, with all his high-powered experience in government and business, did not know what was happening.

"We're talking about the loss of $1.2 billion and you know nothing about it?" Scott said. "We've got to get better answers from you."

Rep. Jean Schmidt, R-Ohio, said that while Corzine's "answers sound so nice," he "invested people's money without their knowledge in a market that I wouldn't even invest in."

The public hearing examined the MF Global bankruptcy and reports that as much as $1.2 billion in customer funds have gone missing. The disappearance of customer funds from the company has damaged the trust that farmers, ranchers, and businesses across America place in futures trading, the committee said in its press release.

The committee said that it is trying to determine what happened at MF Global because it wants to restore the confidence businesses have in futures investments. Customer funds used to guarantee trades must be segregated from the broker's funds, and this did not seem to be the practice at MF Global. The separation of funds protects customers' margin in the event that their trader defaults or files for bankruptcy as is what occurred at MF Global.

The hearing was the first time Corzine commented publicly about the bankruptcy of the company he operated. There were three panels testifying about MF Global before the committee.

Jill Sommers, Commissioner, Commodity Futures Trading Commission, and James Kobak, Lead Counsel for the Trustee for the Liquidation of MF Global Inc., were the first panel members.

Those on the third panel were: John Fletcher, on behalf of the National Grain and Feed Association; Terrence Duffy, Executive Chairman of CME Group, Inc.; William J. Brodsky, Chairman and CEO of Chicago Board Options Exchange; Dan Roth, President and CEO of National Futures Association, Chicago; Stephen Luparello, Vice Chairman of Financial Industry Regulatory Authority; and Gerry Corcoran, on behalf of the Commodity Markets Council.

Corzine was the sole member of the second panel.

Members questioned Corzine and other witnesses about the events leading up to the bankruptcy and the whereabouts of customer funds.

Farmers and ranchers especially rely on futures markets to smooth price volatility and manage the risks that are inherent to production agriculture, committee chairman Rep. Frank Lucas, R-Okla., said.

"Today's hearing was an effort to get answers for the constituents impacted by MF Global's collapse," Lucas said.

"Former MF Global CEO Jon Corzine's presence was critical to our objective, and unsurprisingly, we are finding that there are still more questions than answers about the missing customer funds. There is a great deal more to learn if we are to restore confidence in the futures markets. Ultimately, our primary focus is ensuring MF Global's customers have their money restored. This hearing was the first step in that process, but it will not be the last."

Rep. Colin Peterson, D-Minn., added, "The Agriculture Committee's oversight of the futures and derivatives markets is a responsibility that I do not take lightly. Wall Street, apparently not content to sully its own reputation, has now stained our well-run futures markets by apparently violating the supreme law - protection of customer funds.

"At the Agriculture Committee we are focused on the facts. It is the facts that will tell us what happened, who knew about it, and consequently, who was responsible. Only by uncovering the facts, can we prepare ourselves for policy responses that are necessary to address what has happened."

Criticism of Corzine's ambiguous responses was bipartisan.

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