WASHINGTON – Jon Corzine told a congressional panel Thursday that he never intended to break rules requiring failed securities firm MF Global to safeguard client funds. He also said he doesn’t know what happened to an estimated $1.2 billion that were missing.
Corzine is testifying before the House Agriculture Committee about the firm’s bankruptcy, which followed disastrous bets on European debt that were made while Corzine was CEO.
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Corzine deflected blame for the company’s collapse. He argued that he inherited a firm already doomed by his predecessors’ bad financial decisions.
Corzine appeared strained and at times grasped for words. But he responded to every question posed, choosing not to exercise his Fifth Amendment right.
His answers were cautiously worded. He often said he couldn’t recall or lacked access to materials needed for him to answer.
“I’m not in a position, given the number of transactions, to know anything specific about the movement of any specific funds,” he said.
Still, Corzine said he accepts responsibility for the firm’s risky bets and said its customers’ losses weigh on his mind “every day — every hour.”
The former U.S. senator was subpoenaed to explain how MF Global, which he led for about 20 months, collapsed into the eighth-largest bankruptcy in U.S. history and why an estimated $1.2 billion in client funds remains unaccounted for.
Corzine apologized to “all those affected” by MF Global’s failure.
The company filed for bankruptcy protection on Oct. 31. Corzine resigned as CEO on Nov. 3 and hadn’t spoken publicly since.
“I simply do not know where the money is, or why the accounts have not been reconciled to date,” Corzine said.
He said he can’t say whether there were “operational errors” at MF Global or whether other companies have held onto money that should be returned to MF Global.
Corzine defended his tenure at the firm. He said MF Global toppled, in part, because of a large quarterly loss caused by his predecessors’ accounting moves.
Rating agencies responded to the loss by downgrading the firm’s credit rating, which panicked investors and trading partners.
“The marketplace lost confidence in our firm,” he said.
He said he made the high-stakes bets only after discussions with company executives who traded European debt long before he arrived. And he said that he reduced MF Global’s investment risks by some measures.
Some outside experts challenged that assertion.
Janet Tavakoli, an expert on the transactions MF Global specialized in, said Corzine’s remarks divert attention from the firm’s fundamental flaw: It lacked the cash to cover its bets after investors started to fear that a major European nation would default.
“His entire testimony looks like a very skilled way to try to detract from that key issue,” said Tavakoli, president of Tavakoli Structured Finance.
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