Jon Corzine, the one-time New Jersey governor and U.S. senator who headed MF Global, repeatedly told a Senate committee hearing Tuesday that he has no idea what happened to the missing money.
“I never gave any instructions to anyone at MF Global to misuse customer funds,” Corzine said during hours of intense grilling from the incredulous senators.
But moments after Corzine and two other top executives at the firm testified, bombshell allegations surfaced to contradict them.
A “senior executive” at MF Global has claimed that “Corzine was aware of loans that were made” from customer accounts to the company’s own broker-dealer funds, said an official at the CME Group, a clearinghouse for derivatives trading.
CME’s executive chairman, Terrence Duffy, told the committee his firm’s auditors had talked with a female executive at MF Global in Europe who told them that Corzine knew of $175 million that had been moved from customer funds in the U.S. to the firm’s trading accounts overseas.
“Somebody went in and violated the rules of the CME, violated the rules of the government and transferred customer money into broker-dealer accounts,” Duffy said.
Those transfers, many of which occurred on Oct. 27 and Oct. 28 — only days before the firm’s collapse — were “disguised from regulators” by “false” reports that MF Global provided, Duffy claimed.
Duffy declined to give the name of the female executive but said the Justice Department and other government agencies investigating MF Global know her identity.
“You’ve tossed a bomb right in the middle of this hearing,” Kansas Sen. Pat Roberts, the ranking Republican on the Agriculture Committee, told Duffy. “We’ve spent a lot of time here today, but we should have had you on first.”
Before Duffy spoke, Corzine, along with MF Global’s chief operating officer, Bradley Abelow, and its chief financial officer, Henri Steenkamp, kept telling the senators they had been “shocked” and “stunned” when they discovered on Oct. 31, hours before they filed for bankruptcy, that hundreds of millions of dollars in customer funds were missing.
At the time, MF Global was scurrying to find cash as its huge bets on European sovereign bonds tanked.
“I simply do not know where the money is, or why the accounts have not been reconciled [by investigators\],” Corzine said. “There were an extraordinary number of transactions during MF Global’s last few days.”
But the senators weren’t buying those claims of ignorance.
“I’m baffled that the three top executives of the company cannot answer the questions of what happened to the customers’ money,” Sen. Chuck Grassley (R-Iowa) said.
The three execs dodged every attempt by the committee to get them to at least name which officials at MF Global had the authority to order the transfers of such huge sums out of customer accounts.
At one point, a frustrated Roberts blurted out: “Let’s put everybody’s name down on a company chart until we finally get down to the custodian.”
For Corzine, a former chief of Goldman Sachs, the MF Global scandal marks the seamy end to a career built on big risks. As a U.S. senator in the wake of the Enron scandal, he once co-sponsored the Sarbanes-Oxley Act, requiring tough new reporting standards for business executives.
Now he is the first former senator in a hundred years called to appear before an investigation by his former colleagues.
But let’s face it. Anyone who claims he can’t find a billion dollars of other people’s money deserves to be investigated — at the very least.