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December 08, 2011 at 09:38 AM
In a halting and nearly hoarse delivery, an apparently humbled Jon Corzine, the former chairman and CEO of the now bankrupt MF Global, testified Thursday before the House Agriculture Committee, saying “I apologize both personally and on behalf of my company” for both MF Global’s failure and for the nearly $1.2 billion in client funds that appear to be missing. “I simply do not know where the money is,” Corzine testified, “or why the accounts have not been reconciled to date.”
In his prepared testimony and in response to questions from the committee, Corzine went on to say that he was “stunned” to learn on Sunday, Oct. 30 that MF Global “could not account for many hundreds of millions of dollars of client money. I remain deeply concerned about the impact that the unreconciled and frozen funds have had on MF Global’s customers and others.”
When Agriculture Committee Chairman Frank Lucas, R-Okla., asked if there was a shortfall in the client accounts, and why such a shortfall should occur, Corzine said that “there were many transactions that occurred in those last chaotic days; it would be hard to speculate why those shortfalls took place.”
When Lucas asked if MF Global’s books were a “mess,” as some have charged, Corzine said “our books and records reflected the chaos of the last two or three days as the firm was under severe pressure and lost the confidence of the marketplace. I have reason to believe our books and records weren’t in a mess, but that’s a question that others will have to opine about as they look at them in retrospect.”
Corzine pointed out in his testimony that he has not had access to MF Global’s records since his Nov. 4 resignation as CEO, “not even my notes,” which he said limited his ability to respond in full to the committee’s questions.
Corzine also said that while he accepted responsibility for the ‘repurchase transactions to maturity,’ trades at MF Global, aka ‘RTMs’ or ‘repos,’ and “strongly advocated the trading strategy” of RTMs followed at the firm which he joined as CEO in March 2010, he stressed that MF Global’s involvement in those RTM trades was “disclosed to the board of directors, the senior officers of the company, the company’s accountants and numerous outsiders.”
It was those trades, mostly in European sovereign debt instruments, that eventually caused MF Global’s bankruptcy, though Corzine pointed out in his testimony that “none of the foreign debt securities that MF Global used in the RTM trades has defaulted or been restructured. All of those securities that reached maturity while they were part of the RTM position paid in full.”
