The hottest ticket in Washington yesterday was to the House Agricultural Committee hearings into the MF Global bankruptcy.
The man set to testify, Jon Corzine, was a former member of the U.S. Senate, and a former New Jersey governor. As with many of Wall Street's big players, Corzine earned his stripes at Goldman-Sachs.
After losing the governor's seat, Corzine went to MF Global . MF Global lost millions, and filed bankruptcy October 31. There is an estimated $1.2 billion in outside customer funds missing, creating 1.2 billion reasons for interest in Corzine's involvement.
What is the SEC doing about MF Global?
Reuters reports that the Securities and Exchange Commission (SEC) is examining misleading financial statements submitted by MF Global. The way the Huffington Post tells it, financial transactions usually cleared nightly appear to have been waylaid by banks when the partners in trade realized MF Global was doing business with money it didn't really have. Depending on the outcome of SEC investigations, criminal charges could be filed against Corzine and others at MF Global.
What is the CFTC doing about MF Global?
The CFTC (Commodities Futures Trading Commission) seems to be closing the barn door after the horses have escaped. A few days ago it passed rules limiting the kinds of investments into which customer funds can be invested. It's somewhat embarrassing for the CFTC that the rules were initially set to be passed in July, according to the Washington Post. It appears that CFTC Chairman Gary Gensler delayed the rule after strong lobbying efforts by Corzine and other brokers. Now, the CFTC has devoted pages of its web site to aiding MF Global customers hurt by the financial losses.
Is Corzine directly responsible for the losses?
Under licensing, law and regulation, Corzine had a strict obligation to follow the rules against commingling funds. However, Corzine has released a stunning prepared statement in which he claims not to know where $1.2 billion dollars is. Asked by a congressman if he'd authorized the commingling of customer funds, Corzine made an ambiguous response saying he didn't "intend" for that to happen.
Why didn't Corzine assert his rights under the 5th Amendment?
Corzine and his legal team are in damage control mode, believing that would further damage his image. Before the hearing, an effort was made to get a prepared statement before the public, the first step in image resurrection. The Baltimore Sun published the text of Corzine's statement. A Wall Street Journal article quotes Corzine saying "I simply do not know where the money is."
Can Corzine avoid criminal prosecution?
Mr. Corzine has staked out a savvy legal position. The entanglements of commodities trading are much more complex than those in stock trading, which can be more easily tracked. Since Corzine invested outside the country, the various rules of those countries can make tracking even more difficult. Corzine says he can't answer some questions because he does not have full access to his transaction records. He can appear to be cooperating with authorities, while not offering any additional information.
Did Corzine pocket the money?
No one's saying that, unless you consider his salary pocketing the money. Corzine put the customer money into risky European investments at a very bad time. The euro is at risk of collapse. The EU countries are either in recession or on the verge of it. European leaders are trying to figure out how to bail out troubled countries without buying up bad debt. Yet, Corzine defended his investment decisions, telling the House agricultural committee members that other MF Global personnel were responsible for the mechanics of the trades.
Anthony Ventre is a freelance writer who has written for weekly and daily newspapers and several online publications. He is a frequent Yahoo contributor, concentrating in news and financial writing.
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