MarketWatch
written by Ronald D. Orol
Thursday December 8, 2011
As much as $1.2 billion in client funds may be unaccounted for after the eighth-largest bankruptcy in U.S. history, reiterated an attorney representing the trustee overseeing distribution of customer money for the firm. The trustee first warned in November that funds were missing.
“I simply do not know where the money is, or why the accounts have not been reconciled,” [Would you want him in charge of your hard earned money? Come on now! He had a FIDUCIARY DUTY to every customer as head of that firm! (emphasis mine)] Corzine said to a House Agriculture Committee hearing that sought to examine the MF Global collapse. He also said he was “stunned” when told that MF Global couldn’t account for the money.
New York-based MF Global filed for bankruptcy protection on Oct. 31 after disclosing sizable exposure to derivatives and other investments related to billions of dollars in European sovereign debt.
Regulators are investigating whether the firm tapped into customer futures accounts for its own proprietary trading. No one at the firm has been charged so far.
Yet Corzine testified that he would never intend or direct or have customer funds moved, but added he was aware of a shortfall in funds on the evening of Oct. 30.
“I never intended to break any rules whether it dealt with segregation rules or any other rules,” he said. “I’m not in a position given the number of transactions to know anything specifically about the movement of any specific funds.”
Corzine, who left MF Global on Nov. 3, was subpoenaed to testify before the committee. He said he offered to testify in January, once he had been able to obtain and review “relevant records,” but that this was rejected. Corzine told lawmakers he has had limited access to his records since leaving the firm and that he needed them to “testify accurately.”
The Commodity Futures Trading Commission, Securities and Exchange Commission and the Federal Bureau of Investigation are conducting investigations into the failure. Lawmakers on the panel squabbled about the CFTC’s failure to identify problems and take action at MF Global before its collapse. Some Democrats on the panel defended the agency [UNREAL! (emphasis mine)], insisting that it does not have the resources to do regulate effectively.
“I don’t blame the law enforcement. I am concerned about whether you have the resources to do the job you need to do,” said Rep. Leonard Boswell, Democrat from Iowa.
Republican counterparts, however, raised concerns about the agency oversight, questioning how officials could be taking so long to find the missing customer money and about conflicts of interest leading the CFTC chairman, Gary Gensler, to recuse himself from the investigation.
Gensler said last month that he would not be involved in any matters associated with MF Global’s bankruptcy. Gensler and Corzine both worked at Goldman Sachs Group Inc. at the same time.
Rep. Timothy Johnson, Republican from Illinois, raised concerns about Gensler’s absence, asking whether he is part of a “Goldman Sachs fraternity.”
“If Mr. Gensler is here or listening to this somewhere, which I assume he is, from the standpoint of Congressman Johnson, I find your failure to testify here totally unacceptable,” he said.
Republicans asked pointed questions to Jill Sommers, a CFTC commissioner that is supervising the commission’s MF Global investigation, arguing that the agency did not appear to do a good enough job communicating with the SEC and other regulators in the period before the firm’s bankruptcy filing. The Financial Industry Regulatory Authority, a self-regulatory organization that polices securities brokers, raised concerns in June that MF Global had a substantial position in European debt and was not appropriately holding capital against it.
“I am not sure exactly of the circumstances of who was consulting with the SEC and FINRA in the days leading up to the bankruptcy,” Sommers said, adding that she was not involved in that point. “I think there are periodic meetings [that] regulators have to review issues in the markets, but I’m not sure how often those happen.”
Corzine, a former [DEMOCRATIC (emphasis mine)] U.S. senator and [DEMOCRACTIC (emphasis mine)] governor of New Jersey, also remarked he was deeply saddened by the firm’s failure, noting that there were “an extraordinary number of transactions” during MF Global’s last few days and that he did not know if there were “operational errors.”
Both Republicans and Corzine’s former colleagues on the Democratic side noted they have been hearing from ranchers and farmers in their states who have had their accounts frozen and appear to have lost money.
The agriculture committee is responsible for investigating the failure of MF Global because it has jurisdiction over regulation of commodity-futures brokerages, as well as over farmers and ranchers that use futures trading as a way to hedge.
So far, four weeks after the bankruptcy, thousands of former investors at MF Global have had accounts frozen or have received only partial distributions.
Lawmakers also said that they have heard concerns from some farmers in futures as a hedge that the missing funds have had a chilling effect on investment in the markets.
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