A contrite Jon Corzine, in his first public defense of his leadership of now-bankrupt futures brokerage MF Global, told U.S. lawmakers he "never intended" to break rules and had no clue what happened to hundreds of millions of dollars in missing customer money.
The former U.S. senator and Goldman Sachs chief executive freely answered lawmakers' questions during a fairly friendly House Agriculture Committee on Thursday.
But he tried to duck responsibility by repeatedly claiming a lack of intent and lack of recollection about key events that led to the firm's downfall and its scrambled books.
Legal experts said it was a clear tactic to try to avoid criminal charges.
"I never intended to break any rules, whether it dealt with the segregation rules or any of the other rules that are applicable," said Corzine, wearing a somber dark suit and armed with an accordion file folder of documents and a highlighter pen.
Thursday's hearing was a stunning reversal for a political and financial power broker who endured three hours of pointed questions behind a placard that bore the title "Honorable" in front of his name. Corzine had once been the lawmaker who made witnesses squirm.
The testimony came six weeks after MF Global collapsed into bankruptcy once the market lost confidence in the firm following a revelation it had made a $6.3 billion bet on European sovereign debt.
The search for hundreds of millions of dollars in missing customer funds has sent reverberations through the farm belt and trading floors, and has attracted the attention of the FBI and federal prosecutors.
When pressed by lawmakers about whether he authorized a transfer of customer funds to firm accounts - a major violation of industry rules - Corzine said: "If I did, it was a misunderstanding."
Michael Weinstein, a white-collar lawyer with Cole Schotz law firm in New Jersey, said Corzine's persistent claim of lack of intent "was essentially code for 'Prosecutor, you bring these charges, you are going to have a hard time proving intent, and that's what you need to convict me'."
Neither MF Global nor any of its executives has been charged with wrongdoing.
Lawmakers thanked Corzine for not invoking his right to avoid self-incrimination under the Fifth Amendment of the U.S. Constitution. But he was criticized for not giving a straight answer on whether he directed the transfer of customer funds to firm accounts.
"Throughout this hearing I can count the times you used the words 'never intend,' 'not to my knowledge,' 'not to my recollection,' 'never intended to.' And I understand the position that you're in, but Mr. Corzine, we've got to find that money," said Democratic Representative David Scott.
Insider link to Corzine video story: reut.rs/rYzrVN
THE 'PLIGHT' OF FARMERS
Corzine apologized for the collapse of the firm, and said his "sadness" pales in comparison to MF Global's customers, employees and investors.
Thousands of customers, including many farmers who use futures to hedge risks, have had their money frozen.
"Their plight weighs on my mind every day - every hour," Corzine told the panel after being sworn in by committee Chairman Frank Lucas.
Corzine said, "My father was one of those folks who'd go to a grain elevator to hedge out future crops."
The hearing stretched over eight and a half hours, and was the first to bring together a full cast of characters, including Corzine, regulators and the legal counsel for the trustee liquidating MF Global.
In its strongest accusation yet against the firm, CME Group Inc, MF Global's on-the-ground regulator, said the firm misused hundreds of millions of dollars of customer funds by moving the money to its own accounts.
"Transfers of customer funds for the benefit of the firm constitute serious violations of our rules and of the Commodity Exchange Act," CME Executive Chairman Terrence Duffy said.
The court-appointed trustee has estimated the shortfall of customer money at $1.2 billion, but CME has disputed that figure as being too high. In his prepared testimony, Duffy indicated the shortfall was roughly half that amount.
Corzine was flanked by his bow-tied lawyer, Andrew Levander, and said he was aware that he had the right to counsel. He pleaded ignorance on how customer money might have made its way into the firm's own coffers.
"I simply do not know where the money is, or why the accounts have not been reconciled to date," he said.
Lawmakers asked Corzine to lay out how he may have "unintentionally" contributed to the mixing of customer and firm money. He pointed to the chaos of the hours leading up to MF Global's bankruptcy filing on October 31.
"Someone could misinterpret 'You gotta fix it,' which I said the evening of October 30th,'" Corzine said.
Corzine defended his time at the top of the firm, which he joined in March 2010, saying MF Global reduced leverage during his tenure. He said he accepts responsibility for the repo-to-maturity trades that related to the firm's $6.3 billion bet on European sovereign debt.
"At the time that MF Global entered into the transactions, I believed that its investments in short-term European debt securities were prudent," he said.
Corzine said there was some dissent within MF Global about the European debt strategy but that "generally we arrived at a consensus."
He tried to drive home that the European debt bets have held up and said the market confidence crisis had more to do with MF Global executives' "inability" to explain that the firm's losses were not tied to the sovereign debt exposure.
"Your answers sound so nice, but you riskily invested people's money without their knowledge in a market I wouldn't invest in," said Republican Representative Jean Schmidt.
Corzine conceded the business strategy he championed may have been flawed.
"Sitting here today, with the knowledge that the market has drawn the conclusion it has drawn, and the facts are what they are, it would have been better to have taken different judgments," he said.
(Reporting by Sarah N. Lynch, Christopher Doering, Rachelle Younglai, Alexandra Alper, Margaret Chadbourn, and Philip Shishkin in Washington and Ann Saphir in Chicago, with additional reporting by Grant McCool and Nick Brown in New York; writing by Karey Wutkowski; editing by John Wallace, Bernard Orr.)
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