Rich Schultz/Associated PressJon S. Corzine, the former chief executive of MF Global.
A Congressional panel has asked Jon S. Corzine to testify about the downfall of MF Global, and the hundreds of millions of dollars in customer money that went missing in the brokerage firm’s final days.
The hearing, scheduled for Dec. 15, will be a role reversal for Mr. Corzine, who spent five years on Capitol Hill as a Democratic senator from New Jersey. As a Congressional witness, Mr. Corzine is expected to come under fire for presiding over MF Global as it caused the futures industry’s first major breach of customer money. A spokesman for Mr. Corzine declined to comment on Tuesday.
The hearing, organized by the oversight unit of the House Financial Services Committee, could present the first public grilling of Mr. Corzine about his risky bets on European sovereign debt, wagers that ultimately doomed the firm.
Lawmakers are also planning to question Bradley Abelow, the firm’s chief operating officer and Mr. Corzine’s chief of staff when he was governor of New Jersey.
It is unclear whether Mr. Abelow and Mr. Corzine, who resigned as MF Global’s chief executive earlier this month, will accept the request that they testify, though the subcommittee could subpoena the executives if they balk. Mr. Abelow received the request on Tuesday and plans to respond soon to lawmakers, said a person close to the company who was not authorized to speak publicly.
The hearing will overlap with an intensifying federal investigation into MF Global. The Commodity Futures Trading Commission is leading the search for the missing money while the Federal Bureau of Investigation and federal prosecutors in New York and Chicago are examining potential criminal wrongdoing.
Neither the firm nor Mr. Corzine have been accused of wrongdoing.
Investigators now believe that much of the unaccounted-for customer money left the firm as the company was beginning a tailspin late last month, said people briefed on the matter who requested anonymity because the investigation was still under way. Regulators suspect that MF Global used some of the money to meet its own financial obligations, which could mean that those funds are gone forever.
The exact amount of missing money is undetermined, and it changes by the day. On Monday, the trustee overseeing the dismantling of MF Global’s brokerage unit pegged the number at around $1.2 billion, twice the previous estimate. Forensic accountants from Deloitte and Ernst Young working for the trustee, James Giddens, came to the much larger estimate after they spent roughly three weeks reconstructing the firm’s books.
Regulators were taken aback by the announcement, signaling the first hiccup in an otherwise smooth investigation, according to people briefed on the matter. The trustee’s office gave regulators little more than 20 minutes’ notice before it publicly released the finding, according to the people.
Now, some regulators are questioning the $1.2 billion figure, suspecting that the trustee double-counted $220 million that had been transferred between units of MF Global, according to one of the people briefed on the matter. Over the last day, the C.F.T.C. has tried to independently check the numbers.
The CME Group, the exchange where MF Global did most of its business, disputed the larger figure on Tuesday. In a statement, the exchange said it was “confident reports of significantly larger shortfalls are incorrect.”
Kent Jarrell, a spokesman for the trustee, stood by the larger estimate, while noting that it was preliminary.
Mr. Giddens is charged with returning money to MF Global’s customers. Customers — including farmers in Iowa and hedge funds in New York — have slowly received a portion of their accounts. The trustee has distributed at least $1.5 billion over the last three or more weeks, though that remains a fraction of what customers are owed.
In bankruptcy court in Lower Manhattan on Tuesday, Judge Martin Glenn approved a proposed claims process for the trustee to dispense additional funds. Mr. Jarrell said that electronic application forms would be posted to the trustee’s Web site and that claims would be evaluated soon.
Also on Tuesday, the trustee started receiving a flow of some $1.3 billion in MF Global customer funds that were stored at Harris Bank.
The funds, made up of foreign currencies, securities and cash, will give the trustee additional money to return to the MF Global customers, though it does not reduce the overall shortfall in funds.
“It’s the last big pot of money held in U.S. depositories,” Mr. Jarrell said.
The CME Group also increased a guarantee it had offered the trustee in case there was a shortfall as customers received their money. The exchange will now provide, in essence, a $550 million insurance policy to the trustee’s office, up from $250 million.
Lawmakers are also questioning the sluggish progress in returning money to customers. At the MF Global hearing next month, the House subcommittee plans to scrutinize the lingering woes that the firm’s customers face.
Lawmakers hope to interview top regulators about their oversight of the firm. They plan to call on Robert Cook, head of the Securities and Exchange Commission’s office of trading and markets, and William C. Dudley, the president of the Federal Reserve Bank of New York.
Gary Gensler, chairman of the C.F.T.C., will also be asked to testify, though Mr. Gensler has recused himself from the case after fearing that his past ties to Mr. Corzine would distract from the investigation.
Mr. Gensler, who once worked for Mr. Corzine at Goldman Sachs, is unlikely to testify, a person with knowledge of the matter said.
Article source: http://feeds.nytimes.com/click.phdo?i=0ca2bb9375c4da82ac14ed2e9ea6d6b3
Speak Your Mind
You must be logged in to post a comment.