Congressional report blames Corzine for MF Global’s collapse

Former MF Global CEO Jon Corzine Testifies To House Hearing On Company's BankruptcyCongressional investigators took aim on Wednesday at a former colleague, Jon S. Corzine, blaming the onetime senator’s risk-taking at MF Global for accelerating the brokerage firm’s demise.

In excerpts from a broader MF Global report to be released on Thursday, Republican members of a Congressional panel outlined a withering critique of Mr. Corzine’s 19-month tenure at the firm. Mr. Corzine, a former Democratic senator and governor from New Jersey, resigned as MF Global’s chief executive last fall after the firm raided customer accounts during a futile fight for its life.

While the Republican report avoided pinning blame on Mr. Corzine for the missing customer money, sidestepping whether a crime was committed, it argued that his fixation with risk positioned him as a central player in the firm’s collapse.

In a series of potential missteps, the report said, Mr. Corzine missed warning signs about MF Global’s weak liquidity position and he torpedoed an overhaul of the firm’s risk controls. Citing “a dereliction of his duty,” the report claims that the moves arguably left customers vulnerable to the invasion of their accounts.

The findings from the oversight panel of the House Financial Services Committee show that Mr. Corzine was the architect of a $6.3 billion bet on European debt — a trade so big that it spooked the markets and forced a run on the firm. When subordinates challenged Mr. Corzine’s European gamble, according to the report, he imposed an “authoritarian atmosphere” in which he ejected the aides and installed sympathetic executives he knew from his days at Goldman Sachs.

“Choices made by Jon Corzine during his tenure as chairman and C.E.O. sealed MF Global’s fate,” Representative Randy Neugebauer, a Republican from Texas who is overseeing the report as chairman of the oversight panel, said in a statement.

The report is an aggressive rebuke of Mr. Corzine, a former co-head of Goldman who was a longtime confidant of Washington and Wall Street elite. Yet his defenders are likely to dismiss the excerpts, which shed little new light on his actions, as a political attack on the former Democratic official.

The report is also unlikely to chip away at Mr. Corzine’s legal defense. Federal authorities have all but officially removed the darkest cloud looming over Mr. Corzine: the threat of criminal charges.

And Mr. Corzine has noted that his bet on European debt, while alarming to some, proved profitable for the firms that took over the positions. Mr. Corzine, his supporters say, placed the wager after inheriting a firm that faced extinction following five consecutive quarters of losses.

Mr. Corzine’s spokesman did not immediately respond to a request for comment.

The excerpts divulged on Wednesday offer a preview of a long-awaited Congressional report that is expected to deconstruct the firm’s downfall. The House panel’s full findings, built on more than 50 witness interviews and an analysis of more than 243,000 documents, is likely to strike at an array of regulatory and management failures in the lead up to MF Global’s bankruptcy in October 2011. The report will also examine the role that credit rating agencies played in the firm’s undoing.

The panel’s yearlong investigation builds on a parallel examination led by James Giddens, the court-appointed trustee seeking to recover money for MF Global’s customers. The report’s findings led Mr. Giddens to join a lawsuit against several top MF Global executives, including Mr. Corzine, saying they breached their fiduciary duties to the firm and its customers.

The various reports detail the latest chapter in the MF Global story. Farmers and ranchers, who traded futures contracts through MF Global to protect themselves from the price swings of their crops, have recouped about 82 percent of their money but are still owed millions of dollars.

And regulators continue to investigate how MF Global improperly transferred about $1 billion in customer money to pay its own bills as the firm spun out of control. The Commodity Futures Trading Commission could still file a civil enforcement action against Mr. Corzine for failing to supervise employees who tapped the customer accounts. The Securities and Exchange Commission is also building potential enforcement cases surrounding the firm’s limited disclosures about the European bet, according to people briefed on the matter.

But federal investigators do not expect to file criminal charges against top executives, the people briefed on the matter said. The investigators, citing internal e-mails, have concluded that a state of chaos and sloppy record-keeping caused the money to vanish. An e-mail reviewed by The New York Times shows that an MF Global employee explicitly assured Mr. Corzine that money he wanted to transfer belonged to the firm, not customers.

Lawmakers were unsatisfied. They hauled Mr. Corzine to Washington three times last year to explain the missing money. In unwavering testimony, Mr. Corzine explained that he never intended to authorize the misuse of customer money.

– Assange or Corzine?
– Jon Corzine, the man who stole $1.6 billion from customers for JP Morgan