MF Global bankruptcy: Exec says Corzine knew about missing money
At bankruptcy hearing, an MF Global executive said 'Mr. Corzine was aware' of misused customer funds. About $1.2 billion is still unaccounted for after the bankruptcy.
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But several senators expressed frustration with the executives' insistence that they did not know who might have authorized the transfer of clients' money.Skip to next paragraph
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"Funds don't simply disappear," said Kansas Sen. Pat Roberts, the committee's top Republican. "Someone took action, whether legal or illegal, to move that money. And the effect of that decision is being felt across the countryside."
Roberts said MF Global violated "a sacred rule of the futures industry," under which customers' money remains segregated from the firm's.
"You don't break the glass in regards to segregated funds," Roberts said.
As the senators drilled into who might have authorized the transfer of funds, Corzine pointed to the role of the firm's treasury operations department.
"The people who headed that were probably closest to the scene of the action," he said. Roberts noted that the department ultimately reported to Abelow.
The committee is continuing its investigation of MF Global. Democratic Chairwoman Sen. Debbie Stabenow said staffers are interviewing MF Global employees, "asking for an accounting of checks and balances — who was in charge."
Added Sen. Mike Johanns, a Republican: "Somebody in this organization had to have the ability to say, 'Light's green, take the money.'"
Corzine and Steenkamp said that given what's now known, they would not have signed the firm's last quarterly financial statement attesting that its internal financial controls were adequate.
Under a 2002 anti-corporate-fraud law that Corzine co-wrote as a U.S. senator, the CEO and chief financial officer of public companies must personally certify the accuracy of their company's financial statements. It can be a violation of the law for executives to sign a false statement.
The three executives say that they did not become aware of the shortfall until hours before the firm filed forbankruptcy protection on Oct. 31.
Tuesday's hearing included an added element of intrigue: Corzine was pressed by some of the senators he served with from 2001 through 2005.
The Senate panel is one of three congressional committees to have issued subpoenas to compel Corzine's testimony on the issue. It marked the first time a former senator has been subpoenaed by his former peers in more than 100 years, according to the Senate historian's office.
Many lawmakers have heard from farmers, ranchers and small business owners in their states who are missing money that had been deposited with the firm. Agricultural businesses use brokerage firms like MF Global to help reduce their risks in an industry vulnerable to swings in oil, corn and other commodity prices.
Corzine told lawmakers that he never intended to authorize the transfer of funds from customer accounts. He said he does not believe "it would be possible" for anyone to misinterpret anything he said as authorizing the misuse of customer funds.
Corzine, Steenkamp and Abelow have been sued in class-action complaints on behalf of MF Global shareholders. The lawsuits accuse the executives of making false and misleading statements about MF Global's financial strength and cash balances.
MF Global did not list the European debt on its balance sheet for all to see. Instead, those holdings were shifted to the company's "off-balance sheet," deep in its financial statements. Some separate filings with regulators excluded the European debt entirely.
A lawyer for the trustee overseeing the liquidation of MF Global's brokerage operations said in court Friday that the trustee's staff has discovered some "suspicious" trades in MF Global customer accounts that were made in the last days before the firm failed. The lawyer didn't provide details.