NEW YORK—Jon S. Corzine, the former CEO of bankrupt broker-dealer MF Global (MFG), said that he does not know the whereabouts of the company’s missing customer funds, according to testimony in front of the House Agriculture Committee on Thursday.
The company’s financial situation turned sour due to its large bets on the European sovereign debt, and when the European crisis intensified, it became one of the largest bankruptcies in corporate history.
“I simply do not know where the money is, or why the accounts have not been reconciled to date,” Corzine announced in his prepared statement, although he did apologize to shareholders, customers, and employees. Experts at the committee hearing estimate that as much as $1.2 billion of customer funds could be missing. The Agriculture Committee has oversight of the Commodities Futures Trading Commission (CFTC), a regulator of MFG.
MFG filed for bankruptcy on Oct. 31. Corzine, the former New Jersey governor and U.S. senator, resigned as chief executive days before the bankruptcy filing.
At the testimony, which was broadcast by CNBC, Corzine stated that contrary to published reports, his company actually reduced its exposure to European debt holdings in the time leading up to the company’s failure. Regarding the missing funds, Corzine said that he was not close enough to the details to speculate what could have occurred.
“Moreover, there were an extraordinary number of transactions during MF Global’s last few days, and I do not know, for example, whether there were operational errors at MF Global or elsewhere, or whether banks and counterparties have held onto funds that should rightfully have been returned to MF Global.”
While Corzine maintained that he was unaware of any illicit conduct, others have called into question MFG’s behavior over its last days, specifically allegations that MFG had transferred client funds—which should be segregated and off-limits to the firm—to its own accounts.
“Our audit and spot check of MFG were performed at the highest professional level; the transfer of segregated funds out of the appropriate accounts was disguised from all regulators,” said CME Group Inc. Chairman Terrence Duffy.
The Securities and Exchange Commission, the CFTC, and the U.S. Department of Justice are currently investigating MFG’s bankruptcy for improper conduct.
