In a testimony prepared for delivery to Congress on Thursday, the former senator and New Jersey governor says he was “stunned” to learn shortly before the firm sought bankruptcy protection at the end of October that MF Global could not account for what could be over $1.2 billion in customer funds.
“I simply do not know where the money is, or why the accounts have not been reconciled to date,” the former MF Global chief executive says, according to the testimony.
The firm is now in liquidation after an effort to sell unraveled, with regulators then pushing MF Global into bankruptcy court on October 31. The trustee overseeing the firm’s liquidation said last month that at least $1.2 billion in clients’ money, which the firm was required to keep separate from its own, may be missing.
The Federal Bureau of Investigation, the Commodity Futures Trading Commission, and other authorities are investigating the missing funds, but are having difficulty discovering what happened to them.
The House Agriculture Committee, one of the federal agencies that regulates MF Global, subpoenaed Corzine to appear at a hearing on Thursday on the firm’s bankruptcy after turning down Corzine’s request to testify voluntarily in January.
In his prepared statement, Corzine says that he will not invoke his Fifth Amendment right to remain silent, recognizing the importance of congressional oversight, and believing “it is appropriate that I attempt to respond to your inquiries.” However, he added that the subpoena has given him little time to prepare for the hearing and only limited access to records “essential to my being able to testify accurately.
“Auditors looking into the missing funds found no accounting error, but were informed by MF Global “that customer money had been transferred out of segregation to firm accounts,” said CME Group Executive Chairman Terrence Duffy. CME Group, which runs markets for derivatives, including the Chicago Mercantile Exchange, oversees MF Global. “Transfers of customer funds for the benefit of the firm constitute serious violations of our rules” and of federal law, said Duffy.
Duffy, who will also testify at the hearing, says his group’s auditors found no sign that customer funds were missing as of October 26. However, CME Group auditors returned to MF Global on October 30 after learning from the CFTC that a draft accounting report at MF Global showed a $900 million shortfall in customer funds.
Today, Corzine will tell the House committee that, though he “ultimately had overall responsibility for the firm,” he did not generally involve himself in the movement of cash and collateral, or the mechanics of settling trades. “Nor was I an expert on the complicated rules and regulations governing the various different operating businesses that comprised MF Global,” he says in his prepared statement.
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Corzine says he does not know which MF Global customer accounts remain “unreconciled” and whether they were subject to rules about keeping client funds separate from those of the firm.