Corzine's risky moves felled MF Global financial firm, GOP critics say
WASHINGTON — The MF Global financial firm collapsed last year because of mistakes made by Jon Corzine, its former chairman and former governor of New Jersey, said Republicans on a House subcommittee on Wednesday.
Corzine's push to convert the 230-year-old commodities brokerage firm into a full-service investment bank caused its bankruptcy and resulted in a failure to protect customer funds, said Rep. Randy Neugebauer, chairman of the House Financial Services Subcommittee on Oversight and Investigations.
“Corzine dramatically changed MF Global's business model without fully understanding the risks associated with such a radical transformation,” Neugebauer said in a statement. “Farmers, ranchers and other customers may never get back over $1 billion of their money as a result of his decisions.”
On Thursday, the subcommittee will release the full results of its yearlong investigation into the collapse of MF Global. The probe consisted of three hearings, more than 50 witness interviews and a review of more than 243,000 documents. The report also examined the role that regulators and credit rating agencies played in the firm's downfall.
According to a summary of the findings released on Wednesday, Corzine set up an authoritarian leadership structure that allowed him to make risky investments in European bonds, prompting a downgrade of the firm's credit rating. The move prompted investors to pull their money from the firm, which in turn led the firm to use other clients' money to cover its losses.
“By expanding MF Global into new business lines without first returning its core commodities business to profitability, Corzine ensured that the company would face enormous resource demands and exposed it to new risks that it was ill-equipped to handle,” the subcommittee's report states.
To generate the revenue needed to fund the firm's transformation, Corzine invested heavily in the sovereign debt of struggling European countries. The investments, which carried risks of default and other problems, were a “prime focus” of Corzine's attention, but he failed to develop a strategy for managing the risks, the subcommittee found.
MF Global Holdings filed the eighth-largest bankruptcy in the United States a year ago after a $1.6 billion shortfall in client money was discovered.
Corzine, a former co-chairman of Goldman Sachs, represented New Jersey in the Senate from 2001-06. He served as governor from 2006-10 and was CEO of MF Global in 2010 and 2011. He resigned from the firm shortly after it filed for bankruptcy. He told Congress that he does not know what happened to customers' money.
None of MF Global's executives, including Corzine, have faced civil or criminal charges in connection with the firm's collapse.
“However, the responsibility for failing to maintain the systems and controls necessary to protect customer funds rests with Corzine,” the report states. “This failure represents a dereliction of his duty as MF Global's chairman and CEO.”
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Calif. oil slick expected to dissipate
- University of New Hampshire language guide panned
- Planned Parenthood requests expert study
- 911 dispatcher hung up on caller before wounded teen’s death in June
- Undocumented alien released, suspected in crime spree
- Clinton to testify before House committee on Benghazi in October
- Compromise keeps highway accounts funded
- House approves bill targeting VA staffers
- Defense memo reveals plan to protect transgender troops
- New TSA administrator vows training to address security gaps
- Cruz switches targets, takes exception with IRS practices