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Reply #94: Corzine Deflects Blame For MF Global's Fall [View All]

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Demeter Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Dec-08-11 04:34 PM
Response to Reply #93
94. Corzine Deflects Blame For MF Global's Fall
http://www.npr.org/2011/12/08/143380694/corzine-deflect...


...The former U.S. senator was subpoenaed to explain how MF Global, which he led for about 20 months, collapsed into the eighth-largest bankruptcy in U.S. history and why an estimated $1.2 billion in client funds remains unaccounted for...Corzine defended his tenure at the firm. He said MF Global toppled, in part, because of a large quarterly loss caused by his predecessors' accounting moves. Rating agencies responded to the loss by downgrading the firm's credit rating, which panicked investors and trading partners...Janet Tavakoli, an expert on the transactions MF Global specialized in, said Corzine's remarks divert attention from the firm's fundamental flaw: It lacked the cash to cover its bets after investors started to fear that a major European nation would default...


Corzine, 64, said many people in his position would invoke their Fifth Amendment right to avoid answering questions at Thursday's hearing. But he said that as a former senator he recognizes the importance of congressional oversight and will try his best to answer the panel's questions. Corzine, however, left open the possibility that he will decline to answer some questions. He said that since his resignation from MF Global, he hasn't had access to certain information he might need to "reconstruct the events that occurred during the chaotic days and the last hours leading up to the bankruptcy filing...Without adequate time and materials to prepare, I may be unable to respond to various questions members might pose," he said. Attempting to answer questions poses a risk for Corzine. Anything he might say could be used against him in a courtroom, should Corzine ever be charged in the case. The FBI and several federal regulators are investigating MF Global...

In his remarks, Corzine disputed media reports that he personally pushed the company to make big, doomed bets on risky European debt using too much borrowed money. Corzine says the company's revenue was "drying up" when he arrived because of competition from online and high-tech brokerages. He also notes that the company worked with outside consultants on its strategic plan and internal compliance systems. And he says that much of his compensation was in stock options. The amount of borrowed money used known as leverage decreased when he ran the company, he says, and he favored the trades that doomed it only after discussions with MF Global's senior traders. Corzine notes that the European debt securities are all "at least A rated." Typically, that means the borrower is unlikely to default. He makes no mention that Standard & Poor's this week said it might downgrade credit ratings for all of the nations whose bonds MF Global owned.

Legal experts say Corzine could be held personally liable for misrepresenting to investors the risks the firm had taken. Other top MF Global executives also could face legal jeopardy, they say. Corzine will say Thursday that the company's board signed off on the investments and was aware of the risks involved...Several class-action lawsuits on behalf of shareholders have been filed against Corzine and three other top executives. A bankruptcy court is consolidating the suits. They accuse the firm and its leaders of making false statements about MF Global's strength and cash balances.
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