Former New Jersey governor and Democrat bundler extraordinaire Jon Corzine officially resigned from the brokerage he served as well as he served the people of the Garden State on Friday, and his “golden parachute” didn’t deploy after all, as reported in the New York Times:
Jon S. Corzine has resigned from his posts at the embattled brokerage firm MF Global, the company announced on Friday.
Mr. Corzine, the firm’s chairman and chief executive, will not seek his $12 million severance from MF Global, which filed for bankruptcy on Monday, according to the company’s statement.
The resignation capped a disastrous week for Mr. Corzine, as he saw MF Global lose two-thirds of its market value, file for bankruptcy and face a handful of federal investigations into more than $600 million in missing customer money. The decision also signaled a rapid downfall of what was supposed to be Mr. Corzine’s grand return to Wall Street — a comeback that began in early 2010, after a roughly 10-year sabbatical that he spent in politics.
Corzine also lawyered up in the face of ongoing investigations from the FBI, SEC, and Commodity Futures Trading Commission. The Times notes that Corzine has not yet been accused of wrongdoing. Hell, neither has Herman Cain, and he’s getting saturation media coverage.
Doubtless the media will soon be swarming all over the Corzine story, because it’s truly a tale for our times: a well-connected high-rolling fat cat, who was seriously considered for a role in the second Obama Administration (most likely as Treasury Secretary!) just trigged the eighth-largest bankruptcy in U.S. corporate history, and over $600 million of his clients’ money has gone missing.
Fox Business has more details of the activities that launched so many investigations:
A new analysis from The Wall Street Journal reveals MF Global for the past two years disguised its debt levels to investors by temporarily cutting borrowing before reporting earnings each quarter. The practice, known as “window dressing,” is not considered illegal but appeared to have masked investors’ ability to gauge the amount of leverage on the company’s balance sheet.
Corzine also lobbied against a proposal from the Commodity Futures Trading Commission that would have more tightly restricted how futures-trading firms can invest funds in customers’ trading accounts, the Journal reported.
Gary Gensler, chairman of the Commodity Futures Trading Commission, is mad enough to spit nails, as you can see from this Associated Press account:
At a Senate hearing Thursday, Gensler had harsh words for Corzine’s company.
“You don’t put your hand in the cash register; you just don’t,” Gensler said.
He said MF Global’s failure to separate clients’ money from its own assets violated “the core foundation” of investor protection.
Tough talk! So, why didn’t super-regulator Gensler see this disaster coming? It’s a total mystery.
In completely unrelated news, did you know Jon Corzine used to work at financial mega-firm Goldman Sachs? It’s true! He worked with a guy named Gary Gensler while he was there. Then they went to Washington and worked on the Sarbanes-Oxley financial regulations together. Gensler even donated $10,000 to the New Jersey Democrat Party when Corzine was running for governor. The Associated Press relates this delightful banter between the two old pals and political allies:
Speaking at a Princeton University conference last year on the day before Corzine’s wedding, Gensler described working with Corzine as a “privilege.”
He recalled that when the full Senate voted on the Sarbanes-Oxley accounting law, “Jon was sitting in the presiding chair, and I was staffing Chairman Sarbanes on the floor.”
Surveying the audience at Princeton’s Financial Institutions and Regulation Colloquium, Gensler quipped, “Jon, your life has changed a lot since our days together on a trading floor if this is your idea of a bachelor party.”
Senator Charles Grassley (R-IA) failed to see the humor in all this, and suggested Gensler should recuse himself from the Corzine case, because “it’s hard to see how the chairman could be completely objective in looking out for wronged investors when he has such strong ties to the principal of the failed firm.” As Grassley sits on the Senate Agriculture Committee, which oversees the CFTC, his suggestion carries considerable weight.
Bloomberg News reports that the MF Global trustee is looking to issue some subpoenas:
Officers and directors of MF Global Inc., the bankrupt brokerage that former Goldman Sachs Group Inc. (GS) co-chief executive Jon Corzine quit today, can be subpoenaed by a liquidator in a probe of possible involvement in the commingling of customer accounts.
U.S. Bankruptcy court judge Martin Glenn said at a hearing today that the brokerage trustee, James W. Giddens, can share documents and depositions with the Securities and Exchange Commission and the Commodity Futures Trading Commission. The trustee must probe management’s possible involvement without interference from the parent company, Glenn said.
“There have already been serious allegations of misconduct,” Glenn said, citing company lawyers who told the SEC on Oct. 31 that there was a significant shortfall in its collateral for segregated accounts.
“Whether management was involved is clearly a proper subject for investigation, and the trustee must be able to investigate without interference from any party of interest,” Glenn said.
Another Bloomberg report claims that most of the missing client money has turned up in a JP Morgan custodial account, mixed in with MF Global’s money, which is not good:
MF Global Holdings Inc., the bankrupt futures brokerage, has located $658.8 million in missing customer funds in a custodial account at JPMorgan Chase & Co. (JPM), according to two people with knowledge of the matter.
The account contained a total of $2.2 billion as of Oct. 31, which includes both the firm’s own money and customer funds, according to one of the people, who declined to be identified because the information is private. MF Global’s customer funds had a shortfall of $633 million, or more than 11 percent, out of a segregated fund requirement of about $5.4 billion, regulators said yesterday.
Spokespeople for MF Global and JP Morgan declined to comment for the Bloomberg story.
Update: CNBC reports that JP Morgan is saying the money in that custodial account is not the missing $600 million of client funds:
JP Morgan Chase shot down a report that it was holding hundreds of millions of dollars in missing MF Global client funds.
JP Morgan told CNBC Friday that, much like other banks, it has been holding MF funds and awaiting instructions from the bankrupt company’s trustee.
The bank said the funds are not the missing client funds and the account has always been “transparent” to MF and its trustee.
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