Former MF Global chief Jon Corzine said on Tuesday he felt a need to clarify his prior statements, definitively telling a new panel of lawmakers that he never gave instructions that could have been misinterpreted as permission to misuse customer funds.
The Senate Agriculture Committee was holding on Tuesday the second hearing in under a week to feature Corzine, who has said he does not know the location of hundreds of millions of dollars of customer money missing from the futures brokerage.
Corzine told lawmakers last week that he never intended to break rules about keeping customer funds segregated from firm money, but said that an employee may have misinterpreted instructions to try to save the firm.
On Tuesday, Corzine said, I want to be clear - I never gave any instructions to misuse customer funds, I never intended anyone at MF Global to misuse customer funds.
The futures brokerage filed for bankruptcy on October 31, after it was forced to reveal it bet $6.3 billion on European sovereign debt. That disclosure caused ratings downgrades and saw nervous investors and customers begin to flee the firm.
Corzine resigned as chief executive days after the bankruptcy filing.
The search for the missing customer funds has sent reverberations through the farm belt and trading floors, and has attracted the attention of the FBI and federal prosecutors. They are trying to determine whether customer funds were diverted to firm accounts, a major violation of industry rules.
In the meantime, thousands of customers have had their money frozen, although some has been returned as the trustee in the bankruptcy sorts through MF Global's records. [ID:nN1E7B80FV]
Corzine reiterated on Tuesday that he does not know where the money is, but he was willing to speculate on why funds are not yet accounted for.
He said in the final days of MF Global, he directed the sale of $1.3 billion in commercial paper, hundreds of millions of dollars in MF Global proprietary assets, and $4.5 billion in government agency bonds.
As I sit here, I didn't, do not know whether all of these and many other transactions were properly recorded and effectuated, or whether banks and other counterparties involved in such transactions properly credited the right accounts for these sales, Corzine told lawmakers.
He also revealed that JPMorgan Chase contacted him and other MF Global employees on October 28 about certain overdrafts and whether funds had been transferred in compliance with (Commodity Futures Trading Commission) rules.
Corzine said he had no personal knowledge about the issue, so he asked senior people in MF Global's back office in Chicago and in the firm's legal department to become directly involved.
So even in the midst of the chaotic last days of business, I had confidence in our people and systems, Corzine said.
Two top-ranking company executives, Chief Operating Officer Bradley Abelow and Chief Financial Officer Henri Steenkamp, appeared on the same panel as Corzine. They also said they lack answers about the money.
Senators were frustrated by the testimony, frequently asking the executives and Corzine Where's the money? and What happened?
It's now been a month a half since the firm collapsed and customer money is still nowhere to be found, Senate Agriculture Committee Chairwoman Debbie Stabenow said.
This isn't the Dark Ages. MF Global didn't keep their books with feather quills and dusty ledgers. The rules about keeping customer money segregated are pretty straightforward.
Abelow and Steenkamp said they do not know what happened.
I unfortunately have limited knowledge of the specific movement of funds at the U.S. broker-dealer subsidiary, MF Global Inc, during the last two or three hectic business days prior to the bankruptcy filing, Steenkamp said in his testimony.
The court-appointed trustee has estimated the shortfall of customer money at $1.2 billion, but other regulators have disputed that amount as too high.
Farmers who became collateral damage from the collapse of MF Global got a chance to air their frustrations, telling lawmakers on Tuesday that their confidence in the markets has been shaken.
Dean Tofteland, a corn and soybean farmer from Minnesota, said when he heard news that MF Global was having problems, he talked to his broker, who told him, No customer has ever lost a penny in customer segregated accounts.
But three days later his $253,000 account was frozen and he could not adjust his short positions.
Tofteland's positions were transferred to a new broker with only 15 percent of the required collateral, and he was forced to liquidate the hedges, he said. Since then, prices dropped and he lost another $100,000 without having the hedge.
Tofteland said he has not returned to the futures market.
What they call 'unlawful comingling' on Wall Street is called 'stealing' back on Main Street, he told lawmakers.
C.J. Blew, a Kansas farmer and rancher, said the agriculture sector needs answers about what happened to the customer money.
This has a ripple effect, I think, throughout the industry. You got farmers double margining. You got people with stress on their lending situations already so it's important that we get to the bottom of it, Blew said.
(Reporting by Alexandra Alper, Aruna Viswanatha and Christopher Doering; writing by Karey Wutkowski; Editing by Tim Dobbyn)