U.S. lawmakers investigating the collapse of futures brokerage MF Global showed frustration with the firm's leaders about what happened to hundreds of millions of dollars in missing customer funds.
The Senate Agriculture Committee is holding on Tuesday the second hearing in under a week to feature former MF Global chief Jon Corzine, who has said he does not know where the money is.
Two top-ranking company executives, Chief Operating Officer Bradley Abelow and Chief Financial Officer Henri Steenkamp, also said in testimony prepared for the hearing that they lack answers about the money.
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.
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.
The search for hundreds of millions of dollars in missing customer funds has sent reverberations through the farm belt and trading floors, and has attracted the attention of the FBI and federal prosecutors. Thousands of customers have had their money frozen.
Neither MF Global nor any of its executives has been charged with wrongdoing.
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 said.
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.
Corzine, who will testify later on Tuesday, sat behind the panel of farmers with his bow-tied lawyer, Andrew Levander, at his side.
Steenkamp and Abelow used their remarks to paint a picture of a chaotic final descent into insolvency for MF Global.
They will appear on the same panel as their former boss Corzine, but it is unclear if there will be any finger-pointing.
There are close ties between Abelow and Corzine.
Abelow, who is a Goldman Sachs alumnus like Corzine, joined MF Global in September 2010. Abelow had served in Corzine's cabinet when the former MF Global chief was governor of New Jersey from 2006 until 2010.
Steenkamp, an accountant, joined MF Global's predecessor , Man Financial, in 2006, after working at PricewaterhouseCoopers for eight years.
Corzine's testimony is largely similar to the remarks he delivered before the House Agriculture Committee last week, when he apologized to MF Global's customers, employees and investors.
Corzine said 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.
Two of MF Global's regulators - Jill Sommers, the commissioner leading the Commodity Futures Trading Commission's review of MF Global, and CME Group Executive Chairman Terrence Duffy - are scheduled to testify later on Tuesday, after the MF Global executives and Corzine.
(Reporting by Alexandra Alper, Aruna Viswanatha and Christopher Doering; writing by Karey Wutkowski; Editing by Tim Dobbyn)