Report blames Corzine in firm's collapse

Ben Protess / New York Times News Service /


Published Nov 15, 2012 at 04:00AM / Updated Nov 19, 2013 at 12:31AM

Congressional investigators took aim Wednesday at a former colleague, Jon Corzine, blaming the onetime senator’s risk-taking at MF Global for accelerating the brokerage firm’s demise.

In excerpts from a broader MF Global report to be released today, Republican members of a congressional panel outlined a withering critique of Corzine’s 19-month tenure at the firm. Corzine, a former Democratic senator and governor from New Jersey, resigned as MF Global’s chief executive last fall after the firm raided customer accounts during a futile fight for its life.

While the Republican report avoided pinning blame on Corzine for the missing customer money, sidestepping whether a crime was committed, it argued that his fixation with risk positioned him as a central player in the firm’s collapse.

In a series of potential missteps, the report said, Corzine missed warning signs about MF Global’s weak liquidity position and he torpedoed an overhaul of the firm’s risk controls. Citing “a dereliction of his duty,” the report claims that the moves arguably left customers vulnerable to the invasion of their accounts.

The findings from the oversight panel of the House Financial Services Committee show that Corzine was the architect of a $6.3 billion bet on European debt — a trade so big that it spooked the markets and forced a run on the firm. When subordinates challenged Corzine’s European gamble, according to the report, he imposed an “authoritarian atmosphere” in which he ejected the aides and installed sympathetic executives he knew from his days at Goldman Sachs.

“Choices made by Jon Corzine during his tenure as chairman and CEO sealed MF Global’s fate,” Rep. Randy Neugebauer, R-Texas, who is overseeing the report as chairman of the oversight panel, said in a statement.

The report is an aggressive rebuke of Corzine, a former co-head of Goldman who was a longtime confidant of Washington and Wall Street elite.

Yet his defenders are likely to dismiss the excerpts, which shed little new light on his actions, as a political attack on the former Democratic official.

The report is also unlikely to chip away at Corzine’s legal defense. Federal authorities have all but officially removed the darkest cloud looming over Corzine: the threat of criminal charges.

And Corzine has noted that his bet on European debt, while alarming to some, proved profitable for the firms that took over the positions. Corzine, his supporters say, placed the wager after inheriting a firm that faced extinction following five consecutive quarters of losses.

Corzine’s spokesman did not immediately respond to a request for comment.

The excerpts divulged Wednesday offer a preview of a long-awaited congressional report that is expected to deconstruct the firm’s downfall.

The House panel’s full findings, built on more than 50 witness interviews and an analysis of more than 243,000 documents, is likely to strike at an array of regulatory and management failures in the lead up to MF Global’s bankruptcy in October 2011. The report will also examine the role that credit rating agencies played in the firm’s undoing.