We’re not sure what Corzine thought testifying in front of Congress would be like. You’d think that his experience in Congress and as a Senator would have prepared him. We actually thought he’d simply take the fifth. Instead, as we pointed out last week, we got an exercise in plausible deniability. It might have worked- except he changed the strategy mid-stream (a mistake he seems to make a lot).
Today he amended his ambiguous statement to the Senate Agriculture committee. Reuters reports:
Former MF Global chief Jon Corzine corrected his earlier statements about the hundreds of millions of dollars in missing customer money, telling lawmakers on Tuesday there was no way to confuse anything he said as an authorization to raid those funds.
He also conceded there were “break the glass” contingency plans at the now-bankrupt futures brokerage, but under questioning denied that tapping customer funds was recommended.
This was a subtle shift in the testimony; he had previously testified that he “couldn’t recall” directing anyone to raid client accounts, and that he never “intended” for it to happen. The more declarative statement here, in theory, would be a strengthening of his defense, as deafening silence from the rest of his company has done nothing to shed more light on the situation.
Except, as it turns out, not everyone was silent. Zerohedge reports (emphasis ours):
… here comes the CME Executive Chairman Terry Duffy, under oath, with what Roberts said “is a bomb” statement which basically says that Corzine lied under oath. Specifically, according to Duffy’s remarks during the Q&A, an MF Global employee advised the CME that Corzine had been aware of a loan made to Euro affiliates just days prior to the bankruptcy: a loan which effectively was that of commingled customer accounts.
If this was the case, we can hope that this money will be traced back to the originator of the loan and recovered. Unfortunately, we aren’t convinced that will be the case. Duffy further asserted that it was made very clear to him that searching for an accounting error was worthless- which, in our opinion, sounds like a roundabout way of saying that MF Global and Corzine broke the law.
The silver lining coming out of this testimony is an important distinction that Duffy makes in this case, arguing that it was not a failure of the system, but a violation of the law. While we will caveat that statement by saying there are still reforms that need to be made, his comments echo what we have said about the wider universe of FCMs available to those interested in doing business in the futures industry.
However, should the proof of Corzine perjuring himself solidify, not only will he face potential criminal charges for the false testimony and his actions at MF Global, but he may also provide those seeking to hold him personally responsible for their losses with all the ammunition they need. Testimony today has concluded- we’ll have to wait to see what this soap opera brings next.