MF Global's former CEO Jon Corzine is set to testify before the House Agriculture Committee this afternoon, and from his 21-page prepared statement, it looks like the ex-governor and senator from New Jersey, will pour on the empathy for customers, but claim he knows nothing about where the missing $1.2 billion went.
Here are 10 key takeaways from Corzine's prepared testimony:
1. Corzine, who grew up on a farm in Illinois, will express his sadness for the plight of customers, employees and investors and he will apologize to them since he was CEO of MF Global at the time of its bankruptcy. "My sadness, of course, pales in comparison to the losses and hardships that customers, employees and investors have suffered as a result of MF Global's bankruptcy. Their plight weighs on my mind every day - every hour."
2. Corzine, who resigned from MF Global on Nov. 3, will claim he doesn't have access to documents, internal communications, and his notes, which are essential to testifying accurately. In other words, he doesn't remember any details.
3. The former Goldman Sachs chief can't be helpful to the House Ag Committee because they turned down his request to testify voluntarily in January. So he didn't have enough time and materials to prepare. He won't be able to answer certain questions.
4. Corzine will refute that he was responsible for the $1.2 billion missing from customer's segregated funds. After all, his involvement in the firm's clearing, settlement and payment mechanisms, and accounting was limited.
5. Despite media reports that MF Global took on too much risk, Corzine will say the firm reduced its leverage during his tenure. In the quarter ended March 31, 2010, MF Global's leverage was 37.3 and during his tenure it was consistently around 30.
6. Corzine will explain the controversial usage of RTMs -- repurchase to maturity agreements -- which allowed the firm to finance its investments in the sovereign debt, as if they were routinely used before he joined the firm. The former Goldman Sach's chief will claim that the RTMs were attractive as a way to reduce financing risk and market risk. Then he will pass the buck to the MF Global's auditor. "...(T)he accounting issues with respect to the RTMs would have been reviewed by MF Global's internal auditors, outside auditors (PricewaterhouseCoopers), and its audit committee."
7. Corzine will show that prior to his joining the firm as CEO in March of 2010, that MF Global already traded European sovereign debt instruments. For the fiscal year ending March 31, 2010, had $9 billion in foreign government securities. It had used RTM transactions in the past to purchase other types of securities.
8. Refuting the impression that he is a rogue trader gone wild, Corzine will convey that he did not make this decision alone. MF Global's involvement in RTMs involving European sovereign debt securities was the subject of internal discussions with the company's traders, senior managers, and the board of directors. He will contend, the board was sophisticated, asked hard questions and raised concerns about the RTMs.
9. In response to media rumors that MF Globals' chief risk officer advised/or warned against these trades, Corzine will contend that MF Global was within its risk limits.
10. As for what happened to MF Global customer funds that were supposed to be in segregated accounts, Corzine will again say, "I simply do not know where the money is." He will cite the enormous number of transactions made during MF Global's chaotic last days leading up to the bankruptcy filing on Oct. 31st. And last, but not least, he will blame the banks and other counter-parties for losing the customer funds and not returning them to MF Global.
Stay tuned for more analysis of Corzine's in-person testimony, which is underway now. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio