Corzine: Don't know where firm's missing money is

[December 08, 2011]  WASHINGTON (AP) -- Jon Corzine plans to tell a House committee that he doesn't know the location of clients' money that went missing from failed investment firm MF Global.

The former U.S. senator has been subpoenaed to explain how MF Global, which he led for about 20 months, collapsed into the eighth-largest bankruptcy in U.S. history and why an estimated $1.2 billion in client funds is missing.

In prepared testimony, Corzine apologizes to "all those affected" by MF Global's failure. MF Global filed for bankruptcy protection on Oct. 31.

It's the first time in more than 100 years that Congress has subpoenaed a former senator to testify, according to Senate historian Don Ritchie. The occasion blends the two worlds Corzine has occupied for his professional life -- Wall Street and public office.

For five years, Jon Corzine embodied one of the most prestigious positions in Washington: U.S. senator. On Thursday, he is scheduled to return to Capitol Hill in a humbled and humiliating role: a star witness likely to invoke the Fifth Amendment.

Corzine has been subpoenaed to explain how MF Global collapsed into the eighth-largest bankruptcy in U.S. history and why an estimated $1.2 billion in client money has gone missing.

It's the first time in more than 100 years that Congress has subpoenaed a former senator to testify, according to Senate historian Don Ritchie. The occasion blends the two worlds Corzine has occupied for his professional life -- Wall Street and public office.

Corzine, 64, has been publicly silent since MF Global filed for bankruptcy Oct. 31. He resigned as CEO on Nov. 4.

The former New Jersey senator and governor may offer a statement at the House Agriculture Committee hearing. But he'll likely decline to answer potentially damaging questions by invoking his Fifth Amendment right against self-incrimination.

Otherwise, anything he might say could be used against him in a courtroom, should Corzine ever be charged in the case. The FBI and several federal regulators are investigating MF Global.

"He can't begin to answer substantive questions," said Stephen Gillers, a professor at New York University School of Law.

The hearing will likely provide few answers to what happened at the firm. But it may offer some political theater. Corzine would have to invoke his Fifth Amendment right each time he's asked a potentially damaging question.

Corzine will likely take a similar tack next week, when he's scheduled to testify to two other congressional committees.

By invoking the Fifth Amendment, "You're not saying anything about your legal culpability," Gillers noted. Still, he said, "there is a public perception that if you have nothing to hide, then you will hide nothing."

A Democrat, Corzine represented New Jersey in the Senate from 2001 through 2005. He later served as the state's governor. Before entering politics, he was CEO of Goldman Sachs from 1994 to 1999.

Lawmakers in both parties may have a lot to ask him. Some have heard from farmers, ranchers and small business owners in their districts who are missing money deposited with the firm.

Agricultural businesses use brokerage firms to help reduce their risks in an industry vulnerable to swings in oil, corn and other commodity prices. But MF Global increased risks by making big bets on European government debt -- bets that proved disastrous.

Legal experts say Corzine could be held personally liable for misrepresenting to investors the risks the firm had taken. Other top MF Global executives also could face legal jeopardy, they say.

Several class-action lawsuits on behalf of shareholders have been filed against Corzine and three other top executives. A bankruptcy court is consolidating the suits. They accuse the firm and its leaders of making false statements about MF Global's strength and cash balances.

MF Global didn't list its European debt on its balance sheet for all to see. Instead, those holdings were shifted to an "off-balance sheet," deep in its financial statements. Some separate filings with regulators excluded the European debt entirely.

Under a 2002 anti-corporate fraud law -- which Corzine helped write as a senator -- CEOs of public companies must personally certify the accuracy of financial statements.

Corzine also may be questioned about his lobbying against a rule proposed last year by the Commodity Futures Trading Commission. The rule would have restricted how firms that handle futures contracts, such as MF Global, can invest customer money. Corzine lobbied CFTC Chairman Gary Gensler, a former Goldman Sachs colleague, and his staff.

Last summer, the CFTC board canceled a vote on the proposed rule. It was adopted this week.

The last time a former senator was subpoenaed to testify by a congressional committee was in 1908. Former Sens. Marion Butler of North Carolina and Matthew Butler of South Carolina were summoned by a House committee over a corporate lobbying scandal, according to the Senate historian's office.

[Associated Press; By MARCY GORDON]

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