WASHINGTON Jon Corzine said he "never intended to break any rules" while he was chief of MF Global and that he doesn't know what happened to the hundreds of millions of dollars in missing customer money.
Corzine, in his first public appearance since the firm filed for bankruptcy on October 31, gave lawmakers a lengthy account of the final days of futures brokerage MF Global and apologized to those harmed by the firm's collapse.
"I never intended to break any rules, whether it dealt with the segregation rules or any of the other rules that are applicable," said Corzine, wearing a somber dark suit and armed with an accordion file folder of documents and a highlighter pen.
When pressed by lawmakers at the House Agriculture Committee about whether he authorized a transfer of customer funds to firm accounts, Corzine said: "If I did, it was a misunderstanding."
Investigators are determining whether MF Global raided customers' segregated funds for its own needs -- a major violation of industry rules. While MF Global made trades for its own profit under Corzine, its principle business was matching and clearing commodity trades on behalf of customers.
Corzine said his "sadness" over the collapse of the firm pales in comparison to MF Global's customers, employees and investors.
"Their plight weighs on my mind every day -- every hour," Corzine, a former U.S. senator, told the panel after being sworn in by committee Chairman Frank Lucas. He was flanked by his lawyer, Andrew Levander, and said he was aware that he had the right to counsel.
"My own expectation, even at these late hours, is that the money will be recovered."
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.
The bulk of the missing money is from customers' futures accounts. Futures are traditional tools used by farmers to hedge risks to offset potential losses.
"I simply do not know where the money is, or why the accounts have not been reconciled to date," he said.
Corzine's contrite but defensive remarks are his first since he resigned from the firm in early November.
He said he accepts responsibility for the firm's massive bets on European sovereign debt, which at the time he believed were "prudent."
According to Corzine, MF Global's collapse was caused by a combination of market concerns about the firm's sovereign debt exposure, ratings downgrades, and "an inability" of MF Global management to explain that its losses were not tied to the European debt bets.
"WE'VE GOT TO FIND THAT MONEY"
After a terse opening statement during which Corzine stuttered while apologizing to MF Global customers, he relaxed as he defended how he ran the firm since he joined in early 2010.
Lawmakers thanked him for answering questions and not invoking his right to avoid self-incrimination under the Fifth Amendment of the U.S. Constitution. But some criticized Corzine for not giving a straight answer on whether he directed the transfer of customer funds to firm accounts.
"Throughout this hearing I can count the times you used the words never intend, not to my knowledge, not to my recollection, never intended to. And I understand the position that you're in, but Mr. Corzine, we've got to find that money," said Democratic Representative David Scott.
In separate testimony, a top executive of futures exchange operator CME Group Inc said MF Global misused hundreds of millions of dollars of customer funds by moving the money to its own accounts, the strongest accusation yet against the bankrupt futures brokerage.
"Transfers of customer funds for the benefit of the firm constitute serious violations of our rules and of the Commodity Exchange Act," CME Executive Chairman Terrence Duffy said in prepared remarks.
CME, the biggest U.S. futures exchange operator, was a hands-on regulator of MF Global. Duffy said the brokerage admitted during a call with regulators that customer money was transferred out of segregation to the firm's own accounts.
The court-appointed trustee has estimated the shortfall of customer money at $1.2 billion, but CME has disputed that figure as being too high. In his prepared testimony, Duffy indicated the shortfall was roughly half that amount.
Neither MF Global nor any of its executives has been charged with wrongdoing.
"STUNNED" BY MISSING CUSTOMER MONEY
Nine witnesses were scheduled at the hearing, but Corzine, a senator from 2001-2006 and a former governor of New Jersey, is the star.
Corzine arrived with little fanfare just before the hearing started. Capitol Hill Police quickly escorted Corzine to the committee's holding room while he awaited his turn to testify.
Corzine said in his 21-page prepared testimony that while it is difficult for him to reconstruct the chaotic events leading up to the bankruptcy because he no longer has access to relevant documents, he feels compelled to answer lawmakers' questions.
He said he could not explain the missing customer money.
"I do not know, for example, whether there were operational errors at MF Global or elsewhere, or whether banks and counterparties have held onto funds that should rightfully have been returned to MF Global," Corzine said.
"I was stunned when I was told on Sunday, October 30, 2011, that MF Global could not account for many hundreds of millions of dollars of client money."
He defended his tenure at the top of the firm, saying MF Global reduced leverage during his tenure.
Corzine said there were some within MF Global who dissented about the European debt strategy but that "generally we arrived at a consensus."
(Reporting by Sarah N. Lynch, Christopher Doering, Rachelle Younglai, Alexandra Alper, Margaret Chadbourn, and Philip Shishkin in Washington and Ann Saphir in Chicago; writing by Karey Wutkowski; editing by John Wallace, Bernard Orr)