NEW YORK (Reuters) - Even with an apology and an insistence he has no idea what happened to missing client money, MF Global’s former chief Jon Corzine cannot distance himself from the mess at the bankrupt futures brokerage.
Corzine testified to Congress on Thursday about the chaotic final days of MF Global, defying some predictions that he would refuse to answer questions.
In testifying, the risk-loving former politician and Wall Street chieftain will be stuck with the version of events he put on the record.
Time will tell, experts say, if that strategy was smart. Corzine has not been accused of wrongdoing, although the FBI and a host of other government agencies are investigating the company’s collapse and what happened to hundreds of millions of dollars in missing customer funds.
“If there is negligence, carelessness or deliberate misconduct there, I don’t know that he is going to be able to distance himself from it, depending on what the facts show,” said Bennett Gershman, a law professor at Pace University in New York.
At the hearing before the U.S. House Agriculture Committee, the onetime U.S. senator and New Jersey governor first read from a 21-page written statement, and then took questions from the panel. It was his first public appearance since the company spiraled into bankruptcy on October 31, hit by bad bets on European bonds.
Corzine repeatedly apologized to customers, employees and investors. Under persistent and tense questioning from legislators, he clearly and calmly said he never intended to break any rules about mixing client money with the house portfolio, one of the allegations leveled by a regulatory inquiry.
“I can only say that I had no intention to authorize the transfer of segregated money,” Corzine said in response to repeated questions about possible co-mingling.
White collar criminal defense lawyer Michael Weinstein said Corzine’s statements appeared to be “conveyed to a prosecutor or anybody looking at this that they will have difficulty pinning him down and proving he had intent to defraud.”
“It could give a prosecutor pause,” said Weinstein of Cole Schotz in New Jersey.
Corzine, who is also a former chief of Goldman Sachs Group Inc, said he did not know where hundreds of millions of dollars in missing customer money was — a key question in the investigation. He told the panel that when he learned of unreconciled accounts late on October 30 “it really was disbelief, stunned disbelief.”
One former federal prosecutor said Corzine’s addressing the issue of the missing money was a double edged sword.
“On the one hand, it’s great that he didn’t know. On the other hand it is terrible that he didn’t know,” said Eli Richardson of Bass, Berry & Sims law firm in Nashville, Tennessee.
“Someone in his position is supposed to know the over arching, broad financial condition of the company.”
Another legal expert praised Corzine for not invoking his right against self-incrimination provided by the Fifth Amendment of the U.S. Constitution.
“What he needed to do is to strike this balance coming before his former colleagues and come up with something that he could say and still in essence say nothing,” Jacob Frenkel, a former U.S. Securities and Exchange Commission attorney, told Reuters Insider.
There is no one road map for how high-profile executives respond when summoned before Congress.
Former Lehman Brothers CEO Richard Fuld and Goldman Sachs head Lloyd Blankfein both chose to testify while their firms were under scrutiny. On the other hand, executives of bankrupt solar panel maker Solyndra in September refused to answer questions posed by a House panel.
Corzine appeared to be making a public relations statement as much as a legal one. With a long history as an establishment figure and a member of the very Congress whose lawmakers sought to question him, he had a public persona to protect.
Frenkel, of law firm Shulman Rogers, said “today is a show” that will not provide any answers about intent or whether anyone deliberately turned a blind eye to the company’s deteriorating situation, some of the elements that would be necessary to bring a criminal case.
“It is far from clear if anyone did anything intentionally wrong at MF Global,” said David Siegal, a former federal prosecutor who is a white-collar defense lawyer with Haynes and Boone in New York.
Siegal said Corzine’s attorney, prominent defense lawyer Andrew Levander of Dechert LLP, would not have allowed his client to testify unless he was confident it “wouldn’t later come back to bite” the former MF Global boss.
“He’s stuck with this. That’s his story. It will be difficult for him to tell a different story later.”
Reporting by Grant McCool; Editing by Martha Graybow and Bernard Orr