The U.S. House Agriculture Committee voted to subpoena Jon S. Corzine, former chairman and chief executive officer of MF Global Holdings Ltd., for a Dec. 8 hearing on the collapse of the New York-based brokerage.
House lawmakers on the panel voted by voice without opposition today in Washington to issue the subpoena. The Senate Agriculture Committee and the House Financial Services Oversight and Investigations subcommittee separately announced plans to consider Corzine subpoenas next week.
Congress has joined federal regulators in seeking answers about the steps that led to MF Global seeking bankruptcy protection on Oct. 31 after wrong-way bets on European sovereign debt. The Commodity Futures Trading Commission, Securities and Exchange Commission and Justice Department are investigating as much as $1.2 billion in missing customer funds.
“The events that have unfolded since Oct. 31 are unprecedented and have resulted in the loss of property of many of our constituents and a loss of confidence in the futures markets for many more,” Representative Frank D. Lucas, the Oklahoma Republican who leads the House Agriculture Committee, said at the meeting. Corzine’s testimony “is essential to fulfill our objectives on behalf of our constituents and to complete the hearing record,” Lucas said.
Steven Goldberg, a New York-based spokesman for Corzine, declined to comment.
Goldman Sachs (GS) Model
Corzine, a Democrat who served in the Senate and as New Jersey’s governor, joined MF Global in March 2010 with a plan to remake the company into an investment bank in the image of Goldman Sachs Group Inc., where he had been co-chairman before entering politics. He repeatedly ratcheted up a wager on the debt of countries including Italy and Spain.
He bet $11.5 billion on European debt in his bid to rebuild profits, almost twice the net amount disclosed to investors, and relied on short-term hedges that left the firm exposed to larger losses if they couldn’t be rolled over.
Corzine overcame resistance from directors, senior traders and risk managers to accumulate the bonds, according to two people with knowledge of the situation. He used the hedges, or offsetting trades, to cut the net risk reported to shareholders to $6.4 billion, according to an Aug. 3 regulatory filing.
‘Clearly His Right’
The House Agriculture Committee wants Corzine to answer questions about MF Global’s failure and management of client funds even though he may invoke his constitutional right to not answer in light of ongoing investigations, Representative Mike Conaway said today in a Bloomberg Television interview.
“I fully expect him to be here Thursday,” said Conaway, a Texas Republican who serves on the panel. “If he answers questions, fine. If he takes the Fifth Amendment, that’s clearly his right as well.”
The subpoena hasn’t been issued yet, and lawmakers will talk with Corzine’s lawyers over the weekend to determine whether it’s needed, Conaway said.
“The committee certainly wants answers to what happened, but given the pending criminal inquiries and the potential catastrophic ramifications of speaking now, I’d advise him to take the Fifth,” said Mark Paoletta, a partner at Dickstein Shapiro LLP in Washington who formerly was chief investigations counsel for the House Energy and Commerce committee.
House Agriculture is the first of three congressional committees seeking Corzine’s testimony at hearings on MF Global. Senator Debbie Stabenow, the Michigan Democrat who leads that chamber’s Agriculture Committee, released a statement today saying the panel will meet Dec. 6 to determine whether to compel Corzine to appear at a Dec. 13 hearing.
‘Decisions and Events’
Representative Randy Neugebauer, the chairman of the Financial Services subcommittee, said today that his panel also will hold a vote on whether to subpoena Corzine because it has “become clear” that he wouldn’t testify willingly at the panel’s Dec. 15 hearing.
“Mr. Corzine is the only person who can provide a thorough account of the investment decisions that led to MF Global’s collapse and the activities at MF Global in the days and weeks leading to its collapse,” Neugebauer said today in a statement. “For the past week, we led a good-faith effort to obtain his testimony voluntarily.”
The subcommittee will meet on Dec. 7 to decide whether to subpoena Corzine.
Neugebauer, a Texas Republican, is investigating the relationships between regulators and the failure of the firm.
In a Nov. 28 letter to CFTC Chairman Gary Gensler, Neugebauer requested all communications and documents “related to the coordination of the CFTC’s oversight of MF Global” with the SEC, New York Fed, Financial Industry Regulatory Authority, CME Group Inc. (CME), National Futures Association and Chicago Board Options Exchange.
Neugebauer also asked for “all communications or records of communications between officials at the CFTC and representatives and employees of MF Global” from March 1, 2010, through Oct. 31, 2011, a period corresponding with Corzine’s tenure at the firm. He gave the CFTC until Dec. 7 to respond.
The lawmaker requested similar documentation from the SEC in a letter sent today to Mary Schapiro, the agency’s chairman. He gave the SEC until Dec. 9 to respond.
“We began to delve into every aspect of MF Global’s collapse weeks ago, and the subcommittee is sifting through documents, working to obtain documents, and ensuring our investigation is done in a thorough -- and not a hurried -- fashion,” Neugebauer said.