Jon Corzine Is Working at MF Global. Say What?

"First of all, I like to work," says Jon S. Corzine, in his new office on Fifth Avenue in Manhattan, explaining why he took the job as chief executive officer and chairman at a little-known derivatives trading firm called MF Global (MF). "Second, I have generally worked in large institutions where I didn't have the same entrepreneurial opportunity that MF provides. It may not be a startup, but if you have a long-term view of building a competitive financial institution of excellence, this is an extraordinary vehicle to try and get at that opportunity. It's in the part of the world that I have some experience and knowledge of, so I don't feel uncomfortable.…" Corzine pauses, then adds, "A little dated, but we'll get caught up."

Two of the last three jobs Corzine held did not end well for him. As chairman of Goldman Sachs (GS) in the late 1990s he lost a power struggle with his co-CEO, Henry Paulson. He rebounded with a successful, self-financed bid for the U.S. Senate from New Jersey and quickly established himself as a major Democratic rainmaker before leaving to run for governor. Helping the state dig out of a fiscal hole was to be his legacy, but budget problems only deepened in a bitter first term, and he lost last November, tripped up by Republican challenger Chris Christie.

Now Corzine, 63, is trying to steady his career by remaking MF Global. The 3,200-strong firm, recently beset by a trading scandal and bad luck, specializes in options and futures, which Allan Zavarro, the former global head of futures trading for ABN Amro Bank, describes as "a bastard stepchild. It's a coup for MF to get a guy of that quality who wants the job."

Corzine received a signing bonus of $1.5 million and will get the same amount in annual salary, with a bonus target of $3 million. For a man who left Goldman Sachs with a fortune estimated at over $400 million and then spent $134 million of it on politics, money matters, as does the opportunity to play the savior and redefine his legacy. "He clearly wants to be remembered for something other than a frustrating time in New Jersey politics," says Jeff Tittel, director of the New Jersey Sierra Club, a former ally of Corzine's.

"Language of Money"

Corzine started as a bond trader at Goldman in 1975. The work ethic he learned on his father's 120-acre farm in Willey Station, Ill., helped push him to the front of his class, and by 1985 he was co-head of the fixed-income desk at the firm and was made partner. At his 25-year high school reunion, he ran into William Summer, a friend since grade school. "I remember asking him if he did a lot of traveling, and I asked him if he learned any languages," says Summer, a San Diego-based financial executive. "He said he spoke the language of money, and that's all he needed."

Even as he climbed the ladder at Goldman, Corzine distinguished himself as friendly and unassuming. "Everybody wants to be Jon's friend," says Barry L. Zubrow, chief risk officer at JPMorgan Chase (JPM), who was chief administrative officer at Goldman and served in Corzine's Trenton administration. "He has a unique ability to make everyone feel like they are his best friend." Among those he got along with well was current Goldman Sachs CEO Lloyd Blankfein. Corzine was "absolutely part of Blankfein's meteoric rise" within the company, says Janet Hanson, a former co-head of money-market sales in New York at Goldman.

When Corzine ascended to chairman in 1994, Goldman was in the throes of a panic the likes of which it has rarely experienced in its 141-year history. That spring the firm had suffered a $300 million trading loss, and when Chairman Stephen Friedman left, more than 30 partners departed as well. "Corzine could uniquely assure people that Friedman's exit wasn't indicative of larger failures to come," says Noreen Harrington, who joined the firm as a trader in 1987 and became a managing director (she left in 2002).

Pushed Out at Goldman

After stabilizing the firm, Corzine positioned Goldman as a leader in market advisory and underwriting, leading to a central role in the $38 billion marriage of Chrysler and Daimler-Benz (DAI). Deals like that helped Goldman rack up $3 billion in profits in 1997. In June 1998, Goldman announced it would be going public, an epochal event in the history of Wall Street. Corzine, however, wouldn't be around to see it happen. In August a hedge fund called Long-Term Capital Management began to unravel, exposing the financial system to disaster with leveraged bets it couldn't cover. Wall Street banks had to rescue the firm to avert a sell-off that might have taken them down too, and Corzine ended up committing $50 million more than his board had authorized. Making matters worse, Goldman had more than $1 billion worth of losses on bets similar to LTCM's. "The losses in trading gave partners fodder to help push out Jon," says Harrington. "They saw trading as far too risky."

In September, Goldman announced that the initial public offering was off. Meanwhile tensions were mounting between Corzine and his No. 2, Paulson. In May 1998, Corzine floated the idea that the two join forces as co-CEOs, a proposal Paulson accepted. But the two could not co-exist at the top. "They were polar opposites in so many ways," says Harrington. "Paulson likes fly-fishing and watching birds, and Corzine likes basketball and downhill skiing. If Jon said black, Paulson said white."

In his recent memoir, On the Brink, Paulson writes: "I concluded I could not continue to work with Jon as co-CEO. I secured the support of our management committee, and in early January 1999, Corzine's friend and protégé John Thain, then our CFO, went to talk with him. Then I followed and told Jon that he would need to step aside. 'Hank,' I remember him saying, 'I underestimated you. I didn't know you were such a tough guy.' " Paulson didn't respond to calls.

While Corzine was on a family ski vacation in Colorado, the committee stripped him of his co-CEO title. Goldman announced his departure on Jan. 11, 1999, and the bank went public four months later, raising $3.66 billion.

"I think it's fair to say he was really hurt by it, but look what he went on to do," says Hanson. "He just dusted himself off, and said, O.K., next thing."

Elective Politics

A month after walking out the door at Goldman Sachs for the last time, Corzine announced he was running for the U.S. Senate from New Jersey; at the time, he and his wife owned a house in Summit, where they had raised their three children. He spent $62 million of his own money to defeat the Republican candidate, Representative Robert D. Franks, and in January 2001 started life as an elected official.

Corzine's Wall Street connections were valuable to the Democratic Party, and he was tapped in December 2002 to head the Democratic Senatorial Campaign Committee, which spent $88.3 million to win the Senate back from Republicans in 2004. Corzine's effort netted one seat: Barack Obama from Illinois.

Corzine didn't stay in the Senate long. Already in his 50s, he says he was too impatient to play the seniority game and leapt at the chance to grab executive powers. After James E. McGreevey's midterm resignation, Corzine successfully ran for governor—this time spending $43 million in personal funds and vowing to use his Wall Street experience to repair the state's finances. He scored some wins for a self-described '60s liberal, adding children to state-run health-care programs, expanding access to preschool, leading the effort for a family-leave law, and abolishing the death penalty. It was the missteps that stuck with voters, according to New Jersey Senate President Stephen M. Sweeney, particularly Corzine's proposal to pay down the state debt largely by raising highway tolls 800 percent. Commuters hated the idea. Determined to persuade voters of his logic, he scheduled public forums in each of the state's 21 counties, complete with a 40-minute slide show. "That was like wearing a sign on his back that says 'Kick me' 21 times," says Sweeney. "Jon's one big struggle was that he was looking at things through a business mind rather than politically. You have to look at the realities of government and what you can get done, then come up with the best plan you can. At times, he just didn't get it."

More Problems

Even fellow Democrats had difficulty relating to Corzine. "When you were talking to him about New Jersey politics, you had to reach him sometimes through the glaze," says Robert G. Torricelli, former U.S. Senator from New Jersey. "I don't think he emotionally or intellectually ever fully left the financial world."

His personal life became an issue, too. In the midst of his run for governor, his ex-wife Joanne famously said: "Jon did let his family down, and he'll probably let New Jersey down, too." Then, while governor, Corzine refused Republican demands that he make public e-mail exchanges he had with Carla Katz, a state-employees union official whom he had previously dated. They weren't romantically involved by the time he became governor, but during his term the media reported that he had given her millions of dollars in a settlement that formally ended their relationship. "Here in the state people would say he's a multimillionaire who bought a U.S. Senate seat, the governorship, and threw millions of dollars at a girlfriend," says Richard J. Codey, former president of the New Jersey Senate. "It's hard to claw your way back from that."

His tenure as governor was further hindered when he cracked 11 ribs and broke his leg and sternum in a car accident. He wasn't wearing a seat belt.

The New Jersey budget deficit stood at a record $8 billion when voters ousted him in 2009. Corzine left with a 58 percent disapproval rating, according to Fairleigh Dickinson University's PublicMind Poll, the highest ever in the state for a departing governor.

Looking Back

Corzine speaks now of his political career as if it happened to someone else. There is no perceptible emotion in his voice and no sense of grievance. "The argument that people in public life never get anything done and don't actually confront real problems is one that has occasional merit," he says, "and when you do confront problems and take them on, people might argue you are too aggressive, tone-deaf, or out of touch. If you have a state that is deep in debt, it should continue to invest in the education of its children and its infrastructure but take on its financial shortcomings. Sometimes just doing what is comfortable and tone-sensitive might not be the best plan."

He professes pride at what he accomplished as governor and some regret that those accomplishments have been obscured. "It's clear that I could not develop a popular mandate around the toll plan, and it became very easy to make that into a basis of assessing my whole tenure," he says. "There were a lot of other good things which people might not be focused on. We had a child welfare system that was broken. I could go on."

The situation at MF Global promises plenty of fresh headaches. The firm was spun off from Man Group in an initial public offering in 2007 on the same day that two Bear Stearns hedge funds collapsed. Seven months later, MF Global disclosed that a trader in Memphis, since indicted on criminal charges, had lost $141.5 million on unauthorized bets on wheat futures, and the stock sank 28 percent in a day. Profits were squeezed last year by a drop in trading volume, and shares, which topped $30 at the end of 2007, are stuck this year around $7. The private equity firm JC Flowers, run by Chris Flowers, an old friend from Goldman Sachs, bought a $150 million minority stake in the firm in 2008. The next year, MF Global started an application for a primary dealer license, which would enable it to trade directly with the Federal Reserve. This is a ticket to a club whose 18 members include Goldman, Citigroup (C), and Bank of America (BAC) and put the firm in position to attract a leader with big-league Wall Street credentials, like Corzine. News of his appointment as CEO in March, which included his installation as an operating partner at JC Flowers, sent shares up 10.4 percent in a single day. "The market sees him as a transformational leader," says Ed Ditmire, an analyst with Macquarie Group in New York.

Doubted Again

Some analysts doubt that Corzine, 11 years removed from Wall Street, can pull off the massive rescue MF Global needs, including salvaging its damaged reputation and recruiting talent in a very competitive environment. "We have no evidence that when a Goldman Sachs star leaves, they take the Midas touch with them," says Robert Brusca, president of Fact & Opinion Economics and former chief of the New York Fed's International Financial Markets Division. "It shows MF Global has a commitment to growth, but it's like a basketball team that brings in one high-paid coach. While that might help, it's going to be the team, not the coach, that leads to a successful season. I am skeptical of what Corzine can reasonably deliver."

Being underestimated is nothing new to Corzine, say his friends. It's part of what motivates him. When he announced his bid for the Senate, says Daniel Neidich, co-CEO of Dune Capital Management, "I had senior Wall Street guys say that he had so little chance of winning that they were embarrassed for him. And then he went and won."

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