What is in this article?:
• In the face of increasingly exasperated committee member questions, the executives — responsible for the eighth-largest bankruptcy in U.S. history and the odd, potentially criminal, loss of an estimated $1.2 billion in customer funds — exhibited amnesia symptoms, reciting a wide range of variations on “I don’t recall.”
• But immediately after the executives were dismissed, the CME Group’s Terrance Duffy gave testimony under oath that contradicted former MF Global head Jon Corzine’s claims of ignorance regarding the disappearance of customer funds.
Able to meet cash demands
Corzine: “From all reports that I’d received, to my recollection on that day, we were able to meet our cash demands.”
Abelow again claimed to be in the dark. “I do not recall being made aware of our running out of cash ... and being unable to meet obligations.”
Roberts dug farther, asking about the possibility that “operational money movers ... was told to cover the liquidity needs or margin calls overwhelming the firm’s cash flow by taking money out of the segregated customer accounts?”
Corzine: “I don’t believe anyone would operate that way. We had no experience in the 19 months I’d been there that anyone had overridden those systems. I have no reason to believe that occurred in those last hours.”
Abelow refused to “speculate about conversations I didn’t see or participate in. I can only tell you I don’t recall participating in any conversation about use of customer funds or assets other than for their intended purposes.”
Roberts, growing frustrated, made the point that before MF Global’s collapse, CME knew the firm was “attempting to hide something. In fact, didn’t MF Global leadership go so far as to request and receive an actual plan that would ‘break the glass’ and tap into your customers’ segregated accounts?”
Corzine admitted there was such a report, although “it was not ever the intent to recommend tapping into segregated customer funds.”
Despite his placement at the firm’s pinnacle, Abelow again claimed he was not plugged in and had not “reviewed the specific document. My recollection was that the key source of liquidity under that scenario was the use of a revolving credit facility.”
Roberts retorted “you might want to take a look at it” and then laid out a possible explanation for the firm’s actions. “By all accounts, on the Friday before bankruptcy, MF Global thought it had found a buyer to save (the firm). It seems well within the realm of possibility that a classic run on the bank overwhelmed (the firm’s) cash flow. And an executive could have communicated, somehow, an order to use your customer segregated funds to cover the firm’s liquidity thinking, of course, everything would be fine by Monday morning. The company would be bought out and an infusion of money from the new owner could replace the missing customer funds. Is this plausible?”
Corzine paused before answering. “As in a number of questions, being asked to speculate — and I don’t think I should speculate — I had no reason to believe until the evening of Oct. 30 that there was a misuse of customer funds.”
Abelow echoed a common refrain from Mf Global executives, saying he was “shocked” to learn of the customer fund shortfall.
Roberts, in a clipped tone, “well, if this isn’t what happened? What did happen?”
The executives passed on answering.