It wasn't until towards the end of a long day when the Senate Agricultural Committee finally heard some truly meaningful testimony.
CME executive director Terrence Duffy had something to say and said it. And in so doing - he might well have opened up Corzine and perhaps his President/COO to charges of perjury. The Senators were simply unable to get the most basic of answers from Corzine and his chief officers about the simplest of matters. How and where did $1.2 billion in segregated customer account monies go? And how could it have happened? Assuredly Senators, viewers and listeners were appalled, if not angered, by these supposedly accomplished fiduciary experts hemming and hawing (and lying?) about having no knowledge whatsoever until 10/30/11 or so when they were so shocked to learn about it. They either were unwilling to or could not even identify who within the organization even had the ability to authorize or carry out such transfers. I mean, monies can't be transferred out of segregated customer accounts unless somebody can actually do it, right? And somebody has to say it's OK to do it, right? And somebody somewhere has to know it was done. Corzine spent much of his time addressing Rule 1.25 about ways a broker/dealer can actually legally use client funds for its own purposes when this wasn't even really the issue.
But Mr. Duffy laid out a neat time line including information his staffers received from an MF Global employee which contradicted Corzine's (testimony). And Mr. Duffy's statements made a whole lot more sense. His auditors received daily segregated account reconciliation records during the last few tumultuous days. On Thursday and Friday they were told by MF that the "seg accounts" had $200 million in excess funds and things were fine. Then they were told that this was in error and it actually had a $200 million shortfall. ( Corzine contends that everyone at MF was so shocked that they didn't even attempt to figure out what happened, but rather spent the next couple of days furiously trying to reconcile figures). Duffy testified that his staff was finally told on 10/29 that there was a $900 million shortfall. Later, on 10/31, his auditors were told that MF had transferred $950 million from segregated customer accounts to its the broker/dealer arm so they might as well stop looking for any error. This on top of learning that MF had asked a London affiliate to send back $175 million it had loaned to them from co-mingled accounts.. But worst for Corzine,a senior MF employee told his staff that Corzine knew of the transfers and they were directed by management. Mr. Duffy described these activities as illegal, violation of rules and, just as important, efforts to disguise what was going on. No wonder Mr. Duffy was so forthright - his staff had been intentionally misled. And one could easily figure what Mr. Duffy thinks of the (honorable) Mr. Corzine's performance which he witnessed earlier.
So the day was spent hearing from farmers, ranchers and other legitimate parties simply trying to use commodity hedges the way they were intended. They described what happened to their ability to conduct business by addressing agricultural risk factors when Corzine betrayed their trust. Then you had the "maybe lying perjurers" three top MF executives insulting everyone's intelligence. Then you had the CME executive chairman describe a thoroughly plausible scenario of what actually happened. In my mind, Corzine and his henchmen were exposed for what they are. Hopefully, this vitally important matter will continue through the system post-haste before everyone forgets about it or legislators let an ex-Senator and ex-Governor get a free pass. More hearings - quick! And for God's sake - will somebody put some heat on the Department of Justice to actually do something for once.
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