Jon Corzine Returns to Washington

At Goldman Sachs (NYSE: GS  ) , some people referred to Jon Corzine as "Fuzzy." And it wasn't just the avuncular beard, either. In William Cohan's Money and Power, he quotes a partner as saying that Corzine was a "fuzzy thinker" who "wasn't crisp and wasn't black and white. He fuzzed things when he communicated."

That fuzziness was on full display yesterday, when Corzine testified before the House Agriculture Committee. His testimony was peppered with phrases like, "I don't remember" and "I don't recollect." He frequently said that he couldn't answer questions without access to notes, documents, and emails. At times during the hearing, it seemed hard to believe that this man had been CEO of both Goldman Sachs and later MF Global in addition to being a senator and governor of New Jersey. At one point, he actually said that he didn't know who the person was "who would hit the button" to make money go places. Shouldn't a CEO know the person with the button?

How fuzzy was he?
The House Agriculture Committee subpoenaed Corzine so they could learn more about his role in the collapse of MF Global. If you were hoping to see some sparks fly, however, you'd have been out of luck. I was amazed by the warmth and chumminess of the proceedings. At one point, a congressman congratulated Corzine on his wealth! At another time, a congressman -- perhaps forgetting about the subpoena -- thanked Corzine profusely for remaining there so long for all the questions. Through it all, Corzine had a name card in front of him that read: The Honorable Jon Corzine.

Corzine began his testimony by reading his prepared remarks (pdf file). He said he "was stunned" to learn that his firm could not account for hundreds of millions of client money. And he added that he "simply [does] not know where the money is."

Corzine was very quick to point out that his involvement "in the firm's clearing, settlement and payment mechanisms, and accounting was limited." At one point, he said that he did not know "which accounts are unreconciled or whether the unreconciled accounts were or were not subject to the segregation rules." This attempt to distance himself from the operational aspects of his firm led former SEC Chairman Harvey Pitt -- as reported on Francine McKenna's blog -- to describe his prepared remarks as the "three monkey defense: See no evil, hear no evil, speak no evil."

Too complicated to run
This "defense" continued throughout the remainder of the hearing. Corzine made it clear that he wasn't well-versed on the operational side of the business, and he appeared to be hazy about who did what in this area. On numerous occasions during his testimony, he referred to how complex everything was, especially during the final days leading up to the bankruptcy. When asked if he knew about commingling of funds, he replied, "I never intended to break any rules. I never intended to direct or have segregated funds moved." Those words "never intended" came up a lot yesterday.

Corzine appeared to open up the possibility that maybe unintentional mistakes were made in the chaos of the final week before the bankruptcy. And how could he be expected to know what was going on?, he seemed to imply. Things were just incredibly complex. At one point I tweeted that Corzine was employing the "Too Complicated to Run" defense. The complexity of MF Global's business seemed to be beyond the ability of anyone to effectively manage. At least that's what Corzine's testimony appears to suggest.

We deserve better
Sadly, our elected representatives, for the most part, didn't really challenge this defense. Congressman David Scott, to his credit, didn't buy the "it's all too complex" argument, but the others didn't offer strong objections.

As a result, the hearing was very disappointing and didn't shed much light on what happened to the customers' money. Going in, I wondered if Corzine would be pleading the Fifth Amendment at times in order to protect himself. Alas, pleading ignorance seemed to work just fine for him.

I honestly do not believe for a minute that Corzine's story would hold up under more vigorous and intelligent questioning. I hope that day comes sometime soon. MF Global's customers, who have been so poorly served throughout this debacle, were once again let down yesterday -- this time by the U.S. Congress.

Right now, they deserve clarity, not fuzziness.

Our team here at The Motley Fool is continuing to dig deep into the MF Global mess. If you'd like to share any information with us, email tips@fool.com or call our tip line at 703-254-1546.

John Reeves does not own shares in any of the companies mentioned in this article. You can follow him on Twitter @TMFBane.

Motley Fool newsletter services have recommended buying shares of Goldman Sachs. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (32) | Recommend This Article (36)

Comments from our Foolish Readers

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  • Report this Comment On December 09, 2011, at 1:58 PM, Millsteen wrote:

    He would fold under Judge Judy and in a lot less time.

  • Report this Comment On December 09, 2011, at 2:47 PM, toastedseeds wrote:

    Why is this fellow not in Jail? He is resposible for a company that is missing millions from customer accounts. Shouldn't Sarbanes Oxley apply in some way? This is why people are willing to sit in freezing parks.

    If he and many others don't start getting indicted and sent to jail this country is going to explode.

    ts

  • Report this Comment On December 09, 2011, at 2:50 PM, don448 wrote:

    Corzine is another Congressman crook! His defense of not knowing, and too complex to understand ignores the obvious that he was smart enough to get his own money out before it crashed! Is a stupid crook easier to forgive than a smart one? If he gets a pass on this, it will prove beyond a doubt that Congress is in bed with the crooks and there is not investment protection in the US. Of course, we all suspect that anyway. Where did Madoff screw up? Did he fail to pay off the correct people?

  • Report this Comment On December 09, 2011, at 3:07 PM, Darwood11 wrote:

    I found the proceedings remarkable and the background also.

    Corzine, the chief executive, who was the architect of the entire strategy, pleads ignorance when $1.2 billion of customer funds "disappears," continuing to walk the streets, is congratulated and schmoozed by congressmen on his success (as in "wealth") and says he wasn't aware!

    I had read elsewhere that Corzine was involved in a "personal lobbying blitz" in which he urged regulators at the Commodity Futures Trading Commission "to weaken a rule that would rein in the use of customer funds." Apparently he went right to the top and discussed this with CFTC chairman Mr. Gary Gensler. Gensler is a former employee of Goldman Sachs and was once a subordinate of Corzine!

    I'd have to say, if this is any indication, then things ARE getting worse, not better!

  • Report this Comment On December 09, 2011, at 3:13 PM, TMFLomax wrote:

    Great piece, John. I did catch the sign with "The Honorable" title on TV, and kind of inwardly laughed. Geez. Thanks for the thorough writeup on how it all went down though. Sad...

    Alyce

  • Report this Comment On December 09, 2011, at 3:37 PM, etoast wrote:

    Agree with both you and Alyce that situation is sad. I did not see any of the Corzine testimony, but your description reminded me of the Chief Justice confirmation hearings a few years back. I'm not comparing John Roberts to Jon Corzine, but in both cases it seems the congressional panel was not up to the task.

  • Report this Comment On December 09, 2011, at 4:07 PM, TMFBane wrote:

    Thanks for all of the great comments, everyone!

    @toastedseeds, You raise a great point about Sarbanes-Oxley. According to an expert who is quoted in a Bloomberg piece today, there may be a breach of Sarbanes Oxley here. Here's the piece in question: http://www.bloomberg.com/news/2011-12-09/corzine-s-intent-at...

    @darwood11, yes, you are referring to regulation 1.25. Corzine did lobby for that, clearly. But my understanding is that that probably didn't apply in this instance. Instead of investing client money in sovereign debt, it's more likely that the broker dealer side of the business made the Repo-to-Maturity trades, and then perhaps dipped into client funds when the liquidity crisis occurred. Obviously, we don't know for sure yet. Regardless, dipping into customer segregated accounts is a crime.

    @TMFLomax, yeah, that name card was just too much under the circumstances.

  • Report this Comment On December 09, 2011, at 6:51 PM, jmlerche wrote:

    This article is a clear picture of what is so wrong with this country.

  • Report this Comment On December 09, 2011, at 7:02 PM, awallejr wrote:

    Good article. If Corzine doesnt get prosecuted then this will confirm how rigged the "game" really is. Seriously I want Eliot Spitzer as Head of the SEC.

  • Report this Comment On December 09, 2011, at 7:17 PM, Iceberg450r wrote:

    The fact that this man is not in prison without bail until we get answers where the money is, shows a complete break down of the system in this country. It's obvious he's buddies with all these congress men and if they are not involved in one way or another he has dirt on them for something else. This is them just going through the motions to make it look like they attempted to do their job... In fact Corzine is most likely at dinner with the crooks right now laughing at how stupid the American public is and wondering how much more $ they can steal from us!

  • Report this Comment On December 09, 2011, at 8:12 PM, fennecfoxen wrote:

    "At one point, a congressman congratulated Corzine on his wealth!" -- Your phrasing almost seems to suggest that you believe it would be better for him to be berated on the basis of his wealth alone.

    (And if that's the case, sir, you should quit writing for the Fool and go camp out with those 'occupy' bozos.)

  • Report this Comment On December 09, 2011, at 8:19 PM, MrChapel wrote:

    Corzine is a close friend and contributor/bundler of President Obama. Did any of you really think anything would stick to him? If so, I have a few bridges in the Sahara for sale, for a nice price.

    You can place MF Global together with Solyndra, Fisker, LightSquared and several other companies populated, owned and governed by Obama cronies. All of them have gotten big payouts for their help in electing him, through the DOE, through changing of the fiscal rules like in Solyndra's case, through pressure being brought to get them funding at the taxpayer's expense. Corzine's 'interrogation' is just more of the same.

    Some poor fool running some insignificant department within MF Global will be put up as a sacrificial lamb and sent to jail while Corzine will be getting a cabinet position or be made a Czar with a massive budget to circumvent the laws.

  • Report this Comment On December 09, 2011, at 10:13 PM, OneLegged wrote:

    He will walk.

  • Report this Comment On December 10, 2011, at 12:20 AM, MichaelDSimms wrote:

    When you have friends in high places you are treated much better. Another crook, who has stolen billions not millions, which is isolated from the realities of life and laws. The rest of us would already be prosecuted in the media and be relegated to a small cell.

  • Report this Comment On December 10, 2011, at 2:35 AM, awallejr wrote:

    "At one point, a congressman congratulated Corzine on his wealth!" -- Your phrasing almost seems to suggest that you believe it would be better for him to be berated on the basis of his wealth alone.

    No. you obviously missed the point. It has nothing to do with wealth in general, it has to do with avoiding the real issue, was Corzine totally inept or reckless in his running or what m,ay be a scam company. Praising him for wealth is like praising Madoff for wealth.

  • Report this Comment On December 10, 2011, at 4:36 AM, vselam wrote:

    Honorable? Seems everyone up there has that name. That way when the uneducated folks glance at the screen they can be assured everything is ok. You think the march on wallstreet is bad. Wait till they piss off the people who actually loss all their money. Down with the house!

  • Report this Comment On December 10, 2011, at 5:28 AM, lowmaple wrote:

    It's quite possible the word honorable was first used so that unacceptable slurs would not inadvertantly be used instead.

  • Report this Comment On December 10, 2011, at 6:42 AM, xferjenx wrote:

    I'd jail everyone in that organization until someone squealed. And where's the Occutards in all this? They should be calling for his head...Hypocrisy...

  • Report this Comment On December 10, 2011, at 7:29 AM, JacksonInVA wrote:

    I am sure our Congress people can really empathize with this crook.

  • Report this Comment On December 10, 2011, at 2:14 PM, 1i22 wrote:

    Sad is the word that came to mind and I see from earlier posts for some others too. It's painful watching this circus in congress and wallstreet over and over again. " Leadership" in our large finanicial institutions and in Congress is an embarassement. The "Greatest Generation" has now been replaced by the "Greed Generation".

    Is a third party needed? I hope not. But we clearly need access to representatives with intelligence, vision, an ability to comprimise effectively and a strong moral compass.

  • Report this Comment On December 10, 2011, at 2:38 PM, southernbeachguy wrote:

    How can a CEO lose $1.2 Billion dollars? Corzine and his CFO should be held accountable and serve some Jail time for falsifying their Financials. This just goes to show that the American people are not doing a very good job electing their Public Officials....this incompitent Corzine was a Governor & Senator, yet he doesn't know where $1.2 Billion is........ Crook may be a better for Corzine.....Just my thoughts.

  • Report this Comment On December 10, 2011, at 4:06 PM, Merton123 wrote:

    Our constitution requires a jury trial before condeming anyone for perceived crimes. The CEO of a large organization delegates a lot of authority to get the work done. Or to put it differently the CEO has to trust his/her team to get the work done.

    Can the CEO of Coca Cola micromanage a billion dollar business?

    What the Corzine affair has shown is that when people don't have values in a publically managed corporation then inevitable these types of activities occur. The fall of the Roman Empire occurred because of the values of hard work, ethics, family values were replaced with the opposite. Are we going to be replaced by China because of our own internal decay? What can we do to revive and reinvigorate organized religion?

  • Report this Comment On December 10, 2011, at 4:51 PM, MGunsU wrote:

    "If you were hoping to see some sparks fly, however, you'd have been out of luck. I was amazed by the warmth and chumminess of the proceedings. At one point, a congressman congratulated Corzine on his wealth! At another time, a congressman -- perhaps forgetting about the subpoena -- thanked Corzine profusely for remaining there so long for all the questions. Through it all, Corzine had a name card in front of him that read: The Honorable Jon Corzine" THAT SHOWS HOW THESE ELITIST DON"T CARE ABOUT THE PUBLIC...

    I've watched videos and it is amazing...

    I am reading T. Boone Pickens "The First Billion is the Hardest" and he mentioned an organization called "United Shareholders Association ". From 1986 to 1994 the United Shareholders Association, focused on enhancing shareholder rights, improving corporate governance/financial transparency, and increasing corporate executive accountability

    Is there any such organization now?

    This is the way to combat corporate greed... from within. We need to break this cycle of elitist cronyism involving politicians (FROM BOTH SIDES) and corporate management...

    THE JAILS SHOULD BE OVERFLOWING WITH THESE *&^%$#@!....

    I'm just saying....

  • Report this Comment On December 10, 2011, at 5:00 PM, TeaPartyPatriot wrote:

    "Corzine blames predecessors for MF Global's fall"

    ...of course, it's BUSH's fault !

    "Corzine's MF Global files for bankruptcy protection"

    So, a lunatic-left d-cRAT socialist recklessly spending other people's money to the point of fiscal collapse and bankruptcy. Who could of guessed that would ever happen, especially by a d-cRAT socialist who left NJ taxpayers $8 BILLION IN DEBT ?

    "Corzine Testimony: I Don‘t Know Where Firm’s Missing Money Is"

    ...check OBOZO's re-election campaign account.

    Given d-cRAT socialist corzine's "skills" with other peoples' money, I wouldn't be surprised if his pal OBOZO-the-Clown now puts him in charge of the OBOZO "green" energy program, because America needs more solyndra-type bankruptcies that create so many high-paying jobs for lawyers!

    Moral: NEVER, EVER let a lunatic-left d-cRAT socialist anywhere near YOUR money - they are all corrupt, self-serving MF-ers.

  • Report this Comment On December 10, 2011, at 5:10 PM, Millsteen wrote:

    If you made the assumption that your assets (bonds, stocks, cash) sit in a segregated account at a brokerage firm, you're right. If you assumed that they were safe and protected from ever being raided by the brokerage firm, think again. This whole affair is disgusting for what it does to further erode trust.

  • Report this Comment On December 11, 2011, at 4:47 AM, TMFKopp wrote:

    @Merton123

    "Our constitution requires a jury trial before condeming anyone for perceived crimes."

    Well put. Thank you.

    Matt

  • Report this Comment On December 11, 2011, at 10:34 AM, TMFBane wrote:

    Matt and Merton123,

    I couldn't agree more that our constitution requires a jury trial before condemning anyone. That's a basic right for everyone.

    But I also think that Americans have a right to ask tough and probing questions of a CEO who blows up his company, thereby causing pain and suffering for numerous stakeholders. And I believe that the CEO has an obligation to answer such questions. That question and answer process just did not take place at the hearing in a satisfactory way.

    In today's NYT, it is reported that Sheila Bair has urged regulators to write rules requiring executives and boards to be "personally accountable for monitoring and compliance" of the institutions they manage.

    To me it's unacceptable that Corzine's "defense" (whether it's from a legal or rhetorical perspective) is that he didn't know what was going on. To paraphrase Sheila Bair, what in the world is he getting paid for?

  • Report this Comment On December 12, 2011, at 11:53 PM, ibuildthings wrote:

    If this guy was a Republican, instead of the Democratic luminary, we would see 24/7 coverage of him, his connections to other Republicans, every Republican bill he supported, ad nauseum. Anyone remember Ken Lay? He donated money to both republicans and democrats, Clinton and Bush both. Yet when Enron collapsed, only the Republican connections were newsworthy.

    I would really like to see our fearless leadership in Washington actually prosecute all the Wall Street criminals who have profited by taking illegal risks with other people's money. As far as that goes, at least the Bushies did put a few crooks in jail.

  • Report this Comment On December 13, 2011, at 12:00 AM, ibuildthings wrote:

    Here is video of VP Biden praising Corzine's talents and economic prowess.

    http://www.youtube.com/watch?v=xm3VMrKqJSA

    If only he was a Republcan.

  • Report this Comment On December 13, 2011, at 7:53 PM, TomBooker wrote:

    I'm sorry I missed this article.

    My brethren and I are having a fit over this "OOPS" defense by MFGI.

    Do they run their business with pencils and paper, or do they use them newfangled computer thangs?

    For decades we have had auditors crawling up our trousers. They don't want to know if they will be able to trace down a transaction which accidentally involved a general ledger Restricted Fund...

    They want to make darned sure the computer system CAN'T TOUCH the Restricted Fund.

    It can even be done selectively. Example

    Some clients permitted GFMI to use their money overnight in repos. But it had to be back in the morning.

    A repo and a repo-to-maturity are different transactions. If someone tried to use funds from a client account, for an RTM, it would not let them.

    If management told the Systems people to permit it, that is when the "intention" to "co-mingle" occurred.

    Think about if from our view. If an IT guy designed a system for a commodity/swaps House, and there was a (business) security hole, and somehow segregated client funds were accidentally or intentionally used... his sss would get fired.

    Because in the commodities broker/dealer world, the segregated funds are mentioned about 12 times in the House's prospectus. It's a regulatory violation, which can garner civil action by both the SEC and the client.

    That's why none of this makes any sense.

    Why would Sr Management permit a gap with consequences to exist in the system... unless they intended to use it?

    This also why this makes no sense.. they can't find the lost money?

    You don't look for ALL of the money. You go to one client's account whose money went missing.

    You then dump all records in the system which belongs to their account ID#. And you step through the records, one at a time.

    OMG! They had 5000 transactions in 2 weeks! Well, take 2 of the literally hundreds of people involved in the investigation, and have them go through them. It won't take 6 weeks.

    And you can do that with other busted accounts.

    The great thing about computers is if they make a mistake, it will 100% consistently make the exact same mistake.

    So then we can rule out the "computer error" BS and start arresting carbon units.

  • Report this Comment On December 14, 2011, at 10:53 AM, nickjob wrote:

    Add to his name " The Honorable, Lying, Thieving Jon Corzine". If he really wanted to find the money, wouldn't he have stayed on instead of resigning? If my wife said we lost the stash of money we kept in the basement, the first thing I would do is run downstairs and try to find it. Only natural. Instead, Big Jon ran out of the building. Maybe he already knew he wasn't going to find it.That's because he was the one who hid it.

  • Report this Comment On December 28, 2011, at 4:10 PM, thidmark wrote:

    "Our constitution requires a jury trial before condeming anyone for perceived crimes."

    Horsefeathers. A jury trial is required to CONVICT someone.

    Corzine should be condemned just for being a general boob.

    I feel sorry for the people who lost their nest eggs because of "perceived crimes."

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