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MF Global Execs: We Don’t Know Where the Money Is

Tuesday, 13 Dec 2011 07:29 AM

 

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Top-ranking executives at MF Global will tell lawmakers on Tuesday that they do not know what happened to hundreds of millions of dollars in missing customer funds, echoing what their former colleague Jon Corzine told Congress last week.

MF Global Chief Operating Officer Bradley Abelow and Chief Financial Officer Henri Steenkamp are due to testify on Tuesday alongside Corzine, who resigned last month after the brokerage filed for bankruptcy.

In prepared testimony to the Senate Agriculture Committee , both executives paint a picture of a chaotic final descent into insolvency.

"I unfortunately have limited knowledge of the specific movement of funds at the U.S. broker-dealer subsidiary, MF Global Inc., during the last two or three hectic business days prior to the bankruptcy filing," Steenkamp said, according to remarks obtained by Reuters.

The Senate panel is holding on Tuesday the second congressional hearing to feature Corzine, who last week gave a long-winded but vague account of the firm's collapse before the House Agriculture Committee.

The House committee gave Corzine relatively light treatment, and it is unclear if the tone will be different on Tuesday. Corzine and the executives will follow a panel of farmers who will represent customers jolted by the firm's collapse.

The futures brokerage filed for bankruptcy on Oct. 31, after it was forced to reveal it bet $6.3 billion on European sovereign debt. That disclosure led to market concerns and ratings downgrades that ultimately doomed the firm.

The search for hundreds of millions of dollars in missing customer funds has sent reverberations through the farm belt and trading floors, and has attracted the attention of the FBI and federal prosecutors. Thousands of customers have had their money frozen.

"I am deeply troubled by the fact that customer funds are missing, and I can assure you that I share your interest, and the public's interest, in finding out exactly what happened," Abelow said in his testimony.

Neither MF Global nor any of its executives has been charged with wrongdoing.

NOT PART OF MY DUTIES

Corzine last week also told lawmakers he did not know what happened to the missing money.

The court-appointed trustee has estimated the shortfall of customer money at $1.2 billion, but other regulators have disputed that amount as too high.

Corzine laid out a defense of his role in the waning days of the firm, saying he "never intended" to break rules, but that an employee may have misinterpreted instructions to try to save the firm.

"I never intended to break any rules, whether it dealt with the segregation rules or any of the other rules that are applicable," Corzine told lawmakers last week.

Corzine will appear on the same panel Tuesday as the two executives, but it is unclear if there will be any finger-pointing. There are close ties between Abelow and Corzine.

Abelow, who is a Goldman Sachs alumnus like Corzine, joined MF Global in September 2010. Abelow had served in Corzine's cabinet when the former MF Global chief was governor of New Jersey from 2006 until 2010.

Steenkamp, an accountant, joined MF Global's predecessor , Man Financial, in 2006, after working at PricewaterhouseCoopers for eight years.

Steenkamp, in eight pages of prepared remarks, sought to distance himself from the hands-on operations that could have led to customer funds being diverted to firm accounts, a major violation of industry rules.

"Direct involvement with operational matters such as bank accounts or fund transfers has never been part of my duties," he said.

Abelow's three pages of prepared testimony did not include the same kind of arms-length defense that Corzine and Steenkamp put forth, but he did say he does not know what amount of funds went missing, how it happened, or where the funds are.

Steenkamp gave a more detailed account of the firm's last days.

He said he was not aware of any problems with customer segregated funds until Oct. 30 when he learned there was a "serious issue" in fund calculations.

"I do not know why these funds cannot be accounted for, but based on the fact that no shortfalls had been reported to me previously, it appears that any irregularities were likely caused by events that occurred shortly before the bankruptcy filing."

A source familiar with the matter has told Reuters that MF Global had been using customer funds for "several days if not weeks," rather than just a few days before the firm collapsed.

© 2014 Thomson/Reuters. All rights reserved.

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