Story updated to include comments of MF Global's former president and CFO.NEW YORK ( TheStreet) --Jon Corzine is in the hot seat again on Tuesday, testifying before the Senate Committee for Agriculture, Nutrition and Forestry. By most lawyers' accounts, the former MF Global ( MF) CEO successfully navigated
Hedge fund manager Tom Brown told Bloomberg in a recent television interview that he could understand that Corzine was not intimately involved in the operational aspects of the business, but he could not believe that more than a billion dollars could be transferred from a segregated account without "at least two" senior officials knowing about the transaction. Congress will likely question Corzine's failure to take responsibility for the missing money. Although he did acknowledge that "the buck stops here," Corzine has to explain how he fell short on his duty as CEO to ensure that the firm had a strong internal risk controls and a culture of compliance. Yves Smith at the blog
Naked Capitalism points out that Corzine could be considered guilty of violating the Sarbanes Oxley Act, which requires the CEO of a company to guarantee that risk controls and rules are in place and monitor their compliance. 2. Seriously? You traded from your Blackberry? A New York Times article Monday portrayed Corzine as a CEO who was "at heart" a trader who took a much larger, "hands-on" role in the firm's high-stakes trading. Apparently, Corzine traded from his Blackberry during meetings and dashed out occasionally to check on the markets. While there is nothing illegal or fraudulent about his direct involvement in trading activities, such behavior is likely to attract criticism as it suggests that Corzine was at odds with his role as CEO, who should be reining in risk rather than taking more of it. Corzine has already taken full responsibility for the now infamous "repurchase to maturity" positions in Europe, adding that while he advocated it strongly the board approved all the transactions. But according to the article, Corzine steamrolled protests from the board and other managers, reportedly telling directors that "If you want a smaller or different position, maybe you don't have the right guy here." 3. Seriously? You didn't get special treatment from regulators? Corzine's significant influence in Washington and his close ties to CFTC head Gary Gensler is also likely to be in the spotlight.
Gensler's name was brought up several times during the testimony before the House Agriculture committee last week. According to media reports, Corzine heavily lobbied against a proposal to restrict the investment of customer money in certain instruments including foreign sovereign debt and repurchase agreements. Gensler delayed the implementation of the rule in July after opposition from Corzine and other industry members. That rule was finally passed earlier this month, when it was already too late for MF Global's customers. It is unclear how much of customer money, if any, was part of the $6.3 billion European sovereign debt exposure. The CFTC rule does not have any restrictions on how a firm invests its own capital-that falls under the broker-dealer side of regulation. In any case, reports that Corzine successfully overruled objections to his outsized trading bets within the firm and used his influence in Washington to push back against any regulations that would limit his ability to execute his high-conviction bet would call for greater scrutiny in the days ahead. --Written by Shanthi Bharatwaj in New York >To contact the writer of this article, click here: Shanthi Bharatwaj. >To follow the writer on Twitter, go to http://twitter.com/shavenk. >To submit a news tip, send an email to: firstname.lastname@example.org.