Former New Jersey Democratic Senator and major Democratic donor Jon Corzine caused brokerage MF Global’s downfall, according to a House investigative report issued Thursday.
The report by the Subcommittee on Oversight and Investigations accuses Corzine of exposing the company to excessive risk and creating an atmosphere in which “no one could challenge his decisions.” These moves led to the firm’s bankruptcy earlier this year.
The report also reveals Corzine’s cozy relationship with the New York Federal Reserve Bank, which may have garnered MF Global unwarranted benefits.
“Choices made by Jon Corzine during his tenure as chairman and CEO sealed MF Global’s fate,” subcommittee chair Randy Neugebauer (R., Texas) said in a statement.
The firm hired Corzine as CEO and board chairman in March 2010 after several years of troubled finances in the hopes that his experience could help turn around the struggling firm.
Corzine introduced a “strategic plan to transform MF Global into a full-service global investment bank within three to five years” that would be similar to Goldman Sachs, according to the report. Corzine was a senior executive at Goldman.
Corzine consolidated control of MF Global after his appointment as CEO. He brought on Bradley Abelow, his former Chief of Staff while governor, to be MF Global’s chief operating officer. Other senior-level staff changes strengthened his grip on the firm.
Corzine also acted as the “de facto chief trader for the company” insulating “his trading activities from the company’s normal risk management review process.”
Corzine requested a meeting with the New York Federal Reserve Bank after taking control. The meeting occurred on June 1, 2010.
“Following that visit, the New York Fed acted quickly on MF Global’s application” for designation as a “primary dealer” despite the Fed’s delays on the application before Corzine’s visit, the report says.
It is unclear whether Corzine’s visit smoothed over any misgivings the New York Fed previously may have had. A Federal Reserve spokesman did not return a request for comment.
But the report indicates Fed employees were happy to see MF Global hire Corzine.
The report also chides the Fed for granting MF Global the "primary dealer" designation. The firm’s risks and the Fed’s own doubts “should have given the New York Fed pause before conferring primary dealer status on MF [Global].”
Corzine served as a Senator for New Jersey between 2001 and 2006, when he won election to be governor of New Jersey. He lost his reelection bid to Republican Chris Christie in 2009.
Corzine was a significant donor to Democratic candidates in the 2008, 2010, and 2012 cycles. He donated to Hillary Clinton’s presidential campaign, Barack Obama’s presidential campaign, and the Democratic National Committee as well as to multiple state candidates and outside organizations such as Emily’s List. He donated $232,200 to various Democratic and liberal candidates and causes in the 2008 cycle alone.
Corzine also bundled donations for President Obama’s reelection campaign. He pledged to raise at least $500,000, according to the Center for Responsive Politics, one of only 236 individuals to pledge at that level.
Corzine’s actions at MF Financial could lead to significant losses for MF Global’s clients.
Corzine could face prison time for his malfeasance at the helm of the financial firm if charges are pressed.