House Republicans say the Obama administration is too politically tainted to investigate former New Jersey Gov. Jon Corzine's role in the MF Global bankruptcy.
The group of congressmen, led by Rep. Michael Grimm (R., N.Y.), is calling for an independent counsel to investigate whether Corzine illegally transferred billions of dollars from customer accounts to offset his risky trading strategy.
Recent Stories in National Security
"If there was ever a textbook definition of conflict of interest, this is it," Rep. Bob Turner (R., N.Y.) said. "We are calling on the administration to take politics out" of the investigation.
Corzine has bundled more than $500,000 for the president's reelection campaign and lobbied administration officials on financial regulation, a fact the lawmakers repeated often at a Wednesday morning press conference.
"It certainly doesn’t fair well when Corzine is listed in the first quarter as one of Obama’s biggest fundraisers—it strikes as political nepotism," Grimm, a former FBI agent, said. "He should be bundling money for a fund to repay these customers."
When Corzine was named CEO of MF Global in March 2010, there was wide speculation that he was hired for his political ties. He forged close relationships with the Obama administration and federal regulators during his time in the U.S. Senate and governor’s mansion. Obama campaigned on his behalf during his losing 2010 reelection bid and considered him for Secretary of Treasury.
One of the nation’s top regulators, Commodity Futures Trading Commission Chairman Gary Gensler, worked with Corzine at Goldman Sachs. The two met several times during Corzine’s tenure at MF Global to discuss financial regulation, including a law that would have restricted its customer investments.
"As the result of direct lobbying efforts of Mr. Corzine and other high level executives, the CFTC delayed certain regulatory changes that would have enhanced customer protections," the letter states, referring to July 2011 phone calls from Corzine’s office to Gensler’s.
The rule, now known as the "MF Global rule," did not become an official regulation until immediately after the firm’s collapse.
Gensler recused himself from the case in November.
MF Global filed for bankruptcy in October 2011 when the firm’s risky, heavily leveraged purchases of European debt—overseen by Corzine—led credit ratings agencies to cut the firm’s rating to junk.
The firm has yet to account for more than $1.6 billion in missing customer funds. Federal law requires financial firms to separate customer accounts from investing accounts. It is illegal to commingle the two.
The lawmakers stressed that the victims of bankruptcy are not professional investors, but farmers and retirees looking after college funds and nest eggs.
"These are not speculators, they’re customers and their money was supposed to be in a sacrosanct account," Grimm said.
Harold Landa, a retired Florida doctor who lost substantial amounts of money in MF Global, blasted the administration for dragging its feet on the investigation.
"I’m a customer one day and the next thing I know all of our money is missing," he said. "People are saying we need more regulations, but we have them on the books already, but those regulations don’t matter if your best friend is the cop who pulls you over."
Corzine pleaded ignorance of the illegal money transfers when he testified before Congress in December.
"I did not instruct anyone to lend customer funds to MF Global or any of its affiliates," he said. "I simply do not know where the moneys is."
Evidence has emerged that seems to indicate otherwise, however. The firm’s former assistant treasurer, Edith O’Brien, told Congress in March that Corzine personally ordered the transfer of $200 million from customer accounts on Oct. 28, 2011, to cover an overdraft. The firm filed for bankruptcy three days later.
O’Brien uncovered an email saying the raid on the customers’ accounts came "per JC's direct instructions."
At least 25 Republicans have signed the letter as of Wednesday. No Democrats have signed the letter, though several are "on the fence," according to Grimm, who refused to identify the fence sitters.
Grimm plans to send the letter to Attorney Gen. Eric Holder in the coming weeks.