Corzine’s Enron Amnesia

Leading Enron Critic Jon Corzine Stays Mum on Enron-Era Accounting at MF Global and Exposes Himself to Charges of Hypocrisy While Democrats Duck and Cover 

• Embattled former MF Global CEO and trusted Obama advisor Jon Corzine dodged and weaved his way through testimony before the House Agriculture committee yesterday, frequently hedging his answers as to how much he knew about the $1.2 billion in missing customer funds at his now-bankrupt firm despite receiving extensive internal warnings about his firm’s risk-taking.
• Corzine’s testimony was rather hypocritical given his earlier, high-profile role as a U.S. Senator involved in the Enron investigations in 2001-2002. At the time, Corzine vocally criticized Enron for deceptive and dishonest accounting—which Corzine’s own bankrupt company now appears to have engaged in as well.
• Meanwhile, House Democrats are continuing to cling to their scandal-tainted campaign cash from Corzine, whose firm shortchanged American farmers, families and seniors. What will it take for Democrats to return their Corzine cash?

BACKGROUND 

Embattled former MF Global CEO and trusted Obama advisor Jon Corzine dodged and weaved his way through testimony before the House Agriculture committee yesterday, frequently hedging his answers as to how much he knew about the $1.2 billion in missing customer funds at his now-bankrupt firm despite receiving extensive internal warnings about his firm’s risk-taking: 

AMOUNT OF MISSING MF GLOBAL CASH “COULD BE MORE THAN $1.2 BILLION”:(Michael J. de la Merced, “MF Global Trustee Says Shortfall Could Exceed $1.2 Billion,” The New York Times, 11/21/2011) 

“CORZINE: ‘I SIMPLY DO NOT KNOW WHERE THE MONEY IS’”: (Scott Patterson and Aaron Luchetti, “Corzine: ‘I Simply Do Not Know Where the Money Is,’” The Wall Street Journal, 12/8/2011) 

REGULATORS SUSPECT CUSTOMER “MONEY IS NOT SIMPLY MISSING,” BUT “GONE”: (Ben Protess, “MF Global is Said to Have Used Customer Money Improperly,” The New York Times, 11/17/2011) 

AND “CORZINE REBUFFED INTERNAL WARNINGS ON RISKS”: “MF Global Holdings Ltd.’s executive in charge of controlling risks raised serious concerns several times last year to directors at the securities firm about the growing bet on European bonds by his boss, Jon S. Corzine, people familiar with the matter said.

“The board allowed the company’s exposure to troubled European sovereign debt to swell from about $1.5 billion in late 2010 to $6.3 billion shortly before MF Global tumbled into bankruptcy Oct. 31, these people said. The executive who challenged Mr. Corzine resigned in March.

“The disagreement shows that concerns about the big bet grew inside the company months before the trade rattled regulators, investors and customers. The executive, Michael Roseman, whose title was chief risk officer, also expressed concerns directly to Mr. Corzine in meetings of just the two men and with other people present, people familiar with the situation said.” (Aaron Luchetti and Julie Steinberg, “Corzine Rebuffed Internal Warnings on Risks,” The Wall Street Journal, 12/6/2011) 

FBI INVESTIGATING HOW CORZINE’S COMPANY LOST CUSTOMER MONEY: (Paul Steinhauser, “RNC Calls on Obama to Return Corzine Contributions,” CNN, 11/3/2011) 

U.S. COMMODITIES REGULATOR: CORZINE FIRM ACTIVITIES “EITHER NEFARIOUS OR ILLEGAL”: (Tim Mak, “Regulator: Corzine Firm ‘Nefarious,’” Politico, 11/15/2011)

“AS REGULATORS PUSHED CHANGES, CORZINE PUSHED BACK, AND WON”:“Months before MF Global teetered on the brink, federal regulators were seeking to rein in the types of risky trades that contributed to the firm’s collapse. But they faced opposition from an influential opponent: Jon S. Corzine, the head of the then little-known brokerage firm.

“As a former United States senator and a former governor of New Jersey, as well as the leader of Goldman Sachs in the 1990s, Mr. Corzine carried significant weight in the worlds of Washington and Wall Street. While other financial firms employed teams of lobbyists to fight the new regulation, MF Global’s chief executive in meetings over the last year personally pressed regulators to halt their plans.” (Azam Ahmed and Ben Protess, “As Regulators Pushed Changes, Corzine Pushed Back, and Won,” The New York Times, 12/9/2011) 

Corzine’s testimony was rather hypocritical given his earlier, high-profile role as a U.S. Senator involved in the Enron investigations in 2001-2002. At the time, Corzine vocally criticized Enron for deceptive and dishonest accounting—which Corzine’s own bankrupt company now appears to have engaged in as well: 

“ANALYSIS: MF GLOBAL PROVES ENRON-ERA ACCOUNTING LIVES ON”: (Nanette Byrnes, “Analysis: MF Global Proves Enron-Era Accounting Lives On,” Reuters, 12/2/2011) 

“OFF-BALANCE SHEET ACCOUNTING METHODS THAT ENRON AND LEHMAN BROTHERS MADE FAMOUS… HAVE A MODERN DAY POSTER-CHILD: MF GLOBAL”: (Nanette Byrnes, “Analysis: MF Global Proves Enron-Era Accounting Lives On,” Reuters, 12/2/2011) 

CORZINE’S FIRM USED ACCOUNTING GIMMICKS TO MAKE MF GLOBAL “LOOK LESS INDEBTED AND THUS LESS A RISK THAN IT REALLY WAS”: (Nanette Byrnes, “Analysis: MF Global Proves Enron-Era Accounting Lives On,” Reuters, 12/2/2011)

FLASHBACK: THEN-SEN. JON CORZINE (D-NJ) ON ENRON:

JON CORZINE, 1/29/2002, OPENING STATEMENT TO SENATE BANKING COMMITTEE: “SECRECY AND DECEIT CAN UNDERMINE AN ENTIRE FINANCIAL STRUCTURE”: “What we’ve seen with Enron is an example of how secrecy and deceit can undermine an entire financial structure.” (“Opening Statement of Senator Jon S. Corzine (D-NJ),” U.S. Senate Committee on Banking, Housing and Urban Affairs, 1/29/2002) 

CORZINE SAID ENRON’S PHONY ACCOUNTING WAS A “PRETTY STRAIGHTFORWARD CASE OF FRAUD”: “Many who read the 217-page document found it damning. ‘’The report presents a pretty straightforward case of fraud,’ said Senator Jon S. Corzine, a Democrat from New Jersey and a former executive at the investment firm of Goldman, Sachs.” (John Schwartz, “Enron’s Many Strands: The Week that Was; Congress Begins an Investigation, Raising New Questions, and Silence,” The New York Times, 2/10/2002)

ENRON REPORT “QUITE DESPICABLE AND DAMNING”: “‘If the facts of it are accurate, it’s quite despicable and damning.’” (Jonathan D. Glater, “Enron’s Ex-CEO Refuses to Testify,” The New York Times, 2/4/2002)

CORZINE ON ENRON: “IT IS FAR TOO EASY TO COOK THE BOOKS IF THERE IS NO REGULATORY STRUCTURE TO CHECK IT”: “I just happen to think that the one that deals with the backbone or foundation of financial market competence is the accounting and reporting. Get an honest picture. If it’s too easy to cook the books, correct it. Now not everybody’s going to cook the books. I don’t believe that everybody is cooking the books. You know, people are using the SPE’s approrpriately. But, the fact is, it is too easy to cook the books if there is no regulatory structure to check it. And that’s exactly what happened to Enron. … 

“The rules of the road were so ambiguous that they allowed their financial geniuses to do what served their aims in getting market value.” (William Greider, “Interview with Senator Jon Corzine,” The Nation, 2/21/2002) 

CORZINE TO THE NATION: “I think the thing that business often fails to understand is that, without checks and balances in the system, without some regulation–not overbearing regulation, but without some involvement of government in the workings of the economy in terms of its excesses–those who are outside the purview of the supervision and regulation end up operating to their own interests and to the detriment of the system at large. And it happens repetitively. It has throughout history.” (William Greider, “Interview with Senator Jon Corzine,” The Nation, 2/21/2002)

Meanwhile, House Democrats are continuing to cling to their scandal-tainted campaign cash from Corzine, whose firm shortchanged American farmers, families and seniors. What will it take for Democrats to return their Corzine cash?:

Corzine Personal Donations to Incumbents and Select National Party Committees

(CQMoneyLine, accessed 11/03/2011)

DEMS RECEIVED $202.6 MILLION FROM SECURITIES AND INVESTMENT INDUSTRY SINCE 2006: (“Securities and Investment: Long-Term Trends,” OpenSecrets.org, Accessed 12/5/2011)

DEMS RECEIVED $39.8 MILLION FROM COMMERCIAL BANKS SINCE 2006:(“Commercial Banks: Long-Term Contribution Trends,” OpenSecrets.org, Accessed 12/5/2011)

DEMS RECEIVED $12.4 MILLION FROM FINANCE AND CREDIT COMPANIES SINCE 2006: (“Finance/Credit Companies: Long-Term Contribution Trends,” OpenSecrets.org, Accessed 12/5/2011) 

DEMS RECEIVED $158.7 MILLION FROM REAL ESTATE INDUSTRY SINCE 2006:(“Real Estate: Long-Term Contribution Trends,” OpenSecrets.org, Accessed 12/5/2011)

“OBAMA AT WAR WITH SELF OVER WALL ST.”: “First, the White House signaled it would make anger toward Wall Street central to President Barack Obama’s reelection campaign. But then, Obama warned against demonizing all of Wall Street — only a few days before he sympathized with the Occupy Wall Street protesters who do exactly that.” (Carrie Budoff Brown, “Obama at War with Self Over Wall St.,” Politico, 11/4/2011)

“ZIGZAGS BETWEEN EMBRACING THE BUSINESS COMMUNITY AND VILIFYING IT HAVE SHADOWED [OBAMA’S] PRESIDENCY: “The White House’s Wall Street whiplash stretches to the earliest days of the administration, with Obama conciliatory one minute and confrontational the next.

“His zigzags between embracing the business community and vilifying it have shadowed his presidency, exposing him to charges from Wall Street that he’s out to get them and from liberals that he coddles Big Business. Based on his own statements, Obama himself can appear undecided about which way to go — an incoherence that has left both sides dissatisfied as he seeks reelection.” (Carrie Budoff Brown, “Obama at War with Self Over Wall St.,” Politico, 11/4/2011)