WASHINGTON — Jon Corzine's three days of testimony on MF Global's collapse offered little to satisfy lawmakers or clients who lost millions when the securities firm failed. Yet legal experts say Corzine helped himself by choosing words with care and articulating an explanation that's hard to disprove.
Corzine, a Democratic former senator and governor of New Jersey, told three congressional panels that he never intended to "misuse" client money or order anyone else to do so. He said no reasonable person who worked with him could have concluded otherwise.
He also rebuffed an assertion that he knew about customer money that might have been transferred to a European affiliate just before MF Global collapsed. It could be hard to build a persuasive case that he did know, experts say.
"It's remarkable how he really has narrowly walked that line — to be able to communicate effectively while preserving his defenses," said Jacob Frenkel, a former enforcement attorney with the Securities and Exchange Commission, one of the regulators investigating MF Global. "He could have hurt himself by testifying. That has not happened."
About $1.2 billion was found to be missing from client accounts when MF Global failed on Oct. 31, becoming the eighth-largest bankruptcy in U.S. history. Much of the missing money belonged to farmers, ranchers and other business owners who used MF Global to reduce their risks from the fluctuating prices of commodities such as corn and wheat.
Brokers such as MF Global generally are required to keep customer money in separate accounts to protect it in case the company fails. MF Global apparently failed to do so. Congress, regulators and criminal investigators are looking into the case.
Those investigations, still in their early stages, will likely yield clearer answers about how client money came to be misused. For now, it remains a mystery.
"I think it was unrealistic for Congress to expect substantive answers to these questions, because no one is that naive," Frenkel said. "That's why these investigations are ongoing — to figure out what happened to the money and who is responsible."
Some of the lawmakers who questioned Corzine appeared to agree.
"If you did anything wrong, the criminal investigators will find that; I won't," said Massachusetts Rep. Michael Capuano, the top Democrat on the panel Corzine faced Thursday.
Corzine was careful to testify that he never "intended" for client money to be misused. That's because intent is a key requirement of criminal prosecution, Frenkel said.
"If someone intended to violate (rules requiring the separation of client accounts), then the conduct is criminal," he said. "If it was unintentional, we are only in the zone of civil enforcement, if that."
If Corzine or others at MF Global are found guilty of civil violations, they might have to pay financial penalties.
One regulator raised the possibility Thursday that crimes were committed. As a primary dealer, MF Global made trades with the Federal Reserve Bank of New York. As the firm's finances worsened in its final weeks, the New York Fed required MF Global to put aside more money to cover the Fed's losses in case the firm failed.
New York Fed General Counsel Thomas Baxter testified that MF Global gave "express representation in writing" that the money it put up was not from client accounts.
"If that representation turns out to be false, a federal criminal offense has been committed," Baxter said.
Michael Greenberger, a professor at the University of Maryland School of Law and a former regulator, said the hearings resolved none of the questions surrounding MF Global's failure.
"Regulators' enforcement divisions and the Justice Department will work together because if the money is missing, somebody did something wrong," Greenberger said.
And given the damage done by MF Global's failure, there's little Corzine can do to revive his public image, said Michael Robinson, a former SEC official who now works in crisis communications.