Former MF Global official says he warned Corzine

Feb 2, 2012, 8:50 PM

AP Business Writer

WASHINGTON (AP) – A former executive at the collapsed brokerage MF Global testified Thursday that he warned then-CEO Jon Corzine a year before the company went under about the risks of making large bets on European government debt.

Michael Roseman, who was chief risk officer for the company, told a House oversight subcommittee that he raised the concern in October 2010, as the company’s bets on European debt approached $4 billion.

Roseman said Corzine, a former governor of New Jersey, “allowed me to express my opinion in the board meetings. … Within the room, there were certainly differences of opinion.”

At another point in the hearing, Roseman said his analysis of the risks that the company was taking was “challenged as being implausible.” He did not specify who challenged it.

Roseman said he was told in January 2011 that he was being replaced, and he suggested to the subcommittee that his views on MF Global’s risk-taking played a role in the decision. Some of the lawmakers agreed.

“It almost looks like they took Mr. Roseman out and they replaced Mr. Roseman with a yes-man,” said Rep. Stephen Fincher, R-Tenn.

MF Global collapsed in October, the eighth-largest bankruptcy in U.S. history. About $1.2 billion disappeared from customer accounts. After the collapse, Corzine told Congress he did not know where the money went.

Corzine also told the panel in December that differences of opinion on risk were allowed to be aired in boardroom discussions.

Roseman’s successor in the risk job, Michael Stockman, told the subcommittee that he was not involved in putting together a plan for how the firm would handle financial distress and a downgrade by a credit rating agency.

He objected to being characterized as a yes-man. He said he and his team of risk analysts gave complete information to senior management and board members, who made “informed and sophisticated business judgments.”

MF Global failed after the bets on European debt spooked investors, credit rating agencies and the firm’s shareholders. Corzine bet about $6.3 million on bonds issued by debt-saddled countries such as Italy and Spain.

As the bonds lost value, MF Global was forced to set aside additional cash as collateral. The money was meant to protect the lender in case the bonds crashed or MF Global went bust.

If MF Global hadn’t made the big risky bets, Roseman told the lawmakers, “In my opinion they would still be here.”

The collapse grabbed headlines in part because it was headed by Corzine, who was once CEO of Wall Street powerhouse Goldman Sachs. He took charge of MF Global in early 2010 and wanted to transform it into a full-scale investment bank, similar to Goldman.

“The eminence of Jon Corzine may have lulled the board of directors, regulators and market participants into a false sense of security _ despite the writing on the wall,” said Randy Neugebauer, R-Texas, chairman of the oversight panel.

Lawmakers also criticized credit rating agencies Moody’s Investors Service and Standard & Poor’s for failing to take account of MF Global’s exposure to European debt in their ratings of the firm’s creditworthiness.

“I’m not so sure I can trust you guys anymore,” Rep. Michael Capuano of Massachusetts, the panel’s senior Democrat, told executives of the two agencies who appeared at the hearing.

They stood by their agencies’ methods for arriving at ratings. But Richard Cantor, Moody’s chief credit officer, said that if the agency had known more earlier about MF Global’s finances, it may have acted differently on ratings.

Most of the $1.2 billion reported missing has been traced to customer accounts and banks, people briefed on the matter told The Associated Press on Wednesday. They spoke on condition of anonymity because they were not authorized to discuss the investigations.

Brokerages are supposed to keep customer money separate from company money. That way, customers are protected if the brokerage fails.

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.

Financial exchange operator CME Group Inc. said Thursday it will create a $100 million fund to insure the accounts of farmers and ranchers who used the exchange to hedge against risks in their business.


AP Business Writer Christopher Leonard in St. Louis contributed to this report.

(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

United States News

Associated Press

Israel strikes in and around Gaza’s second-largest city in an already bloody new phase of the war

KHAN YOUNIS, Gaza Strip (AP) — Israel intensified its bombardment in and around Gaza’s second-largest city early Tuesday, as ambulances and private cars came racing into a local hospital carrying people wounded in a bloody new phase of the war in Gaza. Under U.S. pressure to prevent further mass casualties, Israel says it is being […]

1 hour ago

Associated Press

Magnitude 5.1 earthquake felt widely across Big Island of Hawaii; no damage or risk of tsunami

HILO, Hawaii (AP) — A magnitude 5.1 earthquake on the Big Island of Hawaii was felt widely Monday, but there were no reports of damage or injury, officials said. The earthquake hit at 5:54 p.m. near the Kilauea volcano at a depth of 1 mile (1.6 kilometers) below sea level, according to a statement from […]

3 hours ago

Associated Press

AI’s future could be ‘open-source’ or closed. Tech giants are divided as they lobby regulators

Tech leaders have been vocal proponents of the need to regulate artificial intelligence, but they’re also lobbying hard to make sure the new rules work in their favor. That’s not to say they all want the same thing. Facebook parent Meta and IBM on Tuesday launched a new group called the AI Alliance that’s advocating […]

4 hours ago

FILE - A hearse and debris can be seen at the rear of the Return to Nature Funeral Home, Oct. 5, 20...

Associated Press

Owners of a funeral home where 190 decaying bodies were found to appear in court

COLORADO SPRINGS, Colo. (AP) — The owners of a Colorado funeral home where 190 decomposing bodies were found are set to appear in court Tuesday, facing allegations that they abused corpses, stole, laundered money and forged documents. Jon and Carie Hallford own Return to Nature Funeral Home, which has a facility in Penrose where investigators […]

4 hours ago

Children play on swings during National Night Out, Tuesday, August 1, 2023, in Salisbury, Md. The e...

Associated Press

Handcuffed and sent to the ER – for misbehavior: Schools are sending more kids to the hospital

SALISBURY, Md. (AP) — Three times a week, on average, a police car pulls up to a school in Wicomico County on Maryland’s Eastern Shore. A student is brought out, handcuffed and placed inside for transport to a hospital emergency room for a psychiatric evaluation. Over the past eight years, the process has been used […]

4 hours ago

FILE - The U.S. Supreme Court is seen at near sunset in Washington, on Oct. 18, 2018. The Supreme C...

Associated Press

The Supreme Court is taking up a case that could rule out a tax on wealth favored by some Democrats

WASHINGTON (AP) — The Supreme Court is taking up a case Tuesday over a Washington couple’s $15,000 tax bill that is widely seen as a test of a never-enacted tax on wealth. A decision in favor of Charles and Kathleen Moore of Redmond, Washington, could strike down a provision of the 2017 tax bill that […]

4 hours ago

Sponsored Articles

Follow @KTAR923...

West Hunsaker at Morris Hall supports Make-A-Wish Foundation in Arizona

KTAR's Community Spotlight this month focuses on Morris Hall and its commitment to supporting the Make-A-Wish Foundation in Arizona.


Midwestern University

Midwestern University: innovating Arizona health care education

Midwestern University’s Glendale Campus near Loop 101 and 59th Avenue is an established leader in health care education and one of Arizona’s largest and most valuable health care resources.



Key dates for Arizona sports fans to look forward to this fall

Fall brings new beginnings in different ways for Arizona’s professional sports teams like the Cardinals and Coyotes.

Former MF Global official says he warned Corzine