Where's the Money, Jon?

Article excerpt

Byline: Michael Daly

With the collapse of MF Global, Jon Corzine stands in the middle of the missing-billion-dollar crossfire. How the finance golden boy went from star governor to news-headline disgrace.

On other mornings, the leather upholstered chair at Esquires barbershop could have been a throne, from which Jon Corzine would rise to stride supreme up the street where he had made his name and his fortune. But on this gray, drizzly dawn just before Thanksgiving, the once mighty 64-year-old emerged from the shop at 14 Wall Street looking sunken and defeated. He moved up the block with a skittish quickness, his blue blazer hanging almost scarecrow-loose on his shoulders, as he nervously raised and lowered a coffee cup to his face, seemingly not so much to take sips as to conceal his face--lest somebody recognize him and maybe ask the big question:

"Where's the money?"

The money being up to $1.2 billion in customer funds that had vanished after the implosion of the investment firm he ran, MF Global. The immediate cause of the eighth-largest bankruptcy in American history was a $6.3 billion bet on European debt that Corzine had declared was a sure thing. He seems to have been blinded less by greed than by need, a need to elevate little-known MF Global into the league of Goldman Sachs, where this son of an Illinois tenant farmer had risen to become CEO, only to be deposed more than a decade ago.

Apart from a press release in which he announced his resignation as MF Global's CEO and expressed "a great sadness" for "what has transpired," Corzine has maintained a shamed and, in the view of many, shameful silence, so successfully avoiding the press and angry investors that CNBC jokingly put his face on the side of a milk carton.

That silence may end as early as this week with a bipartisan tar-and-feathering before Congress. The House Agriculture Committee has voted in a rare unanimous moment to subpoena Corzine to appear on Thursday, and he will also likely be called by a committee in the Senate, where he himself served before resigning to become the governor of New Jersey. Corzine in public office was the most progressive of politicians and often stuck to his principles at whatever the cost. But at MF Global, that same willful confidence and indifference to public opinion combined with an outsize sense of himself to create disaster. What made Corzine so admirable in the Capitol and the statehouse could conceivably land him in the big house with the likes of Bernie Madoff.

Corzine is either the worst of the good guys or the best of the bad guys. He does not seem to be a thief. The question is whether he allowed hundreds of millions in customer funds to be lost in a last-ditch effort to stave off MF Global's collapse. One senior executive of the firm insists that nobody was more stunned by the money's disappearance than Corzine himself.

"I can't believe the fuck-up we just discovered," the executive heard Corzine say in the hours after the collapse.

This same MF Global executive suggests that what is largely missing from press accounts of the firm's demise is the condition MF Global was in when Corzine first became CEO last year. The firm has been described as a "bastard stepchild," spun off by its parent the Man Group after it acquired the remnants of Refco, which had collapsed after its CEO stole hundreds of millions of dollars (Refco CEO Phillip Bennett pleaded guilty in 2008 to 20 counts of securities fraud and is serving a 16-year term). The new company had then been rocked when one of its traders lost $140 million in unauthorized wheat deals.

When Corzine arrived, MF Global was a losing proposition in dire need of new revenue streams and, according to one executive, leveraged an astonishing 50-to-1. The executive, who requested anonymity, says the rating agencies warned Corzine at the outset that they would downgrade the firm's credit if he did not swiftly increase profitability. …