Former MF Global chief Jon Corzine apologized to customers, employees and investors who have suffered because of the brokerage firm's collapse, but said he does not know where missing customer money is.
"Their plight weighs on my mind every day -- every hour," Corzine, a former U.S. senator, said in lengthy remarks prepared for delivery on Thursday before a hearing of the U.S. House of Representatives Agriculture Committee.
"I simply do not know where the money is, or why the accounts have not been reconciled to date," he said.
Corzine's contrite but defensive remarks are his first since MF Global's Oct. 31 bankruptcy and his resignation days later. Revelations of massive bets on European sovereign debt caused markets to lose confidence in the firm.
The search for hundreds of millions of dollars in missing customer funds has sent reverberations through the farm belt and trading floors, and has attracted the attention of the FBI and federal prosecutors. Thousands of customers have had their money frozen.
In separate testimony, a top executive of futures exchange operator CME Group Inc said MF Global misused hundreds of millions of dollars of customer funds by moving the money to its own accounts, the strongest accusation yet against the bankrupt futures brokerage.
"Transfers of customer funds for the benefit of the firm constitute serious violations of our rules and of the Commodity Exchange Act," CME Executive Chairman Terrence Duffy said in prepared remarks.
CME, the biggest U.S. futures exchange operator, was a hands-on regulator of MF Global. Duffy said the brokerage admitted during a call with regulators that customer money was transferred out of segregation to the firm's own accounts.
The court-appointed trustee has estimated the shortfall of customer money at $1.2 billion, but CME has disputed that figure as being too high. In his prepared testimony, Duffy indicated the shortfall was roughly half that amount.
Neither MF Global nor any of its executives has been charged with wrongdoing.
"STUNNED" BY MISSING CUSTOMER MONEY
Nine witnesses are scheduled at the hearing, but Corzine, a senator from 2001-2006 and a former governor of New Jersey, is the star.
He said that while it is difficult for him to reconstruct the chaotic events leading up to the bankruptcy because he no longer has access to relevant documents, he feels compelled to answer lawmakers' questions.
"As a former United States Senator who recognizes the importance of congressional oversight, and recognizing my position as former chief executive officer in these terrible circumstances, I believe it is appropriate that I attempt to respond to your inquiries," Corzine said.
In his testimony, Corzine distanced himself from some hands-on aspects of the firm's business practices.
"Even when I was at MF Global, my involvement in the firm's clearing, settlement and payment mechanisms and accounting was limited," Corzine said.
"I was stunned when I was told on Sunday, October 30, 2011, that MF Global could not account for many hundreds of millions of dollars of client money."
He said he accepts responsibility for the repo-to-maturity trades that related to the firm's $6.3 billion bet on European sovereign debt.
"At the time that MF Global entered into the transactions, I believed that its investments in short-term European debt securities were prudent," he said.
However, he said MF Global reduced leverage during his tenure, and that he does "not claim to be an accountant" regarding the treatment of that exposure.
Mary Schapiro, the chairman of the U.S. Securities and Exchange Commission, has said her agency is probing the accounting treatment that helped mask MF Global's exposure to risky foreign sovereign debt. The SEC is also probing the disclosure of that exposure.
Steve Luparello, vice chairman of the Financial Industry Regulatory Authority, said in his testimony on Thursday that MF Global was not fully candid with FINRA in 2010 when the firm was asked about its exposure to European debt.
Luparello said the firm indicated in late September 2010 that it "did not have any such positions" in European sovereign debt.
"We later learned that the firm began entering into transactions that carried European debt exposure in mid-September 2010," he said.
(Reporting by Sarah N. Lynch in Washington and Ann Saphir in Chicago, writing by Karey Wutkowski; editing by John Wallace, Dave Zimmerman)