On the stand, Corzine defends bet that led to MF Global demise

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By Jonathan Stempel | NEW YORK

NEW YORK Former New Jersey Governor Jon Corzine
defended his big bet on European sovereign debt that was a major
factor in the collapse of his company MF Global Holdings Ltd,
and said the auditor of the futures and commodities brokerage
should have flagged any accounting problems.

Corzine, also a former New Jersey senator and Goldman Sachs
Group Inc co-chairman, appeared at a trial where MF
Global’s bankruptcy plan administrator is seeking about $3
billion of damages from PricewaterhouseCoopers LLP for the
auditor’s alleged negligence.

PwC faults Corzine’s decision making for MF Global’s Oct.
2011 bankruptcy.

Thursday’s appearance of Corzine in Manhattan federal court
marked a rare return to the spotlight for the 70-year-old, after
MF Global’s demise upended his four-decade career and sparked
Congressional and regulatory probes.

Testifying for the plaintiff, Corzine said he began ramping
up the bet on debt of five Western European countries in the
summer of 2010, believing the bonds were “relatively low risk”
and expecting they “were going to pay in their own right.”

He said he did this as part of his plan to restore MF Global
to profitability and transform it into a full-service
broker-dealer.

But the administrator said PwC’s accounting advice, largely
on “repurchase-to-maturity” transactions related to the bonds,
improperly let MF Global keep the bonds off its balance sheet.

While the bonds were later paid off, that was not a sure
thing at the time.

MF Global’s eventual disclosure of more details about the
investment, together with an unexpected quarterly loss, spooked
investors and caused a credit rating downgrade.

“It was a loss of confidence and trust in the organization”
in the market after those events that caused MF Global’s
collapse, Corzine said.

He also said PwC had previously met regularly with him and
MF Global’s audit committee, and flagged nothing wrong.

“They were responsible to make sure we were not making
material misstatements,” he said.

Lawyers for PwC will question Corzine later in court.

Corzine testified two months after he agreed to settle a
U.S. Commodity Futures Trading Commission civil lawsuit by
paying a $5 million fine from his own pocket, a rare step, and
accept a lifetime ban from registering with that agency.

He and other MF Global officials have also reached nearly
$200 million of settlements with the administrator and former
investors. Insurance covers much of those payouts.

Corzine has given more than 10 days of testimony under oath,
including before Congress in December 2011.

A Congressional panel in November 2012 blamed his risky bets
and “dereliction of his duty” for MF Global’s demise. Separate
probes uncovered no criminal wrongdoing at MF Global.

Corzine, whose looks have changed little in the last few
years, said he now has a family office that focuses on
charitable giving and investing his family’s money.

The case is MF Global Holdings Ltd as Plan Administrator v
PricewaterhouseCoopers LLP, U.S. District Court, Southern
District of New York, No. 14-02197.



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