Corzine Resigns as Securities Firm Chief

He also has hired a defense attorney.

Friday, Nov 4, 2011  |  Updated 4:33 PM EDT
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Former New Jersey Governor Jon S. Corzine

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Former New Jersey Gov. Jon Corzine has resigned as CEO at his embattled securities firm MF Global, the company's board announced Friday.

The board confirmed Corzine will not seek severance payments in connection with his resignation.

Edward L. Goldberg, the lead director of the board of directors, and Bradley I. Abelow, the company’s president and chief operating officer, will continue in their current positions.

Corzine said that he voluntarily tendered his resignation.

"This was a difficult decision, but one that I believe is best for the firm and its stakeholders," the former New Jersey governor said in a statement. "I feel great sadness for what has transpired at MF Global and the impact it has had on the firm’s clients, employees and many others."

Corzine has also hired prominent defense attorney Andrew Levander of New York, according to a person familiar with the situation.

MF Global filed for bankruptcy protection Monday after a disastrous bet on European debt. It was the eighth-biggest U.S. bankruptcy and the first major Wall Street firm to fail because of bets on European debt.

NBC New York first reported Tuesday that the FBI and federal prosecutors have joined the inquiry into the firm.

A regulator said Wednesday that MF Global moved millions in missing client funds last week. MF apparently made "substantial transfers" of customer money after an on-site audit last week, said the regulator, CME Group Inc.

CME is a private company that oversees firms such as MF Global on behalf of federal regulators. It also operates exchanges where MF Global traded investments.

The money was moved in a way that "may have been designed to avoid detection," CME said in a statement.

CME's statement suggests that MF Global executives rushed hundreds of millions out of client accounts as the company slid toward bankruptcy last week. The company acknowledged that the money was missing early Monday morning.

"If they transferred funds that fast, it was brazen — an act of desperation to try to save themselves at all costs," said Mark Williams, a former Federal Reserve examiner who is now a lecturer at Boston University.

Williams said it's possible that the transfer of money was made earlier but was missed by CME auditors. He said the company apparently lacked strong systems to monitor risk or prevent such illegal transfers.

"If they had good controls, there's bells and whistles that go off when you're trying to transfer money like that," he said.

About $600 million of client cash is still missing, according to two officials with knowledge of the probe.

MF Global's failure is the latest public setback for Corzine, a former head of Goldman Sachs. He had hoped to build MF Global from a brokerage into an investment bank.

Under Corzine's leadership, MF Global started making more trades for its own profit, a practice known as proprietary trading. Those bad trades triggered its worst-ever quarterly loss.

MF Global's credit was downgraded to junk status after it acknowledged the loss last week. Its stock plunged, and business partners required it to put up more money to guarantee its bets. The result was a cash crunch that forced MF Global into bankruptcy. 

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