Corzine at a Loss to Explain Missing $1.2B

An estimated $1.2 billion of customers' money is missing after investment banking giant MF Global declared the eighth-largest bankruptcy in U.S. history, and former CEO Jon Corzine "simply [does] not know where the money is."

Corzine, who resigned as CEO three days after MF Global declared bankruptcy in October, told a congressional committee today that he was "stunned" and "devastated" to find out that "millions of dollars of client money" were missing.

"I simply do not know where the money is, or why the accounts have not been reconciled to date," Corzine said. "My understanding is that our books and records were reflecting the chaos that occurred in the last two or three days as the firm was under severe pressure and had lost the confidence of the marketplace."

In more than three hours of testimony, Corzine said he fully expects the money to be found as regulators sift through the final transactions of the company. He said the money is probably unaccounted for because of  a "miscalculation" or that it is "in the hands of counter parties" that have yet to pay it back to MF Global.

Corzine was widely expected to invoke the 5th Amendment to avoid testifying at today's House Agricultural Committee hearing but as a former senator, he said he understood the importance of such hearings. His testimony marks the first time in a century that Congress has subpoenaed a former senator to testify, according to the Senate historian.

Because he said he has had "limited access" to company documents since resigning Nov. 3 , Corzine did not offer details of how the $1.2 billion went missing.

"There are, Mr. Chairman, many transactions that occurred in those last chaotic days," Corzine said in response to a question from committee Chairman Frank Lucas, R-Okla. "I am not aware of all those nor do I have the information to be able to look at all those transactions. As a consequence, it would be very hard for me to speculate why or where that shortfall took place."

Corzine, who said he personally invested $3 million in MF Global, said he would not use his personal fortune to help repay the farmers and ranchers who will potentially lose money because of the firm's bankruptcy.

"I don't think that this will go unresolved," Corzine said. "I believe that the missing funds will be found."

While Corzine offered little insight into where the money disappeared, James Kobak, the lead council on MF Global's liquidation process, said he expects that, unless the missing money is found, the firm's 38,000 customers will only be able to recoup about 70 percent of their money, which should be paid out in two to four weeks.

Kobak said the $1.2 billion is hard to find because the firm's records are "a mess."

"I think it is fair to state that I think that is what often happens in situations like this where there is a run on the banks and a tremendous volume of transactions in the last days of their business," Kobak said.

The firm sold $10 billion worth of assets leading up to its declaring bankruptcy, Corzine testified.