Former New Jersey governor and CEO of MF Global Inc Jon Corzine began testifying today about who was to blame in the $3 billion trial stemming from the 2011 collapse of commodities brokerage MF Global Holdings.
The bankruptcy plan administrators of the brokerage are suing PwC, the world’s second-biggest professional services firm and former auditor of MF Global, claiming that its negligence and malpractice led to the New York brokerage’s collapse in 2011.
More specifically, PwC allegedly advised MF Global to account for repurchase-to-maturity transactions as if they were sales and immediately book the revenues up to 21 months before they actually rolled in. In fact, the deals were not sales and the company shouldn’t have processed the revenues. MF Global’s administrator also faults PwC’s advice on some deferred tax assets, on which the company took a $119 million write-off just six days before going bust.
Meanwhile, PwC’s lawyers argued in in Manhattan Federal Court that the company’s officers, including Corzine, were behind the scheme and that it merely confirmed to them that the accounting was legal. PricewaterhouseCoopers faces as much as $3 billion in damages if found guilty.
When asked to explain an investment method, Corzine, 70, said: “Maybe I could go back to my farming days. My father would plant corn in the springtime and try to get the best price for it before harvesting in the hall.”
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PwC Wants to Throw Out
The current lawsuit is one of the last remaining pieces of litigation relating to the bankrupt financial services firm, following earlier settlements benefiting shareholders, bondholders and customers.
Thursday’s appearance of Corzine in Manhattan federal court marked a return to the spotlight after he agreed on a deal with the U.S. Commodity Futures Trading Commission (CFTC) to pay $5 million to settle on the same lawsuit. The settlement also required Corzine to undertake that he will never act as a principal, agent, officer, director, or employee of a Futures Commission Merchant (FCM) and that he will never register with the CFTC in any capacity.
The trial’s end should close a messy chapter in Mr. Corzine’s four-decade career, which also encompasses serving as a former U.S. senator and former co-chairman of Goldman Sachs.
MF Global originally filed for bankruptcy back in October 2011 amidst investor worry over its repeated credit rating downgrades and margin calls. Corzine’s unsuccessful $6.3 billion wager on European sovereign debt was largely seen as the last straw. The investment strategy was championed by Mr. Corzine, who rose through the ranks as a bond trader at Goldman.