The Hagstrom Report

Agriculture News As It Happens

Sommers, Kobak, Corzine lead MF Global witness list

Jill Sommers, the Commodity Futures Trading Commission commissioner in charge of the MF Global investigation, James Kobak, the lead counsel for the trustee in charge of the MF Global liquidation, and Jon Corzine, the company’s former CEO, will be the lead witnesses when the House Agriculture Committee holds a hearing Thursday on the MF Global bankruptcy.

The House and Senate agriculture committees have jurisdiction over the futures industry, but the bankruptcy of MF Global, a firm that traded commodities, is particularly sensitive in rural America because as much as $1.2 billion in uninsured customer funds is missing.

According to a witness list on the committee’s website, Sommers and Kobak will testify first, followed by Corzine, who is appearing before the committee under a subpoena.

Corzine, a former Democratic U.S. senator and governor from New Jersey, is expected to deliver prepared testimony, but it is unclear whether he will respond to questions from committee members or plead the fifth amendment to avoid incriminating himself, CNN Money reported today.

In an interview with Bloomberg News to be aired Thursday. House Agriculture Committee Chairman Frank Lucas, R-Okla., emphasized the importance of restoring confidence in the futures markets after customer funds were reported missing.

Sommers, a Republican, has been in charge of the MF Global investigation since CFTC Chairman Gary Gensler recused himself.

Gensler worked with Corzine at Goldman Sachs for a period ending 14 years ago, and also worked with him on the Sarbanes-Oxley law. Gensler told the Senate Agriculture Committee last week that the CFTC counsel advised that he did not need to recuse himself, but that he decided the past history would create a distraction.

Senate Agriculture Committee Chairman Pat Roberts, R-Kans., and Sen. Mike Johanns, R-Neb., have criticized Gensler for recusing himself, but another Republican, Sen. Charles Grassley, R-Iowa, had urged Gensler to take himself out of the investigation.

Six other witnesses with interests in the case are also scheduled to testify:
  • John Fletcher, general manager, Central Missouri AGRIService LLC, on behalf of the National Grain and Feed Association, Marshall, Mo.
  • Terrence Duffy, executive chairman, CME Group, Inc., Chicago.
  • William Brodsky, chairman and CEO, Chicago Board Options Exchange, Chicago.
  • Dan Roth, president and CEO, National Futures Association, Chicago.
  • Stephen Luparello, vice chairman, Financial Industry Regulatory Authority, Washington.
  • Gerry Corcoran, chairman and CEO, R.J. O’Brien & Associates, on behalf of the Commodity Markets Council, Chicago.
House Agriculture Committee ranking member Collin Peterson, D-Minn., said Monday he is preparing a bill that would permit companies like MF Global to invest money only in segregated Treasury bond and general obligation bond accounts.

MF Global got into trouble buying the bonds of troubled European countries.

“I’m not a big regulator, but this is a case where people are out of control,” Peterson said.

The Senate Agriculture Committee will hold a hearing on MF Global next Tuesday, for which Corzine has also been subpoenaed.

Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., has said that her hearing will include testimony from the “victims” whose money MF Global did not keep in segregated accounts.

“My top priority is to focus on customers who need their money back,” Stabenow said in a speech to the Farm Journal Forum on Monday.

Stabenow also said Monday that Congress may need to address the question of whether there needs to be an insurance program for holders of such accounts, similar to those that exist for bank depositors and holders of stocks.

Stabenow also praised the CFTC’s approval Monday of a new rule that would put tighter limits on how commodity firms can use customer funds.

“I applaud the commission’s unanimous approval of this rule, which recognizes the fundamental principle of commodities trading: customer money must be held separate from the firm’s money,” Stabenow said in a news release.

“This common-sense rule was first proposed last October. It is unfortunate that it took the collapse of MF Global to get it passed,” she said. “The commission needs to restore faith in our commodity markets, which are so important to America’s farmers and ranchers. I urge the commission to continue moving forward to protect customers and safeguard these markets.”

Stabenow also urged the CFTC to “move forward promptly” on the rulemaking authority it was given under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Senate Finance Committee Chairman Max Baucus, D-Mont., also applauded the commission’s action. In a letter to Gensler and Sommers, Baucus also urged the commission “ to do everything it can to see that those Montanans who held money with MF Global are given full consideration and made whole.”