Regulators and prosecutors examining the failure of MF Global will discover tomorrow if Jon Corzine, its former chief executive, plans to answer public questions about the collapse of the brokerage firm.
Mr Corzine is preparing for a Congressional hearing on the firm's failure, amid new allegations that he repeatedly ignored the warnings of his chief risk officer about the dangers of his gamble on eurozone debt.
The Senate Agriculture Committee, which has the oversight of derivatives legislation among its responsibilities, has subpoenaed Mr Corzine to appear tomorrow, but it is still not clear if he will exercise his rights under the Fifth Amendment not to answer potentially incriminating questions. As well as the bets that sank the firm, the committee is also examining whether MF Global illegally raided customers' accounts to fund its in-house investments.
The Commodities Futures Trading Commission, MF Global's regulator, said yesterday it had still not tracked down all of the $1.2 billion that appeared to be missing from customer accounts. The FBI has opened an investigation, too.
Mr Corzine's appearance at the hearing could prove a sensation even if he chooses not to speak. As well as being the first time he has appeared in public since MF Global went under on 31 October, it threatens to embarrass President Barack Obama for whom Mr Corzine is a long-time fundraiser and Wall Street cheerleader. He was previously the Democratic Governor of New Jersey and before that state Senator.
Mr Corzine was also chief executive of Goldman Sachs in the 1990s and returned to Wall Street in 2010 to run MF Global on the promise he would turn the sleepy broking firm into a "mini-Goldman".
His transformation of the firm included placing large bets on eurozone sovereign debt, in the belief that Europe's leaders would not let any nation default. The bet swelled to $1.5bn by September 2010 and by October 2011 reached $6.3bn, a figure that alarmed investors and triggered an exodus by MF Global's clients and trading partners. The firm collapsed within days.
The Agriculture Committee is expected to ask Mr Corzine about reports in The Wall Street Journal that he was warned repeatedly that the bet was too dangerous. Michael Roseman, chief risk officer, sketched out scenarios in which the bets could overwhelm MF Global's capital reserves, even if eurozone nations never defaulted. Mr Roseman was told this year that he was no longer wanted and left in March.
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