Gensler explains recusal from MF Global probe

AP News
Posted: Nov 07, 2011 5:10 PM
Gensler explains recusal from MF Global probe

A regulator says he withdrew from an investigation of Jon Corzine's collapsed securities firm to avoid being a "distraction."

Gary Gensler, chairman of the Commodity Futures Trading Commission, said Monday that the CFTC has "excellent career staff" to handle such cases.

Gensler and Corzine were colleagues for 18 years at Goldman Sachs Group Inc. They worked together on the trading floor after joining the firm in the 1970s. Gensler rose to become Goldman's co-head of finance before leaving in 1997. Corzine left Goldman in 1999, after serving as chairman and CEO.

The two collaborated again when Corzine was a senator and Gensler worked on Capitol Hill. As an adviser to Sen. Paul Sarbanes, D-Md., Gensler helped Sarbanes craft the accounting law that bears his name. At the time, Corzine was a senator from New Jersey.

The Associated Press reported last week that in 2005 Gensler donated $10,000 to the New Jersey Democratic Party, which helped get Corzine elected governor later that year.

MF Global collapsed last month after a disastrous bet on European debt. The company told officials at Gensler's agency early Monday that hundreds of millions in client funds are missing. Gensler and other regulators forced the company to file for bankruptcy protection.

Officials are investigating whether MF Global used money from clients' accounts as its financial condition worsened. That would be a violation of securities rules. The FBI also is investigating whether the company broke any criminal laws.

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Corzine, who has retained a criminal lawyer, was chairman and CEO of MF Global until his resignation on Friday. He had hoped to build it from a small securities firm into a full-scale investment bank.

In the end, investors and trading partners grew nervous about the size of Corzine's bets on European debt. They withdrew cash that the company had relied on to operate.

Gensler's remarks Monday were his first on his decision to recuse himself from the investigation. He was speaking at the annual meeting of the Securities Industry and Financial Markets Association, a trade group that MF Global belonged to.


Wagner reported from Washington.

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