Jon Corzine bet $11.5 billion on European sovereign debt in a futile effort to rebuild profits at MF Global Holdings Ltd. - almost twice the net amount disclosed to investors.  He also relied on short-term hedges that left the firm exposed to larger losses if they couldn’t be rolled over. Corzine, who was chairman and CEO of the futures broker up until the time it filed for bankruptcy last month, overcame resistance from directors, senior traders and risk managers to accumulate the bonds, according to 2 people with knowledge of the situation.  He used the hedges, or offsetting trades, to cut the net risk reported to shareholders to $6.4 billion, according to an 8/3/11 regulatory filing by the company. Corzine joined MF Global in March 2010 with a plan to remake the company into an investment bank in the image of Goldman Sachs, where he had been co-chairman before entering politics.

[C-I Note: Our take on the situation is that, Corzine was recruited to the firm for the expressed purpose of created Goldman Sachs - II.  Following that logic, it's likely that, so long as Corzine and his direct reports complied with securities rules and regulations, and operated within the strictures of firm policies, restrictions and limitations, he had ful authority to trade as he saw fit.]

To create the second coming of Goldman Sachs, he repeatedly ratcheted up his wager on the debt of countries - including Italy and Spain - booking gains along the way, according to filings.  The short-term hedges matured before the bonds, meaning the net amount at risk could increase if investors lost confidence in either European sovereigns or MF Global and new hedges couldn’t be bought. "If that assumption does not come to pass, their risk mushrooms," said Matthew Pieniazek, president of Darling Consulting Group, a Newburyport, MA, firm that advises banks on managing their balance sheets.  Hedges that matured along with the bonds would have been prohibitively expensive, he said. ‘My Personal Responsibility’. There was never any doubt about who engineered the sovereign-debt trade.  "Our positions and the judgment about risk-mediation steps are my personal responsibility," Corzine said during a 10/25/11 conference to answer questions about the firm's record quarterly loss and debt-rating downgrade. The firm’s 10/31/11 bankruptcy filing, was the 8th-biggest by a U.S. public company, and led to at least 1,066 workers losing their jobs, disrupted commodities markets and undermined investor confidence in futures brokers. Corzine resigned four days later, on 11/4/11, and has since hired attorney Andrew Levander of Dechert LLP, whose clients have included money manager Ezra Merkin in litigation tied to Bernie Madoff’s fraud scheme.  Neither Corzine nor anyone else at MF Global has been accused of any wrongdoing. For further details, go to:  [Bloomberg, 11/29/11, "Corzine Pushed Bet on Europe Debt to $11.5B" - Miles Weiss, et al].