Finance & Business World

Jon Corzine’s three days of testimony on MF Global’s collapse offered little to satisfy lawmakers or clients who lost millions when the securities firm failed. Yet legal experts say Corzine helped himself by choosing words with care and articulating an explanation that’s hard to disprove.

Corzine, a Democratic former senator and governor of New Jersey, told three congressional panels that he never intended to “misuse” client money or order anyone else to do so. He said no reasonable person who worked with him could have concluded otherwise.

He also rebuffed an assertion that he knew about customer money that might have been transferred to a European affiliate just before MF Global collapsed. It could be hard to build a persuasive case that he did know, experts say.

“It’s remarkable how he really has narrowly walked that line _ to be able to communicate effectively while preserving his defenses,” said Jacob Frenkel, a former enforcement attorney with the Securities and Exchange Commission, one of the regulators investigating MF Global. “He could have hurt himself by testifying. That has not happened.”

About $1.2 billion was found to be missing from client accounts when MF Global failed on Oct. 31, becoming the eighth-largest bankruptcy in U.S. history. Much of the missing money belonged to farmers, ranchers and other business owners who used MF Global to reduce their risks from the fluctuating prices of commodities such as corn and wheat.

Brokers such as MF Global generally are required to keep customer money in separate accounts to protect it in case the company fails. MF Global apparently failed to do so. Congress, regulators and criminal investigators are looking into the case.

Those investigations, still in their early stages, will likely yield clearer answers about how client money came to be misused. For now, it remains a mystery.

“I think it was unrealistic for Congress to expect substantive answers to these questions, because no one is that naive,” Frenkel said. “That’s why these investigations are ongoing _ to figure out what happened to the money and who is responsible.”

Some of the lawmakers who questioned Corzine appeared to agree.

“If you did anything wrong, the criminal investigators will find that; I won’t,” said Massachusetts Rep. Michael Capuano, the top Democrat on the panel Corzine faced Thursday.

Corzine was careful to testify that he never “intended” for client money to be misused. That’s because intent is a key requirement of criminal prosecution, Frenkel said.

“If someone intended to violate (rules requiring the separation of client accounts), then the conduct is criminal,” he said. “If it was unintentional, we are only in the zone of civil enforcement, if that.”

If Corzine or others at MF Global are found guilty of civil violations, they might have to pay financial penalties.

One regulator raised the possibility Thursday that crimes were committed. As a primary dealer, MF Global made trades with the Federal Reserve Bank of New York. As the firm’s finances worsened in its final weeks, the New York Fed required MF Global to put aside more money to cover the Fed’s losses in case the firm failed.

New York Fed General Counsel Thomas Baxter testified that MF Global gave “express representation in writing” that the money it put up was not from client accounts.

“If that representation turns out to be false, a federal criminal offense has been committed,” Baxter said.

Michael Greenberger, a professor at the University of Maryland School of Law and a former regulator, said the hearings resolved none of the questions surrounding MF Global’s failure.

“Regulators’ enforcement divisions and the Justice Department will work together because if the money is missing, somebody did something wrong,” Greenberger said.

And given the damage done by MF Global’s failure, there’s little Corzine can do to revive his public image, said Michael Robinson, a former SEC official who now works in crisis communications.

“Unless Jon Corzine can look under the mattress in his house and find $1.2 billion to give back to customers, his reputation is beyond repair,” Robinson said.

He noted that Corzine spent a career branding himself as an effective manager. Corzine rose from the trading floor of Goldman Sachs to become the investment bank’s co-chairman. He then ran successfully for the U.S. senate and one term as governor of New Jersey. Corzine joined MF Global shortly after losing his bid for a second term.

Now, to protect himself legally, Corzine must avoid being precise about what occurred at the firm he led until last month. That’s why many legal experts had expected Corzine to invoke his Fifth Amendment right against self-incrimination. He never did.

Much of Corzine’s testimony Thursday involved an allegation that he knew about customer money that may have been transferred to a European affiliate just before MF Global collapsed.

“I did not instruct anyone to lend customer funds to MF Global or any of its affiliates,” Corzine told a House panel. He also said he didn’t know about “the use of customer funds on any loan or transfer.”

It was his first public appearance since Terrence Duffy, CME Group Inc.’s executive chairman, alleged Tuesday that he might have known about the $175 million transfer. MF Global traded on exchanges managed by CME Group.

According to Duffy, an MF Global employee told a CME auditor that “Mr. Corzine was aware” of the earlier transfer. Duffy said he referred the matter to the Justice Department and the Commodity Futures Trading Commission.

The transaction Duffy described wasn’t necessarily illegal. Brokers such as MF Global are allowed to borrow from customer accounts temporarily in some circumstances _ to reduce their own risk, for example.

But such cases are a narrow exception. A firm couldn’t use customer money to pay trading partners if its speculative trades lost value. Even in cases where borrowing clients’ money was legal, the firm would have to replace it with a safe, cash-like investment such as a U.S. Treasury security.

Corzine also was questioned about whether he used his relationships with regulators to gain advantages for MF Global.

Corzine has been a major fundraiser for Democrats. He was co-chairman of Goldman Sachs Group Inc. In that role, he worked with two other Goldman executives at the time: Gary Gensler, now chairman of the CFTC, and William Dudley, now president of the Federal Reserve Bank of New York.

Gensler has recused himself from the investigation because of his long history with Corzine. Along with other Wall Street executives, Corzine lobbied Gensler and his staff last summer against a possible CFTC rule that would limited how their firms can invest clients’ money. Afterward, the CFTC delayed adopting the rule until earlier this month.

Early this year, the Federal Reserve allowed MF Global to join an elite group of 22 dealers that help the government sell Treasury securities. The Fed did not assess MF Global to see if it was taking on too much risk. Instead, Fed officials relied on oversight by the CFTC, the SEC and others.

The role of primary dealer conferred on MF Global a seal of financial strength. It gave the firm a competitive edge and likely lowered the interest it was charged to borrow, experts said.

Asked whether he received privileged treatment from the regulators because of his connections, Corzine said, “We didn’t ask for special treatment” from the Fed.

And he said, “I do not believe we were given special treatment” from the CFTC regarding the rule to limit firms’ investments of customer funds.

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Wall Street is poised for further gains amid ongoing evidence of a strong start to the U.S. holiday shopping season and hopes for a plan to deal with the European debt crisis.

Dow futures are up 0.5 percent at 11,555. The broader Standard & Poor’s 500 futures are up 0.6 percent at 1,198.

Markets overseas were boosted again on Tuesday by hopes that the 17 countries that use the euro will finally come up with a plan to deal with their crushing debt crisis.

Italy’s borrowing rates shot up Tuesday to above 7 percent, an unsustainable level on a par with rates that forced the others to seek bailouts.

The fear is that the crisis _ which already has forced bailouts of Greece, Ireland and Portugal _ could engulf bigger economies such as Italy, the eurozone’s third-largest. If Italy were to default on its debt of euro1.9 trillion ($2.5 trillion), the fallout could spell ruin for the euro project itself and send shock waves throughout the global economy.

Though no specific details have yet emerged of what will likely result from a Dec. 9 summit of EU leaders, the ministers are thought to be discussing ideas that would have been taboo only recently: countries ceding fiscal sovereignty to a central authority; some kind of elite group of euro nations that would guarantee one another’s loans _ but require strong fiscal discipline from anyone wanting membership.

On Tuesday, finance ministers also were likely to discuss the options _ plus a possible way to boost the region’s rescue fund, the European Financial Stability Facility, at a meeting in Brussels easy payday loans.

On Monday, stocks advanced strongly, particularly in Europe, with the CAC-40 in France up a massive 5 percent or so.

As a result, the gains Tuesday were not as marked but did provide some further evidence of the hopes that European leaders will finally get their act together in around 10 days time.

In Europe, Germany’s DAX was up 0.2 percent at 5,756, while the CAC-40 fell slightly to 3013. The FTSE 100 index of leading British shares was 0.1 percent higher at 5,320. The euro, meanwhile, was up 0.2 percent at $1.3309.

Earlier, most Asian markets ended higher, with the Nikkei 225 index in Tokyo climbing 2.3 percent to close at 8,477.82.

Elsewhere in Asia, South Korea’s Kospi rose 2.3 percent to 1,856.52 and Hong Kong’s Hang Seng added 1.2 percent to 18,256.20. Benchmarks in Singapore, Taiwan and Australia were also higher.

Mainland Chinese shares advanced, with the benchmark Shanghai Composite Index gaining 1.2 percent to 2,412.39.

Oil prices tracked equities modestly higher _ benchmark crude for January delivery was up 49 cents to $98.70 per barrel in electronic trading on the New York Mercantile Exchange.

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Comedian and commentator Rick Mercer’s distinct take on Canadian politics and social issues can be caught on the Rick Mercer Report every Tuesday at 8 p.m. on CBC. In our series on the financial habits of notable Canadians Mercer told the Toronto Star’s Emily Mathieu about his $19,500 row house, why trying to make a living in show business is a gamble and why entertainers, thanks to the nature of their industry, tend not to retire.

How did your childhood influence your attitude toward money?

My parents were pathological about living within their means and there simply wasn’t a lot of money. So as a family there were no trips to Florida but lots of camping trips, the driveway wasn’t paved (still isn’t) but there was money for music lessons, the house is small and had one bathroom for a family of six but it was paid for.

For people who had relatively little money my parents didn’t actually stress about money because they avoided debt. They certainly made a lot of sacrifices. As kids we knew that they would help out with post secondary education, for example, but the entire time I was growing up I doubt my father ever paid more than a thousand dollars for a truck, and he would paint them with a brush. I can’t actually think of anything that my father needed that he bought new.

Even now if I mention to Dad that I went to Canadian Tire and bought a lawn mower I know what he is thinking “Hmm, bought a new lawn mower, fool and his money”.

What was the best financial advice they passed on?

My father said never loan money to friends or at least never loan money and expect it back. If you are in a position to help a friend that’s great and you are in fact obligated to, but don’t expect it back. He was adamant that allowing a friendship to be damaged because of bad feelings around money is inexcusable.

What was your first big purchase?

My first house. I was 19 years old, I paid $19,500 for a very skinny row house, attached on both sides, attached to 20 other houses and a Chinese take out. The house was essentially condemned; it came with a huge binder of work orders from the city of St. John’s.

I was the cliché of a starving actor and actually couldn’t afford to live in an apartment. Owning the house allowed me to live on my own and concentrate on working in comedy. My cousin and a few friends rented rooms for $75 bucks a month. I financed it with $4,000 down which was money that my parents had planned to give me for university. I had payments of $300 dollars a month on a $15,000 dollar bank loan. The down payment from my parents was a hand up that changed my life.

How do you prefer to pay, cash, card or debit?

I have no preference no fax payday loans. But I’m careful to pay off my cards monthly. Which I understand is a luxury.

Do you bank online?

Very little.

What has been your savviest investment?

Canadian Banks. Boring old Canadian Banks back in the early 90s.

Have you learned any financial lessons the hard way?

Yes I have and the tip I would give for anyone who is playing around in the market is to avoid people with hot tips.

What advice would you give to people about to enter the entertainment industry?

It depends on what area. There are lots of very good stable jobs in the entertainment industry. It’s an exciting industry. That said if a young person says they want to be a professional actor or musician I generally say don’t. A person doesn’t become an actor, a musician or a dancer because other people encouraged them, they do it because they have to, it is in their blood and they can’t imagine doing anything else.

If you can imagine doing something else you should probably concentrate on that. Being an artist or a performer is a very difficult life, there is no job security. In show business you can’t make a living but you can make a killing, it is a big gamble.

Was there a moment in your career where you felt you had achieved financial security?

Yes and no I don’t care to elaborate.

Do you worry about retirement?

I don’t worry about retirement but I do worry about not working. One of the great things about being an actor or a writer is you never have to stop working. I look forward to playing a crotchety old man.

But all actors worry about not working. When I bump into Gordon Pinsent he will talk about work, where the next job is, etc. He’s worked more than almost any actor alive, he could have retired comfortably decades ago but he is an actor and that’s what actors do, they worry about their next job.

Can money buy happiness?

It certainly doesn’t hurt. Anyone who says otherwise is lying. Money can mean not having to worry about paying the bills and there is no doubt about it for the vast majority of people that is the number one cause of stress in their life. But it all comes back to living within your means.

I’m sure there are people with massive salaries and five million dollar cottages in Muskoka they visit for two weeks a year stressing about bills at the end of the month. So one thing we do know is money can’t buy smarts.

Are money and success the same thing?

Absolutely not.

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A former executive of KV Pharmaceutical Co. has accused the Bridgeton-based drug maker of cheating her out of stock options.

Melissa Hughes, the company’s former vice president of human resources, filed a lawsuit Oct. 28 in the Circuit Court of St. Louis County. Her suit was transferred recently to federal court in St. Louis.

Hughes, who resides in St. Charles County, worked at KV from 2003 until 2010.

KV executives could not be reached for comment.

According to the lawsuit, KV awarded Hughes a stock option plan in February 2009, which granted her the right to purchase 40,000 shares of KV’s Class A common stock at $2.95 per share. Two months later, the suit alleges, KV gave her a “retention incentive” that granted her the right to purchase an additional 10,000 shares of Class A common stock at $1.52 per share.

The retention incentive, the suit alleges, was given “for the purpose of retaining her as a key employee with critical and confidential knowledge concerning the financial well-being of the company” because the loss of Hughes and other key workers would have resulted in an exodus of talented employees.

In exchange for continuing to work at KV, the suit alleges, Hughes continued to work at the drug maker “and diligently pursued their economic objectives, and did so at great peril to her long term financial well-being” as the company verged on bankruptcy during the period from April 2009 through September 2010 payday loan lenders.

KV officials acted in bad faith by failing to inform her that her stock options could not be exercised due to the company’s delays in filing its 2009 and 2010 annual reports with the Securities and Exchange Commission, the suit alleges. In addition, the suit alleges that KV officials repeatedly blocked Hughes’ attempts to exercise her stock options in 2010 and 2011.

According to the suit, KV’s former chief executive David Van Vliet told Hughes that her stock options “would be worth $2 million,” but the suit did not specify what period of time Vliet may have referenced. Vliet could not be reached Friday for comment.

Hughes claims that during the time period when she attempted to exercise her stock options from June 2010 to June 2011, the fair market value of KV stock was well above the option purchase price as set forth in her stock option agreements.

According to Bloomberg News, the average price of KV’s common shares during that time period was $3.17, with a low of 61 cents and a high of $13.07.

Hughes was notified last June that KV’s board of directors had canceled her stock options because they had expired before being exercised, the suit alleges.

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India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global retailers such as Wal-Mart.

The Cabinet approved 51 percent foreign direct investment in multibrand retail and increased the FDI cap in single-brand retail to 100 percent despite resistance from both allies and opposition parties.

India currently allows 51 percent foreign investment in single-brand retailers and 100 percent for wholesale operations.

Top retailers like Wal-Mart, Carrefour, Tesco and IKEA have long lobbied to free the policy further. Foreign multibrand retailers have Indian partners in wholesale operations now but have no retail presence in the country of 1.2 billion people.

The spokesman for the ruling Congress party, Abhishek Manu Singhvi called the decision “centrist and reasonable.” He was speaking to NDTV news channel.

The main opposition, the rightwing Bharatiya Janata Party, decried the move.

“The government has clearly bowed to international pressure,” Chandan Mitra, a spokesman told the same TV channel.

Wal-Mart, British-based Tesco PLC and French-based retailer Carrefour welcomed the decision.

“We believe that allowing 51 percent FDI in multi-brand retail is a first important step,” Raj Jain, president of Walmart India, said in an e-mailed statement. “However, we will need to study the conditions and the finer details of the new policy and the impact that it will have on our ability to do business in India,” the statement added.

“Allowing foreign direct investment in retail would be good news for Indian consumers and businesses, and we await further details on any conditions,” Tesco said in its statement.

Tesco currently has a franchise arrangement with Tata Group’s Star Bazaar hypermarket chain, supplying merchandies to outlets in India.

Carrefour opened a New Delhi store last year and would not say what explansion plans might lie ahead.

“This legal evolution should contribute to modernize the Indian food supply chain and to fight against food inflation for the benefit of Indian customers,” its statement said. It added the decision would help India’s farmers and the nation’s general economic development.

Ashish Sanyal, managing director of AMP Retail Services Pvt. Ltd, said, “It’s a good decision that will benefit everyone.” He is a consultant who helps retailers enter India.

More details on the Cabinet decision were not immediately available.

India’s $400 billion retail market is the nation’s second-largest employer, after agriculture, according to consulting firm Deloitte.

Advocates see the move as a way to strengthen India’s almost absent food supply chain _ which is so beset by spoilage, poor infrastructure, hoarding and middlemen that the government estimates some 30 percent of produce rots in a nation with soaring food costs and tens of millions who go to bed hungry each night.

If companies like Wal-Mart and Tesco are allowed to open shops of their own, they may invest billions in improving farming techniques and getting produce into stores more efficiently, bringing down food inflation _ which has averaged 10.5 percent over the last year _ and possibly improving rural incomes.

The Ministry of Commerce says it will cost 76.9 billion rupees ($1.7 billion) to build the additional 35 million metric tons of food storage India needs.

In a July paper, it suggested that loosening restrictions on foreign investment in India’s retail sector could be the best way to get more storage space built.

Yet the country has struggled to find consensus because of concerns about what it would mean millions of small shopkeepers as well as the poor.

Sanyal said small businesses had nothing to fear.

“At the end of the day this is like the high tide. All boats will rise. We will learn from the big retailers.”

Political deadlock on long-promised reforms like this has helped cool foreign investor interest in India. Policymakers are under acute pressure to find ways to attract foreign currency to help strengthen the rupee, which hit an all-time low against the dollar this week.

Traders say the central bank has been buying rupees in recent days but those measures are unlikely to reverse the currency’s plunge absent more far-sighted policy reform.

In July, this year a government committee studying multi-brand retail had cleared the idea and suggested $100 million as minimum investment for foreign companies.

The discussions on opening up India’s retail sector have been going on for 10 years.

“There is a limit to how much time we can spend on a decision,” Singhvi said.

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Walmart has already posted maps online showing where low-priced laptops and Xbox 360 consoles will be placed throughout its stores on Black Friday.

Old Navy is handing out a limited number of free digital cameras to customers who spend at least $40. And Best Buy is playing the movie “Harry Potter and the Deathly Hallows: Part 2″ on a big screen and offering free kettle corn and energy drinks to folks waiting in line outside of its Fairview Heights store.

And yes, many stores and shopping malls are opening earlier than ever

Property and casualty insurer Alleghany Corp. has agreed to buy the insurer Transatlantic Holdings Inc. in a cash-and-stock deal valued at about $3.4 billion.

The companies say the deal values Transatlantic at about $59.79 per share. That’s a 10 percent premium to the company’s $54.43 Friday closing stock price.

New York-based Transatlantic had been courted by several businesses, receiving takeover offers from Validus Holdings Ltd. and a unit of Warren Buffett’s Berkshire Hathaway Inc., National Indemnity Corp. It also said in October that it had started confidential talks with an unnamed party.

In the deal with Alleghany, Transatlantic stockholders will receive 0.145 shares of Alleghany and $14.22 in cash for each share they own.

The companies say the deal announced Monday is expected to close early next year.

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The bottom line is that Germany is likely to be the last man standing. The Euro is important to them and the responsibility for saving it will be decided in Berlin - not Paris, Brussels, or Frankfurt. It will be messy and will involve revamping the main treaty - the Treaty of Lisbon cashadvance.

Cam Harvey provides an overview of some of the finer points. Click here for blog.

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J.M. Smucker Co. said Thursday its fiscal second-quarter net income fell 15 percent as the food maker’s ingredient costs increased.

The maker of Folger’s coffee, Jif peanut butter and its namesake spreads, like most of its food maker peers, has raised prices to offset soaring costs for ingredients. But companies face a tricky balance between covering costs and not alienating consumers with higher prices. Smucker’s total volume fell 1 percent during the quarter.

Meanwhile, the company’s cost for goods such as oil, flour, milk and peanuts rose 30 percent.

“We are effectively managing this period of significant cost inflation,” said CEO Richard Smucker in a statement. Raising prices on products helped the company grow revenue 18 percent.

Orville, Ohio-based J.M. Smucker earned $127.2 million, or $1.12 per share, from August through October. That compares with $149.7 million, or $1.25 per share, in the same quarter last year.

Excluding one-time items, net income totaled $1.29 per share. That fell short of analyst expectations of $1.39 per share, according to FactSet.

Revenue rose to $1.51 billion from $1.28 billion last year. Analysts expected $1.5 billion.

Shoppers bought more items such as Pillsbury baking mixes and Jif peanut butter, but sales of non-branded drinks, Crisco oils, Folgers coffee and Pillsbury flour fell.

Ingredient costs, particularly for green coffee and peanuts, are expected to remain high for the rest of the year, and the company plans further price increases through April, the end of its fiscal year

Coffee has been an increasing focus for J.M. Smucker. It announced in October that it was buying a chunk of Sara Lee Corp.’s North American coffee and tea foodservice operations for $350 million. The two companies also announced plans at the time for a long-term partnership to work on a new liquid coffee drink.

On Thursday, J.M. Smucker also lowered its full year guidance due to costs related to issuing $750 million in long-term debt in October.

It now expects earnings, excluding restructuring, merger and integration costs and other one-time items, to be $4.90 to $5, from a prior range of $5 to $5.15 per share. Analysts expect net income of $5.11 per share.

The news came as J.M. Smucker said it is recalling 3,000 16-ounce jars of its Smucker’s Natural Peanut Butter Chunky from stores in several states because of possible salmonella contamination.

Another 16,000 jars included in the recall never left warehouses.

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London officials attached eviction notices to protest tents outside St. Paul’s Cathedral on Wednesday, asking the demonstrators to remove them within a day or face legal action.

The notices posted by the City of London Corporation said the protest camp was “an unlawful obstruction” of a sidewalk, and asked protesters to take down “all tents and other structures” by 6 p.m. (1800 GMT, 1 p.m. EST) Thursday.

The cathedral and the corporation had suspended legal action to remove the camp two weeks ago, and offered the protesters a deal to allow them to stay until the new year if they then agreed to leave. But the corporation said Tuesday that talks had failed and it was resuming legal action.

If the tents are not removed, the corporation says it will go to court seeking an eviction notice _ a process that could take weeks.

More than 200 tents have been pitched outside the iconic church since Oct. 15 in a protest against capitalist excess inspired by New York’s Occupy Wall Street, and the protesters said they would resist attempts to move them.

“We will contest it,” spokeswoman Naomi Colvin said. “We will be speaking to our legal team and we will be fighting it.”

The governing Chapter of St. Paul’s Cathedral said in a statement that it recognized “the local authority’s statutory right to proceed with the action it has today,” but would continue to meet with protesters in a bid to find a peaceful solution.

Police in the U.S. have been moving in to clear away similar protests, breaking up camps in Portland, Oregon, on Sunday, Oakland, California, on Monday and on Tuesday in New York, where about 200 people were arrested.

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