The Rise And Spectacular Fall of Jon Corzine

jon corzine

The drama of MF Global has escalated this week, to put it lightly.

The battered brokerage firm has filed for bankruptcy, admitted to fraudulent use of clients’ money and is being investigated by at least three federal agencies including the FBI.

The face of this debacle has been MF Global CEO Jon Corzine, an ex-Goldman Sachs CEO and a former New Jersey governor and senator. 

A look back at Corzine’s journey in finance and politics reveals several low and high points, as his career was marked by quick successes but also rife with controversy.

He came from humble roots.

Corzine had a typical and humble Midwestern upbringing. He grew up on a farm in central Illinois; his father was a farmer and insurance salesman, and his mother was a schoolteacher.

In high school, Corzine was a football quarterback and captain of the basketball team.

Source: NYTimes, Illinois Review

He later enrolled in the Marines, and then jumped right into banking out of college.

Corzine attended the University of Illinois at Champaign-Urbana and graduated Phi Beta Kappa in 1969. During college, he enrolled in the reserve Marine Corps and stayed until 1975 - very patriotic.

His first gig out of college was in the bond department at Continental Illinois National Bank in Chicago. Corzine kept busy - and while working days, he attended night school at the University of Chicago Graduate School of Business to earn an MBA in 1973.

Source: Illinois Review

Soon Goldman Sachs came knocking.

In 1975, right after Corzine had moved to a new gig at Bank One in Ohio, he was recruited by Goldman Sachs to work on their government bond desk. He moved his family to Hoboken after that.

Source: Illinois Review, Bloomberg

At Goldman, Corzine rose fast through the ranks, winning fame for getting the firm out of a bad position in Treasuries in 1986.

At Goldman, Corzine moved quickly through the ranks. He started as a trainee in 1975, and his gutsy trades and outgoing personality quickly won him many supporters and quick success - he was made partner in 1980.

According to the U.S. World News & Report, Corzine 'won fame and eternal gratitude' at Goldman after getting the firm out of a bad position on Treasury bills in 1986.

'If it was a good trade for $100, he wanted to make it $1,000 or $1 million,' a former co-worker told the Wall Street Journal.

Source: Reuters, WSJ, U.S. World News & Report

19 years later, he was named CEO of Goldman Sachs. He started pushing for the firm public to go public.

In 1994, he was appointed CEO and Chairman of the company.

When Corzine took the helm in 1994, Goldman Sachs suffered a huge earnings loss - falling from $2.3 billion to $503 million - because of a bad bet in the bond market. Many blamed this on Corzine, though the loss could have also happened under the reign of previous Goldman head Stephen Friedman.

Corzine had to work quickly to put the firm back in good standing, and achieved some success by pushing hard for the investment bank to go public (which would grant the firm a fresh source of funds) and appointing Hank Paulson to the COO position. The firm's reputation was back in good standing by 1995.

Source: The Natural, Reuters

The year before the firm went public, Corzine was criticised for pushing for risky trades in the ruble and as LTCM collapsed.

Corzine didn't shy away from risky bets even at Goldman - in 1998 he pushed for traders to take long positions on the ruble, even as the Russian currency was being devalued. Bloomberg reported the firm suffered $1 billion in trading losses the second half of that year.

He was also criticised for taking similar trading positions as the hedge fund Long Term Capital Management, which collapsed and had to be bailed out that year, throwing the industry into turmoil.

Source: Bloomberg, The Daily Beast

Then right before the firm went public, others in senior positions led a coup d'etat and ousted Corzine.

Goldman heads had enough of Corzine by then, and he was ousted from the CEO position in 1999.

Despite being dethroned from Goldman, Corzine still made huge profits off the public offering he helped push through - Goldman's IPO made him $400 million richer.

He dove straight into politics with that money, putting in about $62 million into a campaign for U.S. Senator to New Jersey. According to the WSJ, an advisor told Corzine to shave his beard or he would lose the campaign - Corzine chose not to and won anyway.

Fun fact: Corzine was apparently the only member of the U.S. Senate with a beard.

Source: WSJ, Reuters

After Goldman, Corzine dove right into politics.

Corzine actually has familial roots in politics - his grandfather was a state assembly in Illinois back in the day.

Throughout his decade in politics, Corzine was perceived to be extremely liberal. In his Senate campaign, he supported reforms in healthcare, public university funding and gun control.

Like any politician, Corzine had gaffes too - he reportedly asked an Italian man who worked in construction if he made 'cement shoes' and joked about Jewish lawyers bailing people out of jail.

Source: NYTimes, Time

He later became the Governor of New Jersey. But he lost his bid for re-election to Chris Christie.

Corzine won the gubernatorial seat for New Jersey in 2005.

Corzine's tenure as governor was also rife with controversy as he tried various measures to decrease the state budget deficit. In 2006, Corzine shut down the New Jersey government because the state assembly would not pass his proposed 1% sales tax increase, eventually - they agreed to a deal and the tax was passed. The shutdown greatly increased negative sentiment about Corzine among Jersey voters. He also proposed a toll increase on New Jersey roads that didn't pass.

Corzine was involved in a car accident that almost took his life in 2007 - he was riding without a seat belt in a speeding state vehicle. Some point to this as an example of Corzine's appetite for risk.

In 2009, he ran for a second term and was beaten by current governor Chris Christie.

Fun fact: He signed a bill legalizing medical marijuana in New Jersey on his last day as New Jersey governor.

Source: WSJ, Bloomberg, NYTimes, Reuters

That's when Corzine went back to Wall Street. He was appointed CEO of MF Global.

Corzine polished off his one-term governorship in early 2010 - and made a return to Wall Street with much fanfare when he was appointed CEO and head of MF Global in March 2010.

Upon joining MF Global, Corzine shook up the company with internal restructuring and a promise to remake the futures brokerage into an investment bank, wanting to fashion it into a 'mini-Goldman Sachs.'

Source: WSJ

Corzine started to take a position on Europe using the firm's own money in late 2010.

In late 2010, Corzine began to take positions on Europe. Part of his expansion efforts for MF Global included using the firm's own capital to trade and possibly make a profit, and European sovereign debt was apparently part of that plan.

It was reported that he oversaw a majority of MF Global's trades on European debt.

Source: WSJ

This year, because of its high exposure to Euro debt, regulators asked MF Global to increase its capital.

The first alert to the firm's demise was when federal regulators asked MF Global to increase its capital in August due to the company's possible high exposure to European debt.

Source: WSJ

Then Moody's downgraded MF Global to basically junk status. A week later, MF Global declared it was bankrupt.

On October 24, Moody's downgraded MF Global's credit rating to one-grade above junk status. The company decided to release earnings early - revealing a $186 million net loss and $6.3 billion of European debt on their books. Share prices for the firm plunged, at one point trading below $1. A Fitch downgrade and another Moody's downgrade, both to junk, followed.

One week after the initial Moody's downgrade, MF Global filed for chapter 11 bankruptcy protection.

Source: MF Global, BI

Now it's under federal scrutiny for using clients' money for trades. Someone could be going to jail.

MF Global is now being investigated by the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Bureau of Investigation and the CME Group.

The company has also admitted to using its clients' money for trades, breaking one of the principal laws of the financial industry - which means someone could be going to jail.

The company's stock is in its first day of over-the-counter trading after being delisted from the New York Stock Exchange, and share prices are falling.

Corzine's saga is still unfolding, and he stands to fall a lot harder as MF Global's internal operations become more and more public.

Source: NYTimes, BI, Bloomberg

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.