PricewaterhouseCoopers Subpoenaed for MF Global Audit; Corzine Resigns

The Commodity Futures Trading Commission (CFTC) has subpoenaed PricewaterhouseCoopers, the auditors for troubled financial firm MF Global, for information on the segregation of clients' assets from the firm’s, in light of the roughly $633 million allegedly missing from customer accounts when the company filed the eighth largest bankruptcy in U.S. history on Oct. 31, according to Bloomberg. In May, PricewaterhouseCoopers gave the company a clean audit opinion in its annual report, Bloomberg said.

During the firm’s precipitous collapse this past week, questions began to arise whether the brokerage firm had properly separated client money from its own funds, as is statutorily required, according to Reuters. Such separation makes it easier for clients to be repaid should the firm fail, like it did here, according to the Associated Press.

Meanwhile, the firm’s embattled head, former New Jersey Gov. Jon S. Corzine, resigned as CEO today and, in what could be a sign of things to come, hired leading white-collar criminal defense lawyer Andrew J. Levander, according to the New York Times. Should it come to light that Corzine’s firm used client funds for company needs, such as for making collateral calls, he could potentially face criminal charges, according to Fox Business News. Levander has previously defended directors of companies such as Lehman Brothers, which collapsed during the height of the financial crisis, and Monster.com, which had been investigated by the government for backdating employee stock options.

In addition, Corzine said that he will not take a $12 million severance package. He has not been accused of any wrongdoing, the New York Times reports, although on Thursday a shareholder filed an action against Corzine and three other MF Global executives, the Timessaid in another article.

The company has also come under fire for a practice known as “window dressing,” where the firm cut its borrowing at the end of the quarter in order for the financial statements to look more appealing to investors, according to the Wall Street Journal. MF Global’s quarter-end borrowings were, on average, 16 percent lower than the average amount borrowed throughout the quarter, and were 24 percent lower than its quarterly peak. While not explicitly illegal, the practice does serve to mask a company’s borrowing and risk levels.