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$1.2Bn in Missing Cash: Focus Shifts to MFG's Back-Office
January 17, 2012
[ by Melanie Gretchen ]
MF Global's back-office operations in Chicago is under investigation, as federal agents continue to look for $1.2 billion in customer funds. MFG's Assistant Treasurer Edith O'Brien, a back-office employee, told people she disagrees with testimony given by former CEO Jon Corzine at a House subcommittee hearing in December. Ms. O'Brien was referring to Corzine's statement that she, Ms. O'Brien, had provided assurance that a $200 million transfer to JPMorgan was proper. That amount was needed to cover an overdraft in the firm's account at JPMorgan, just 3 days before the firm filed for bankruptcy.
Civil and criminal regulators have "talked to a lot of people" in the Chicago office, which handled day-to-day movement of money in customer futures accounts for MF Global, a person close to the investigation said. This included a $6 billion customer-segregated account that was tapped shortly before the company filed for bankruptcy-court protection on 10/31/11.
Mr. Corzine, COO Bradley Abelow, and CFO Henri Steenkamp, who worked at the securities firm's New York headquarters haven't been interviewed, the person said. Neither Mr. Corzine nor Mr. Abelow has been accused of wrongdoing.
Ms. O'Brien, who has declined to be interviewed by a House subcommittee and the Justice Department, is seeking immunity from prosecution in exchange for cooperation, according to the people familiar with the matter, although her role in the transfer is unknown. She remains employed by the company as a trustee to unwind the company.
JPMorgan Sought Acknowledgment of Transfer. The day after the the transfer went through, JPMorgan MD Donna Dellosso wrote to Ms. O'Brien, asking her to "acknowledge and confirm that the transfer and withdrawal ... out of such Customer Segregated Account... for the purpose of covering overdraft amounts in accounts with JPMorgan represented your actual interest in such funds" and were "made in accordance with the provisions" of U.S. commodities laws and rules. No MF Global employee ever signed the letter.
Investigators also would like to interview Christy Vavra, who ran the company's treasury operations and helped handle the movement of customer money, according to familiar with the situation. Christine Serwinski, MFG's North American finance chief who worked with Ms. O'Brien in Chicago, is also a person of interest. Mr. Corzine told lawmakers last month that Ms. Serwinski was "at the very top" of employees who oversaw customer funds - though she was on the vacation for part of the week leading up to MF Global's bankruptcy filing. She had told friends that she planned to leave MF Global in early 2012. Neither she nor Ms. Vavra has been accused of wrongdoing, either.
For more details, go to [WSJ's FINS, 1/17/12].

