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E-mail Ties Corzine to Missing Customer Funds
March 26, 2012
[ by Melanie Gretchen ]
Jon Corzine's "direct instructions" to move $200 million from an MF Global Holdings account containing customer funds, according to an employee e-mail reviewed by congressional investigators, may tie him to MF Global's missing funds. The e-mail, sent on 10/28/12 - 3 days before the securities firm collapsed - was disclosed in a 5-page memo released last week by a House Financial Services subcommittee, during its investigation into an estimated $1.6 billion shortfall in customer funds at MF Global, which collapsed into bankruptcy on 10/31/12.
Banking Overdraft. In the e-mail by Edith O'Brien, an assistant treasurer who was among the employees involved in moving money at MF Global, the $200 million transfer to an MF Global account at JPMorgan Chase in London was "Per JC's [Jon Corzine's] direct instructions," according to the memo. The transfer was needed to fix a $175 million overdraft in the bank account that was making it harder for MF Global to buy and sell securities as it scrambled to survive in late October.
In his defense, Corzine provided testimony to lawmakers in December that he never directed anyone to misuse customer funds. A spokesman for the former CEO said in a statement Friday said, "He never directed Ms. O'Brien or anyone else regarding which account should be used to cure the overdrafts, and he never directed that customer funds should be used for that purpose." In fact, Corzine wasn't "informed that customer funds had been used for that purpose," the statement said.
Final Days. This week, the House subcommiteee will hold a hearing this Wednesday to "help illustrate the events that transpired in the final days of operation that led to the misuse of $1.6 billion in customer funds," Rep. Randy Neugebauer (R., Texas), the subcommittee's chairman said in a statement last week.
To date, the subcommittee has identified 3 types of key transactions that led to the large shortfall in customer funds, the subcommittee found. The others are intraday loans between MF Global's futures commission merchant and its broker-dealer and transactions related to the funding of outgoing broker dealer client money.
The Journal previously disclosed a $165 million transfer sent to the broker-dealer that came from the customer account. Following his resignation after the firm filed for bankruptcy, Corzine has said has said he didn't know the firm had dipped into the customer portion of the funds until Sunday, 10/30/12.
For further details, go to [WSJ, 3/25/12].

