[ by Melanie Gretchen and Howard Haykin ] MF Global's possible misuse of customer money was the subject of red flags apparently detected by 2 former back-office employees, both of whom reported to former CFO Christine Serwinksi for North America;  Ms. Serwinski happened to be on vacation the week before MF Global collapsed, according to people briefed on the matter. The apparent issue came to the attention of 2 employees, Matthew Hughey and Mike Bolan, who noted that a deficiency arose in customer cash accounts. In the Fall of MF Global. Unfortunately for firm investors, the concerns displayed by the two employees - in raising red flags - was not shared by most other personnel on that last Friday of operations.

[C-I Note: In all likelihood, it's questionable whether the alerts could or would have made a difference, at that last Friday of operations.  Who, at the firm, realistically had any significant time to conduct a review or investigation. Second, what's the possibility that the firm could have retrieved the missing funds from the customer accounts.  Remember, the all firm personnel that were rushing around, attempting to sell off any position they could lay their hands on.  The #1 priority at MF Global at its 11th hour was to cover all of its margin calls and collateral obligations so the firm could survive through the weekend - during which time, if necessary, management would seek out a "white knight" to acquire all or part of the firm.]

In any case, it does appear as if the 2 employees were unable to find any supervisory personnel to address their findings.  And who knows, if their diligence might have produced results - (i) the firm might not have subsequently accessed customer funds, which might have left the firm with a lower shortfall in customer funds.

Unfortunately, we'll never know - and any presumed scenarios are simply conjecture.]

During federal investigators' final round of interviews with former MF Global employees, they found that despite the report, MF Global continued to transfer customer money without fully disclosing the potential problem to regulators, the people said, who spoke on the condition of anonymity because they were not authorized to speak publicly. Introducing Edith O'Brien. While Ms. O'Brien, the firm's former treasurer is not a new or forgettable face to federal investigators – before Congress in March, she declined to testify, invoking her constitutional right against self-incrimination – the question is whether she will be granted immunity, affected by whether was privy to the employees report, when she oversaw the transfer of one of $175 million to replace an overdrawn account at JPMorgan Chase in London. At the time, Mr. Hughey and Mr. Bolan were unable to confirm whether the deficiencies were real or the result of an account error, according to one of the people briefed on the matter, a reality mirrored in federal investigation of tens of thousands of e-mails and documents. For further details, go to [Dealbook, 6/3/12].