Jon Corzine accused of ordering transfer of MF Global customers' funds to pay overdraft

Testimony on MF Global's fall challenged

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WASHINGTON — A former MF Global executive appears to contradict testimony from Jon Corzine, saying the former senator and New Jer­sey governor ordered the transfer of $200 million last fall out of a customer account days before the brokerage firm collapsed, according to an e-mail obtained by congressional investigators.

Corzine  Susan Walsh
Susan Walsh
Corzine

Edith O’Brien, MF Glo­bal’s former assistant treasurer, says Corzine ordered the money shifted to one of the firm’s bank accounts overseas Oct. 28 to cover an overdraft, according to a memo that cited the e-mail.

The e-mail noted that the transfer was made “per JC’s direct instructions.”

MF Global filed for bankruptcy protection Oct. 31. The firm failed because of a disastrous bet on European debt. About $1.6 billion of cust­omers’ money hasn’t been recovered.

A House Financial Ser­vices subcommittee released the memo Friday in advance of a hearing Wednes­day. O’Brien has been sub­poe­naed to testify.

In December, Corzine told the panel at a hearing: “I did not instruct anyone to lend customer funds to MF Glo­bal or any of its affiliates.” He also said he didn’t know about “the use of customer funds on any loan or transfer.”
Corzine told a Senate
panel two days earlier: “I never gave any instruction to anyone at MF Global to misuse customer funds.”

Corzine spokesman Ste­ven Goldberg reiterated Friday that Corzine testified that there wasn’t anything he had said that “could reasonably have been interpreted as an instruction to misuse customer funds. He stands by that testimony.”

“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,” Gold­berg said. “Nor was he informed that customer funds had been used for that purpose. To the contrary, as Mr. Corzine testified, he recalls having received written material indicating that the funds used to cure the overdrafts were appropriate for that purpose.”

Client money is required by law to be held separately from a brokerage firm’s cash to protect investors in case a firm fails. If MF Global misused client money, it would violate a fundamental investor protection for people who trade options and futures.

Federal regulators and a federal grand jury in Chicago are also investigating MF Global.

Many lawmakers have heard from farmers, ranchers and small business owners in their states who are missing money that was deposited with the firm. Agricultural businesses use brokerage firms such as MF Global to help reduce their risks in an industry vulnerable to swings in oil, corn and other commodity prices.

Corzine, a former New Jersey governor and U.S. senator from the state, led MF Global until early November. He testified before three congressional panels in December. He said he didn’t become aware of the shortfall in customer money until hours before MF Global’s bankruptcy filing.

No one has been charged in the MF Global case.

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