By Peter Schroeder - 03/23/12 08:34 PM EDT
Former MF Global head Jon Corzine directly authorized the transfer of $200 million of customer funds to fill a gap in one of the firm's accounts, according to congressional investigators.
A memo released Friday by investigators on the House Financial Services Committee quotes an email from a treasurer for the firm sent days before the investment company collapsed, saying the transfer was "Per JC's direct instructions." The transfer was intended to cover a $175 million overdraft in one of the firm's accounts with JPMorgan.
Steven Goldberg, a spokesman for Corzine, said "he never gave any instruction to misuse customer funds and never intended anyone at MF Global to misuse customer funds." He added that Corzine never directed that customer funds be used to address that particular overdraft, and never received information indicating customer funds had been used to do so.
During several appearances under oath before congressional committees in December, Corzine repeatedly maintained he had no idea what could have happened to supposedly segregated customer funds that went missing as the firm went under. The trustee handling the firm's bankruptcy estimates there is an up to $1.6 billion gap between customer claims and the assets available to meet those claims.
“I simply do not know where the money is, or why the accounts have not been reconciled to date,” Corzine told the House Agriculture Committee, adding later, "I certainly would never intend to direct or have segregated funds moved.”
"He stands by that testimony," Goldberg said Friday.
Lawmakers are set to hear from a number of MF Global executives Wednesday, including Edith O'Brien, an assistant treasurer from the company who had refused to testify voluntarily and worked at the Chicago office responsible for handling customer accounts.
O'Brien was the author of the email, sent three days before MF Global went bankrupt, that indicates Corzine ordered the transfer of funds.
"After reviewing thousands of documents and interviewing former MF Global executives and regulators as part of our investigation, the subcommittee has concluded that Ms. O’Brien has unique, personal knowledge regarding how and why customer funds went missing," said subcommittee Chairman Randy Neugebauer (R-Texas) after lawmakers approved the subpoena. "We owe it to the thousands of customers of MF Global — the ranchers, farmers and investors who lost money — to get to the bottom of how this could have happened.”
That email also appears to support a claim made by an executive of a financial exchange monitoring MF Global that Corzine knew of an unauthorized transfer of customer funds.
"One [MF Global] employee indicated that Mr. Corzine knew about the loans that had been made from the customer segregated accounts," said Terrence Duffy, executive chairman of CME Group. Duffy's comments before the Senate Agriculture Committee came just minutes after Corzine wrapped up his testimony, where he reiterated he did not know where the funds went.
This post updated at 8:45 pm.