Friday, March 23, 2012

MFG Whistleblower: Jon Corzine Personally Ordered $200 Million of Clients' Funds Wired to JPM

Back in December, we reported that MF Global Treasurer Edith O'Brien had transferred $200 million in MFGlobal client funds to JP Morgan on Oct 28th.  We stated that O'Brien appeared to be the first and likely ONLY MFG exec that would be doing a perp-walk over the $1.5 Billion in stolen rehypothecated MFG client funds.
Apparently we were wrong.

Thanks to Corzine's Congressional & Senate Testimony that he 'had no knowledge' of where MFG client funds went, Mr. Corzine is now facing perjury as well as felony embezzlement charges.

Bloomberg reports the breaking allegations (that SD readers have already known for months) :

Jon S. Corzine, MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co.
accounts in London, according to an e-mail sent by a firm executive.

Edith O’Brien, a treasurer for the firm, said in an e-mail sent the afternoon of Oct. 28, three days before the company collapsed, that the transfer of the funds was “Per JC’s direct instructions,” according to a copy of a memo drafted by congressional investigators and obtained by Bloomberg News.

O’Brien’s internal e-mail came as the New York-based broker found intraday credit lines limited by JPMorgan, the firm’s clearing bank as well as one of its custodian banks for segregated customer funds, according to the memo, which was prepared for a March 28 House Financial Services subcommittee hearing on the firm’s collapse. O’Brien is scheduled to testify after being subpoenaed this week.

“Over the course of that week, MF Global’s financial position deteriorated, but the firm represented to its regulators and self-regulatory organizations that its customers’segregated funds were safe,” said the memo, written by Financial Services Committee staff and sent to lawmakers.

Vinay Mahajan, global treasurer of MF Global Holdings, wrote an e-mail on Oct. 28 that said JPMorgan was “holding up vital business in the U.S. as a result” of the overdrawn account, which had to be “fully funded ASAP,” according to the memo.

O’Brien Letter

Barry Zubrow, JPMorgan’s chief risk officer, called Corzine to seek assurances that the funds belonged to MF Global and not customers. JPMorgan drafted a letter to be signed by O’Brien to ensure that MF Global was complying with rules requiring customers’ collateral to be segregated. The letter was never returned to JPMorgan, the memo said.
The money transferred came from a segregated customer account, according to congressional investigators. Segregated accounts can include customer money and excess company funds.

Corzine testified that he never intended a misuse of customer funds at MF Global, and that he doesn’t know where client funds went.

“I did not instruct anyone to lend customer funds to anyone,” Corzine told lawmakers in December.
Steven Goldberg, a spokesman for Corzine, declined immediate comment.

Perhaps rather than testifying under oath that he 'had no knowledge'  of the $200 million wire transfer he personally ordered sent to JP Morgan, perhaps Mr. Corzine should have done what we expected prior to his testimony, and pleaded the Fif!