MF Global Staffers Testify (Again) Over Bankruptcy

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Four former employees of the now-defunct broker firm MF Global will appear Wednesday before a House committee which is seeking answers about the eighth-largest bankruptcy in U.S. history. The firm was led by former New Jersey Governor and Senator Jon Corzine.

A recent flurry of leaked emails may focus Congressmen's attention on one event in particular: an October 28, 2011 transfer of $200 million dollars from client accounts to an MF Global account with JP Morgan Chase in London to cover an overdraft. This cash transfer may have been among the first of the withdrawals that left client accounts $1.6 billion short, according to the most recent estimate by a bankruptcy trustee.

Dipping into customer accounts can be a serious violation of securities laws. A memo prepared for the committee suggests JP Morgan Chase requested assurances that the $200 million represented firm money, not customer money, but eventually accepted the cash when MF Global did not provide written confirmation of this.

A snippet of an email from Edith O'Brien, MF Global's assistant treasurer, stated the transfer was done "per JC's direct instructions," with ‘JC’ referring to Jon Corzine.

However, another email which surfaced a few days later in the pages of The New York Times suggests the $200 million came from a “nonseg,” or non-segregated accounts, meaning the withdrawal would have been legal.

James Koutoulas, co-founder of the Commodity Customer Coalition, said account holders are only marginally closer to understanding where their money went.

"For customers the leaks are probably a good thing 'cause they keep it in the news and they keep some public pressure on the investigation,” Koutoulas said. "But where you always run into problems with leaks and speculation is that you run the risk of having faulty information get out."

Two thousand equities clients and 25,000 commodities clients have entered claims in the bankruptcy process.

The MF Global staff called to testify Wednesday includes:

Laurie Ferber, General Counsel, MF Global Holdings Ltd.
Henri Steenkamp, Chief Financial Officer, MF Global Holdings Ltd.
Christine Serwinski, Chief Financial Officer for North America, MF Global Inc.
Edith O’Brien, Assistant Treasurer, MF Global Inc.
Diane M. Genova, Deputy General Counsel, JPMorgan Chase & Co.
Daniel J. Roth, President and Chief Executive Officer, National Futures Association
Susan M. Cosper, Technical Director, Chairman, Emerging Issues Task Force, Financial Accounting Standards Board

Corzine testified at three congressional hearings last fall, but will not speak at today’s session. Steenkamp also testified last year.