Witnesses to shed light on missing MF Global funds

AP

(CBS/AP) WASHINGTON - Witnesses close to MF Global's collapse will offer details Wednesday about customer money that vanished days before the firm failed. Their testimony could challenge previous statements by former CEO Jon Corzine.

A JPMorgan Chase (JPM) executive will testify at a congressional hearing that the bank asked Corzine if an Oct. 28 transfer of $200 million from a customer account satisfied federal rules. Corzine said the issue would be reviewed, according to the executive's prepared testimony for the House Financial Services oversight subcommittee hearing.

Lawmakers on the panel are also expected to press MF Global's former assistant treasurer about an email she wrote that suggests Corzine ordered the transfer. Corzine, a former New Jersey senator and governor, told lawmakers in December that he never instructed anyone to misuse customer money.

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MF Global filed for bankruptcy protection Oct. 31. The company failed after a disastrous bet on European debt. About $1.6 billion in customer money hasn't been recovered. Corzine stepped down as CEO in November. In addition to Congress, federal regulators and a federal grand jury in Chicago are investigating the MF Global failure.

No one has been charged in the case. If the firm misused client money, it would violate a fundamental investor protection for people who trade options and futures. JPMorgan held MF Global funds in several accounts and also processed the firm's securities trades.

Diane Genova, the JPMorgan deputy general counsel, says in her prepared testimony that the bank "reached out" to Corzine on Oct. 28 to discuss money transferred from a customer account to settle an overdraft on the firm's account in London. The bank asked Corzine for written assurance that the funds met federal regulations.

"Mr. Corzine said he understood the request and would have someone within his organization review it," Genova says in her testimony. She says JPMorgan received "multiple clear oral assurances" from senior MF Global executives that the firm complied with the rules in the transfer.

Edith O'Brien, a former assistant treasurer at MF Global, has been subpoenaed to testify. She did not submit any prepared testimony for the year. But lawmakers will press her about an email she wrote, which was cited in a memo released by the panel on Friday. It refers to the transfer of $200 million that was made "per JC's direct instructions."

A Corzine spokesman has said he never directed anyone to use customer funds to fix the overdraft and he wasn't told that customer money was used.

Also scheduled to testify at the hearing are Christine Serwinski, MF Global's chief financial officer for North America, MF Global Chief Financial Officer Henri Steenkamp, and General Counsel Laurie Ferber.

Corzine testified before three congressional panels in December that he never instructed anyone at MF Global to misuse customer funds. He and Steenkamp have testified they didn't become aware of the shortfall in customer money until hours before the bankruptcy filing.

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