MF GLOBAL HOLDINGS:: Investigators Probe a Rush at MF Global to Move Cash – WSJ

By at February 23, 2012 | 12:00 am | Print

MF GLOBAL HOLDINGS:: Investigators Probe a Rush at MF Global to Move Cash – WSJ

By JULIE STEINBERG, AARON LUCCHETTI and MIKE SPECTOR

CHICAGO—Investigators probing the collapse of MF Global Holdings Ltd. are scrutinizing two money transfers made during the securities firm’s final days in an effort to uncover what happened to $1.6 billion in missing customer funds.

Federal regulators at the Commodity Futures Trading Commission and the U.S. bankruptcy trustee for MF Global’s brokerage unit are examining two separate transfers from customer accounts, including a previously undisclosed $165 million transaction, said people familiar with the matter. They said some of the investigators are poring over emails and records related to these and other money transfers.

MF Global collapsed into bankruptcy on Oct. 31, hurt by repercussions from an outsize bet its chief executive, Jon S. Corzine, made on bonds of troubled European countries.

Among those at the center of money transfers in the days leading up to the collapse was Edith O’Brien, an assistant treasurer at MF Global.

On the morning of Oct. 28, according to people familiar with the matter, Ms. O’Brien received a call from Mr. Corzine, who asked her to resolve a problem: The firm’s bank account at J.P. Morgan Chase & Co. in London had run out of money, creating an overdraft.

After the call, Ms. O’Brien sent an email to about a dozen colleagues. “I need $175 mm sent immediately,” said the message, a copy of which was reviewed by The Wall Street Journal.

Money to cover the overdraft was transferred to the London bank account later that day from MF Global’s customer account, according to regulators and former MF Global officials.

As the chaos mounted at MF Global, Ms. O’Brien stopped leaving the office at night, napping on a bench in between long spells of trying to juggle transfer demands.

Mr. Corzine later thrust Ms. O’Brien into the spotlight when he told a congressional panel in December that she had assured him the $175 million transfer was proper.

Federal rules for futures trading allow brokerage firms to keep some of their own money in customer accounts, for reasons that include providing clients with ease of trading, and this money can be withdrawn. But customer funds are never to be touched.

Ms. O’Brien later declined to sign documents presented by J.P. Morgan affirming that the $175 million transfer had been proper, said people with knowledge of the matter.

Prosecutors and lawmakers have sought to meet with Ms. O’Brien, but she has so far declined, asking for legal immunity before agreeing to talk with them, people familiar with the matter said.

Neither Ms. O’Brien, Mr. Corzine nor other MF Global officials have been accused of any wrongdoing.

This article is based on a review of internal MF Global emails and documents, as well as interviews with people with knowledge of the circumstances surrounding the securities firm’s frantic final days.

The emails and other documents reviewed by the Journal disclose new details about the $175 million transfer as well as revealing the other transaction—for $165 million—that may have contributed to the shortfall in accounts of MF Global customers.

J.P. Morgan, as a clearing bank for MF Global, played a part in both transfers. So did officials in MF Global’s Chicago office, where Ms. O’Brien and several dozen others worked in relative obscurity while Mr. Corzine—a former Goldman Sachs Group Inc. chairman and later a senator and governor in New Jersey—sought to remake the sleepy commodities firm into a risk-hungry trading house. Ms. O’Brien was among those responsible for moving funds when customer accounts were tapped, said people familiar with details of the securities firm’s demise.

http://online.wsj.com/article/SB10001424052970203960804577239443350296440.html?mod=WSJ_GoogleNews&mod=igoogle_wsj_gadgv1

via Investigators Probe a Rush at MF Global to Move Cash – WSJ.com.

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