Monday, March 26, 2012

E-Mail to Corzine Said Transfer Was Not Customer Money

NY Times:

Jon S. Corzine, the former chief executive of MF Global, was told during the brokerage firm’s final day of business that a crucial transfer of $175 million came from the firm’s own money — not from a customer account, according to an internal e-mail.

The e-mail, sent by an executive in MF Global’s Chicago office, showed that the company had transferred $175 million to replenish an overdrawn account at JPMorgan Chase in London. The transfer, the e-mail said, was a “House Wire,” meaning that it came from the firm’s own money. The e-mail, sent at 2:20 p.m. on Oct. 28 to Mr. Corzine and two of his assistants in New York, says the transfer came from a “nonseg” account, industry speak for a noncustomer account.

But the e-mail, a copy of which was reviewed by The New York Times, did not capture the full story behind the wire, which turned out to contain customer money. MF Global employees in Chicago had first transferred $200 million from a customer account to the firm’s house account, people briefed on the matter said. Once it was in the firm’s coffers, the people said, Chicago employees then promptly transferred $175 million of the money to the MF Global account at JPMorgan in London — the account that was overdrawn.

The e-mail chain sheds new light on the chaotic final hours at MF Global and the desperate efforts to cover the overdraft at JPMorgan. The transfer of $175 million, along with other transfers of customer money, ultimately left farmers, traders and other clients of MF Global missing about $1 billion of their money.

The e-mail suggests that Mr. Corzine, a former governor of New Jersey, was unaware that the money had been transferred from a customer account. But it is unclear whether someone at the commodities brokerage firm told Mr. Corzine the origins of the money during a phone call or in person. Congressional investigators are interviewing MF Global employees to see whether Mr. Corzine learned that the transfer of $200 million came directly from a customer segregated account, one of the people involved in the case said.

The people with knowledge of the case spoke on the condition of anonymity because the investigation into the firm’s collapse is continuing.

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