Ex-Governor Corzine in Deep Water

Trenton, NJ.
The congressional investigation of the MF Global collapse and subsequent bankruptcy — the eighth-largest in U.S. history — is expected to focus on less senior members of the brokerage’s back-room team.

There is rampant speculation that at least one witness, former MF Global assistant treasurer Edith O’Brien, will plead the fifth at a hearing of a House Financial Services Subcommittee. Despite her pleas to those who might grant it, O’Brien has been denied immunity for her testimony, which will be given under subpoena.

Meanwhile, Jon Corzine, disgraced former head of MF Global (and former New Jersey governor and senator), denied reports he ordered some $200 million worth of funds — possibly including farmer/rancher client money — be transferred to remedy an overdraft in a brokerage account with bank JP Morgan. The directive was supposedly given last Oct. 28, three days prior to the firm’s implosion, and outlined in an O’Brien e-mail that says the $200 million transfer followed Corzine’s “direct instructions.”

This claim flies in the face of Corzine’s testimony before House and Senate legislators last December. During several hearings, Corzine claimed he was unaware of the “misuse” of customer funds, a word he used repeatedly. “I didn’t authorize it, didn’t intend to have it happen,” he told the Senate Agriculture Committee.

Fallout from the loss of some $1.2 billion worth of customer funds due to MF Global actions is not limited to congressional inquiry. In bankruptcy proceedings, client and creditor trustees have butted heads as some 10 class-action court cases have taken shape.