$200M transfer was at Corzine order, exec says

WASHINGTON -- A former MF Global executive is expected to testify Wednesday that the transfer of $200 million in customers' deposits came at the order of former chief executive Jon Corzine. Her testimony appears to contradict what Corzine, a former New Jersey governor and U.S. senator, told Congress in December.

In a memo released Friday by the House Financial Services subcommittee, Edith O'Brien, MF Global's former assistant treasurer, says Corzine ordered the money shifted to one of the firm's bank accounts overseas on Oct. 28 to cover an overdraft, according to a memo that cited the email.

The email noted that the transfer was made "per JC's direct instructions."

Through a spokesman Friday, Corzine repeated what he told the House Financial Services subcommittee that he gave no such order.

MF Global filed for bankruptcy protection on Oct. 31. The firm failed because of a disastrous bet on European debt. About $1.6 billion of customers' money hasn't been recovered.

O'Brien has been subpoenaed to testify. The Associated Press was unable to reach her for comment.

In December, Corzine told the panel at a hearing: "I did not instruct anyone to lend customer funds to MF Global or any of its affiliates." Corzine also told the subcommittee he didn't know about "the use of customer funds on any loan or transfer."

And Corzine told a Senate panel two days earlier: "I never gave any instruction to anyone at MF Global to misuse customer funds."

Steven Goldberg, a spokesman for Corzine, reiterated in a statement Friday that Corzine testified that there wasn't anything he had said that "could reasonably have been interpreted as an instruction to misuse customer funds. He stands by that testimony."

"He never directed Ms. O'Brien or anyone else regarding which account should be used to cure the overdrafts, and he never directed that customer funds should be used for that purpose," Goldberg said. "Nor was he informed that customer funds had been used for that purpose. To the contrary, as Mr. Corzine testified, he recalls having received written material indicating that the funds used to cure the overdrafts were appropriate for that purpose."

Client money is required by law to be held separately from a brokerage firm's cash in order to protect investors in case a firm fails. If MF Global misused client money, it would violate a fundamental investor protection for people who trade options and futures.

Many lawmakers have heard from farmers, ranchers and small business owners in their states who are missing money that was deposited with the firm. Agricultural businesses use brokerage firms like MF Global to help reduce their risks in an industry vulnerable to swings in oil, corn and other commodity prices.

Corzine, a former New Jersey governor and U.S. senator from the state, led MF Global until early November. He testified before three congressional panels in December. He said he didn't become aware of the shortfall in customer money until hours before MF Global's bankruptcy filing.

No one has been charged in the MF Global case. In addition to Congress, federal regulators and a federal grand jury in Chicago are investigating.