Investigators on the hunt for an estimated $1.2 billion in customer money missing since MF Global Holdings Ltd. collapsed are zeroing in on the securities firm's back-office operations in Chicago, people familiar with the situation said.
One back-office employee has told people she disputes congressional testimony by Jon S. Corzine, MF Global's former chairman and chief executive, that she provided assurance that a $200 million transfer was proper, according to people familiar with the matter.
Civil and criminal regulators have "talked to a lot of people" in the Chicago office, which handled day-to-day movement of money for MF Global, including a $6 billion customer-segregated account that was tapped shortly before the company filed for bankruptcy-court protection Oct. 31, according to a person close to the investigation.
Some of the roughly 700 employees have been "approached by everyone and their mother" since regulators swept into the building two months ago, this person said. In contrast, federal prosecutors haven't interviewed Corzine, operations chief Bradley I. Abelow or Chief Financial Officer Henri J. Steenkamp, top executives who worked at the securities firm's headquarters in New York, according to people familiar with the matter. Messrs. Corzine, Abelow and Steenkamp haven't been accused of wrongdoing.
Board of Trade
It isn't clear how much progress the Justice Department, two U.S. attorney's offices, Commodity Futures Trading Commission, Securities and Exchange Commission and other regulators have made as a result of the scrutiny in Chicago, ranging from accountants to controllers to treasury officials. Nestled between the Chicago Board of Trade and the elevated train in the city's financial district, the back office was responsible for making sure that customer futures accounts were handled properly. Another floor housed MF Global salesmen.
People close to the probe said investigators are pushing hard to determine which Chicago back-office employees knew about the movement of money in the days before MF Global tumbled into bankruptcy protection, who ordered certain money transfers and if anyone knew that the transfers would lead to a shortfall in the customer-segregated account.
As company officials tried in late October to overcome a customer exodus and demands for more collateral from counterparties, numerous MF Global employees in Chicago stayed at work around the clock, a person familiar with the situation said. Some workers, exhausted and nerve-wracked, broke down under the pressure and cried, this person said.
The back-office employee who has disputed Corzine's testimony is Assistant Treasurer Edith O'Brien. She has told people that she disagrees with Corzine's suggestion at a House subcommittee hearing in December that she provided assurance that a $200 million transfer to J.P. Morgan Chase & Co. three days before the bankruptcy-protection filing was proper, according to people familiar with the situation.
She has declined to be interviewed by a House subcommittee and the Justice Department and is seeking immunity from prosecution in exchange for cooperation, said people familiar with the matter. O'Brien, who couldn't be reached for comment, still works for a trustee now unwinding the company.
Corzine testified that he got "assurance…from our back-office people in Chicago," including O'Brien, that the transfer complied with all the relevant rules. The transfer was needed to cover an overdraft in an MF Global account at J.P. Morgan.
Corzine testified that he "contacted the firm's back office in Chicago and others and asked them to resolve this issue, which I understood they did." The former Goldman Sachs Group Inc. chairman, U.S. senator and New Jersey governor said the "back office in Chicago explicitly confirmed to me that the funds were properly transferred." At the same hearing, Corzine said O'Brien was the person he spoke to about the issue. Corzine, who declined to comment through a spokesman, has said he never directed anyone at MF Global to misuse customer funds. O'Brien hasn't been accused of wrongdoing.
It isn't clear exactly what O'Brien's role in the transfer was or why she has disputed Corzine's testimony. A letter sent from J.P. Morgan to MF Global the next day was addressed to her and began with "Dear Edith," according to a copy reviewed by The Wall Street Journal. The letter, from J.P. Morgan Managing Director Donna Dellosso, asked MF Global to "acknowledge and confirm that the transfer and withdrawal…out of such Customer Segregated Account…for the purpose of covering overdraft amounts in accounts with J.P. Morgan represented your actual interest in such funds" and were "made in accordance with the provisions" of U.S. commodities laws and rules.
People of Interest
At the bottom are two blanks where MF Global was supposed to indicate it "acknowledged and agreed" that the $200 million transfer was proper, according to the copy of the letter reviewed by the Journal. No one ever signed the letter, a person familiar with the matter said.
In addition to O'Brien, investigators have expressed interest in talking to Christy Vavra, who ran MF Global's treasury operations and helped handle the movement of customer money, according to a person familiar with the situation.
Another person of interest to investigators is Christine Serwinski, who worked with O'Brien in MF Global's Chicago office. Serwinski was the company's North American finance chief and ultimately reported to Steenkamp, the chief financial officer of MF Global. Corzine told lawmakers last month that Serwinski was "at the very top" of employees who oversaw customer funds, though she was on vacation for part of the week leading up to MF Global's bankruptcy filing. Vavra and Serwinski haven't been accused of wrongdoing.
At the time of MF Global's collapse, Serwinski had told friends that she planned to leave the securities firm in early 2012, according to people familiar with the matter. MF Global had begun working on a transition to bring in her successor, these people said. Serwinski and Vavra couldn't be reached for comment.Michael Rothfeld
and Scott Patterson
contributed to this article.