MF Global treasurer goes from obscurity to Congressional glare

March 28 (Bloomberg) -- Edith O’Brien, the Chicago-based treasurer of MF Global Holdings Ltd.’s broker-dealer, was pulled from back-office obscurity onto center stage last year in testimony to Congress by former chief executive Jon S. Corzine.

Today, having become a key figure in the brokerage’s messy denouement, she faces lawmakers directly for the first time.

O’Brien was identified by Corzine several times as an employee with knowledge of transfers that may have included customer funds in what he called the “chaotic’’ days before the New York-based firm sought bankruptcy protection Oct. 31, becoming the eighth-largest bankruptcy in U.S. history. With $1.6 billion in customer money still missing, lawmakers are looking to her to provide details that have so far proven elusive.

“I’m hopeful that Mrs. O’Brien will shed some light on the last days and hours of MF Global,” Representative Randy Neugebauer, chairman of the Financial Services oversight and investigations subcommittee, said yesterday in an interview.

The House hearing is the third the panel has convened to probe events in the firm’s final days when its executives discovered a nearly $1 billion deficit in customer segregated funds. The bankruptcy trustee overseeing the liquidation of the company’s brokerage subsidiary has estimated the total shortfall between customer claims and assets available at $1.6 billion.

Neugebauer, a Texas Republican, said he is looking to find out when -- and how -- the firm first dipped into customer funds.


“To get $1 billion upside-down, that’s a pretty good size of money,” he said. “So we’re all trying to figure how long that had been going on and when it started.”

Attention on O’Brien heightened in recent days after the release of a memo drafted by congressional staff. The memo cites an e-mail from O’Brien noting that a transfer made in the days before the firm’s bankruptcy was done “Per JC’s [Jon Corzine’s] direct instructions.”

Committee staff, in a second memo circulated yesterday, said that it remains unclear how much Corzine knew when the transfer was made. “When Mr. Corzine allegedly directed MF Global employees to move $175 million to cover the overdraft, he may or may not have known the source of funds,” the second memo said.

The account could have contained both client and company funds, the memo noted. Whether the transferred funds were those of the company, its clients or both is not known.

‘Never Intended’

A spokesman for Corzine, Steven Goldberg, said last week that the former MF Global CEO “never gave any instruction to misuse customer funds and never intended anyone at MF Global to misuse customer funds.”

Lawmakers said they remain uncertain what, if anything O’Brien will say when she appears before the committee. She declined an invitation to testify, forcing the subcommittee to subpoena her last week. Reid Weingarten, O’Brien’s lawyer, didn’t respond to a call or e-mail requesting comment.

“A lot of folks thought Mr. Corzine wouldn’t testify and he did,” Neugebauer said, adding that it’s not clear whether O’Brien will be a cooperative witness. “There’s some anticipation of whether she will or she won’t be, but we will not know that for sure until Wednesday.”

Christine Serwinski, chief financial officer of the firm’s North American broker-dealer, first learned on Oct. 27 that there was a “substantial deficit” the previous day in funds kept in segregated accounts including customer money, according to testimony prepared for the hearing.

Page 1 of 2 >>

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome