Among other things, Corzine also was aware, at the time when funds were transferred from the customer segregated accounts, that: (a) the Firm had inadequate controls and systems with regard to liquidity management and regulatory reporting; (b) MF Global was experiencing a liquidity crisis, which had worsened during the last week of October; (c) JPM sought written assurances that the transfer of hundreds of millions of dollars from MF Global’s customer segregated accounts was in compliance with CFTC Regulations; and (d)…MF Global had previously violated Firm policy by using more than what was available of FCM Excess Cash from the customer segregated and customer secured accounts to satisfy the Firm’s proprietary liquidity needs. Additionally, Corzine knew on Friday morning that MF Global had transferred $175 million to MFGUK even though he thought MF Global had immediate access to only $82 million in proprietary cash. He further learned from JPM shortly before 2:00 p.m. ET on Friday that the funds were used to pay the overdraft … and were in fact transferred from a customer segregated account.
Corzine knew that MF Global’s own policy regarding the use of FCM Excess Cash was repeatedly violated to meet the liquidity demands on the Firm. In October 2011 alone, MF Global had violated its policy on at least five business days. Yet, Corzine did not take sufficient steps in response to ensure that proper controls were established and implemented to prevent any further violation of a Firm policy that was designed to protect customer funds.
The CFTC is settling with MF Global for restitution to all customers who still await funds as well as a fine. However, the complaint is pending against Corzine and O’Brien with a monetary penalty as well as losing any industry/trading priviledges. But these charges aren’t their main problem: It looks like Corzine perjured himself when testifying to Congress. However, O’Brien plead the 5th, which just might be the smartest thing she did in this entire saga.