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MF Global bankruptcy: Exec says Corzine knew about missing money

At bankruptcy hearing, an MF Global executive said 'Mr. Corzine was aware' of misused customer funds. About $1.2 billion is still unaccounted for after the bankruptcy.

By Daniel Wagner and Marcy GordonAssociated Press / December 13, 2011

Former MF Global Holdings Ltd. Chairman and CEO Jon Corzine (left) and President and COO Bradley Abelow are sworn in on Capitol Hill in Washington, Tuesday, Dec. 13, 2011, prior to testifying before the Senate Agriculture Committee about the company's bankruptcy.

Susan Walsh/AP

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WASHINGTON

A financial-exchange executive said Tuesday that Jon Corzine might have known that MF Global tapped clients' money to lend to a European affiliate of the firm.

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CME Group Inc. Executive Chairman Terrence Duffy told a Senate panel he had received information that Corzine knew about a transfer of $175 million from customer accounts.

Corzine, a former U.S. senator, has testified that he did not know any customer money was missing until Oct. 30, the day before MF Global became the eighth-largest bankruptcy in U.S. history. About $1.2 billion of customer money was unaccounted for when the company collapsed.

According to Duffy, an MF Global employee told a CME auditor that "Mr. Corzine was aware" of the loan.

Duffy told the Senate Agriculture Committee that he has referred the matter to the Justice Department and the Commodity Futures Trading Commission, which are investigating MF Global's failure. Duffy said he received the information last weekend from CME Group attorneys who are investigating the matter.

MF Global traded on exchanges managed by CME Group.

Brokerage firms are required to keep client money separate from company funds. Depending on the circumstances, transferring money from customers' accounts could violate securities laws and, in some cases, could amount to a crime.

A Corzine representative had no immediate comment on the allegation.

Corzine rose from Goldman Sachs' trading floor to become co-chairman of that firm, before serving as a senator and then governor of New Jersey. After becoming CEO of MF Global in March 2010, he tried to transform the futures brokerage into a full-fledged investment bank.

MF Global failed after a calamitous bet on European debt spooked its investors, trading partners and clients. Corzine resigned as CEO last month.

Earlier Tuesday, Corzine told senators he once served with that he never told anyone to "misuse" customer money that vanished when MF Global collapsed this fall.

Senators demanded that Corzine and two other executives from the securities firm explain who authorized the transfer of money in the days before the firm became the eighth-largest bankruptcy in U.S. history.

"I never gave any instruction to anyone at MF Global to misuse customer funds," Corzine said.

Bradley Abelow, the firm's president and chief operating officer, and Henri Steenkamp, the chief financial officer, also tried at the hearing to distance themselves from any decision to transfer customers' money.

All three witnesses said they do not know where the missing money is. Yet their phrasing varied in subtle ways that could have legal distinctions.

Corzine said he did not direct anyone to "misuse" clients' money.

Abelow said he does not recall "any conversation about customer funds being used for anything other than their intended purpose."

Steenkamp's stance was more sweeping. He said he did not "authorize, approve or know of any transfers of customer funds" out of their accounts.