Report: Jon Corzine Ordered Raid of Customer Funds to Cover Overdrawn J.P. Morgan Account

A bombshell e-mail from a MF Global executive in the days leading up to the firm's collapse reveals that Jon Corzine personally ordered the transfer of $200 million from a customer account to J.P. Morgan

in order to cover an overdraft. Bloomberg reports that the former MF Global CEO gave "direct instructions" to meet an overdraft in one of the brokerage's J.P. Morgan accounts in London. J.P. Morgan was MF Global's clearing bank as well as one of its custodian banks for customer funds. The internal e-mail was sent on October 28 by Edith O'Brien, a treasurer at the brokerage. In the note she states that the transfer of funds were "Per JC's direct instructions." Bloomberg reports that "O'Brien's internal e-mail came as the New York-based broker found intraday credit lines limited by J.P. Morgan." The development comes ahead of a March 28 House Financial Services subcommittee hearing on the collapse in which O'Brien has been subpoenaed to testify. A memo sent to lawmakers said, “Over the course of that week, MF Global's financial position deteriorated, but the firm represented to its regulators and self-regulatory organizations that its customers' segregated funds were safe." The memo also highlights another e-mail sent by the global treasurer of MF Global on October 28. In it, Vinay Mahajan wrote that J.P. Morgan was "holding up vital business in the U.S. as a result" of the overdrawn account. He added that the account had to be "fully funded ASAP." Bloomberg also is reporting that the memo indicates that Barry Zubrow, J.P. Morgan's chief risk officer, personally called Corzine to seek assurances that the funds which would be transferred to cover the overdraft did not belong to MF Global customers. Furthermore, J.P. Morgan apparently drafted a letter which was to be signed by O'Brien ensuring that MF Global was complying with rules requiring customer collateral to be segregated. The letter was never returned to J.P. Morgan. These reports would seem to indicate that Corzine was lying to lawmakers when he testified that he did not order anyone to transfer customer funds out of segregated accounts. “I did not instruct anyone to lend customer funds to anyone,” Corzine told a Congressional panel.