MF Global: The Big Fix Was In; How Corzine Threw a Mid-Level Operations Assistant Under the Bus

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He Said, She Said: The CEO, Senator and Governor’s Word Over a Mid-level Operations Assistant.

In the December 2011 testimony to Congress, when Jon Corzine was asked exactly who assured him that transfers were not from any customer funds, he answered:

John Corzine: “explicit statements that we were using proper funds, both orally and in writing, to the best of my knowledge…The woman that I spoke to was a Ms. Edith O’Brien.”

With that and within seconds, an obscure back office employee with the title of Assistant Treasurer, came to the center of what is emerging to be not only one of the largest bankruptcies in U.S. History, but one of the most momentous, as it reaches beyond the financial district of New York into the heartland and creep into the corners of regulatory offices and our judicial system.  The growing web around the bankruptcy now brings uncertainty to the very foundations of regulation and judicial oversight in the United States.

And with those words, fiduciary culpability for taking client funds was squarely placed onto 46 year-old Edith O’Brien.

Let’s look at how the fix for a crime, which even today is still characterized by by federal authorities as ” MF Global’s actions amount to sloppy record-keeping, rather than criminal fraud” as reported  in a New York Times report on MFGlobal’s use of mailed checks instead of wires in its last days.

Lawyered up by the best and the brightest, and thoroughly prepared for the hearings, Jon Corzine was obviously ready for the question above and when he dropped Edith’s name it was carefully placed into the context of his prior written and verbal testimony.

Naming Mrs. O’Brien as the one who assured him all transfers were proper completed the circle of logic fist planted in Senator Corzine’s written statement given on December 8th to the Agriculture Committee.

Furthermore, even when I was at MF Global, my involvement in the firm’s clearing, settlement and payment mechanisms, and accounting was limited. As the chief executive officer of MF Global, I ultimately had overall responsibility for the firm. I did not, however, generally involve myself in the mechanics of the clearing and settlement of trades, or in the movement of cash and collateral. Nor was I an expert on the complicated rules and regulations governing the various different operating businesses that comprised MF Global.

… I have not had access to the information that I would need to understand what happened. It is extremely difficult for me to reconstruct the events that occurred during the chaotic days and the last hours leading up to the bankruptcy filing.

(As an aside we ask if it was so “chaotic,” why wasn’t Ms. Serwinski, Chief Treasurer for North America, not called back in from her vacation?)

A revisit to the key question at the very first hearing:

In answer to Senator Stabenow’s question if he knew where the money is:

I simply do not know where the money is, or why the accounts have not been reconciled to date. I do not know which accounts are unreconciled or whether the unreconciled accounts were or were not subject to the segregation rules. Moreover, there were an extraordinary number of transactions during MF Global’s last few days

(Another aside, this is strangely the same language and characterization of the last days of MF Global as described by the Trustee Giddens. )

In written statements and throughout the hearings Senator Corzine repeated various versions of this answer:

“I never gave any instruction to misuse customer funds, I never intended anyone at MF Global to misuse customer funds and I don’t believe that anything I said could reasonably have been interpreted as an instruction to misuse customer funds,”

Translation:  “Anyone who misunderstood me was a total ignoramus.”

When asked about internal controls and adherence to compliance, and prior to naming any employees of MF Global, Corzine stated MF Global had professionals responsible for money transfers and compliance and said more than once, “I relied on them.”  Translation:  “I trusted them, but if this happened those rats on the ship were lying to me.”

After this lead up, he then named Edith O’Brien as responsible for all transactions from the FCM in those last days and hours of “chaos” and the one who “gave assurances” that all transfers were properly done. His fix was in.

And all of a sudden a woman with the appearance, demeanor and background of the Kilted Catholic schoolgirl was tied to the rails to take the fall for the entire C level of MF Global Holdings and Senator Corzine.  There was now no escape.

Shortly after naming Mrs. O’Brien the hearing was then over.  And former the Senator  strode out of the room with the jacket of his navy blue suit wide open and his head held high to meet his wife of just over a year, Sharon Elghanayan.

In December 2011 we witnessed a man who had earned one half of a billion dollars while Chairman of Goldman Sachs, was Governor and Senator to the most densely populated state in the country.  A man who now had no knowledge of the facts – but ultimate responsibility for – the looting of hundreds of millions of dollars private property under his aegis.  This was money he claimed no understanding of handling or whereabouts even after – as we now know — he was personally contacted by JP Morgan to meet liquidity needs; and requested to make sure those deficits were immediately resolved.

Yet in December as Corzine strode out of the cavernous hall before second panel of witnesses entered his pace increased. His wife made a jog to catch up with him in the Emancipation Hall of the Capital Building. (Named in honor of the slaves who started construction on the Nation’s capital in 1973.)  Followed by a small entourage, he then walked out of the Capitol building with the appearance and demeanor of a protected man.  Over the next months there was and will be more hearings and revelations to come.

Fast forward to March 2012. He Said….She Said as we Enter the Third  Congressional Finance Sub Committee Hearing.

On March 28th,  2012 the Congressional Finance Committee held its third hearing on the MF Global investigation.  Prior to this, Congress leaked to the press that Edith O’Brien, thrown into the center of the MF Global disgrace, wrote an e-mail that the transfer was “Per JC’s direct instructions.” This email, as reported by Bloomberg news, was dated Oct. 28 — three days before the bankruptcy filing.  Even though there were earlier reports on this, the media suddenly went into a frenzy with headlines such as "Former MF Global Exec: Corzine Ordered $200M Transfer or Did Jon Corzine Lie to Congress about Missing MF Global Funds?

This was “news noise” as the fix was long in and there were earlier reports of email communication from JC to cover liquidity needs. And as Corzine testified with a tone of exasperation earlier “… I don’t believe that anything I said could reasonably have been interpreted as an instruction to misuse customer funds.”  So if Mrs. O’Brien or anyone else misused customer funds they were too ignorant to understand his orders, and after all he had “relied upon” upon and trusted them.

In fact, very shortly after the first testimony where Edith O’Brien was pinned, word was, as Congressman Neugebauer stated in the recent hearing,  that she “disagreed” with Mr. Corzine’s claim in December that she provided assurance that a $200 million transfer to J.P. Morgan Chase & Co. three days before the bankruptcy-protection filing.  (In fact, we now know that O’Brien refused to put her signature to such a statement of assurance after MF Global legal council, Lauri Ferber, asked her to sign it.)

For now, though, Edith O’Brien, who is still a “person of interest” to the FBI remains silent. She apparently knows more than anyone, and may be willing to talk if she is assured immunity.  O’Brien may need it.  After all, over a claimed billion dollars of customer money was improperly moved out of segregation when she was covering for the North American Treasurer during these fateful days.

As Edith O’Brien was duly dismissed from the third hearing after pleading her Fifth Amendment rights, her attorney stood up behind her and whispered,  “let’s go.” They walked out of the hearing room as cameras clicked in rapid fire.

O’Brien’s work in the industry is not glamorous, but is the foundation of the daily functioning and survival of all Brokers.  Command of detail and the requirements for accuracy are so great, few thrive in that environment.  Those who do know where everything is at all times. They must. And that is why when O’Brien’s superior, Christine Serwinsky came into the office on Sunday evening, she handed her a statement detailing each transfer leading to the shortfall in customer funds.

(Which leads to the question why the SIPA trustee has required expenses of millions in IT and personnel to reconstruct all transactions to discover the transactions, while publicly claiming through press shills it was like untangling thousands of bundled telephone lines because everything was so “chaotic?”)

To this date neither John Corzine nor any of the former C-level Executives have been named a person of interest nor even questioned by federal investigators.   Only O’Brien and other back office employees remain at the center of the investigation in what is characterized by federal investigators as a sloppy back office.

After all, Corzine relied on them but they did not understand his orders.

2 April 2012


Photo Credit : The Big Fix the Movie


Further reading by some of those with the best coverage of the MF Global beat (and notably, not part of the MSM):

Janet Tavakoli

Corrected: MF Global: JP Morgan Produces the Smoking Gun


MF Global: The Awkward Construct of a Dual Bankruptcy and the Two Trustees

[EB: Jesse, contact us if you would: english at]


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