Former MF Global Holdings Ltd. Chief Executive Jon S. Corzine testified Thursday that he knew about an overseas transfer of funds that has come into focus in recent days as regulators and Congress seek to find out what became of an estimated $1.2 billion in missing customer cash.
Mr. Corzine testified, however, that he received assurances that the transfer of millions of dollars to a J.P. Morgan Chase & Co. account in London on Oct. 28, the last business day before MF Global filed for bankruptcy, was approved by at least one official in MF's back office.
"The back office in Chicago explicitly confirmed to me that the funds were properly transferred, and I understood that J.P. Morgan Chase was satisfied," Mr. Corzine said, adding that he believed some of the confirmations were in writing.
The firm's primary regulator at the exchange level, CME Group Inc., has suggested Mr. Corzine knew about certain transfers of funds that may have been improper.
Mr. Corzine has said that he "never directed anyone at MF Global to misuse customer funds."
Mr. Corzine, after three long hearings into the collapse of MF Global, doesn't have another one scheduled, but he does face a variety of probes from financial regulators into the firm's collapse. Mr. Corzine and other former MF officials face litigation from numerous aggrieved customers and investors, including one group that tried to serve the former CEO with legal papers at a break in Thursday's hearing.
MF Global declined to comment on litigation.
As the hunt for the missing money enters its seventh week, Mr. Corzine and officials at CME provided to the committee new details about MF Global's final days and the role of people in MF Global's Chicago office, which handled much of the day-to-day plumbing of the firm, including customer transfers.
The new details emerged during a sometimes-testy five hour hearing where Mr. Corzine was questioned over the firm's accounting, its big bets on European sovereign debt and personal matters such as where he stayed in Washington this week—the Ritz-Carlton—and how many aggrieved customers of MF Global he had called—none.
In Thursday's hearing before the House Financial Services subcommittee, Mr. Corzine testified that he spoke about the transfer to J.P. Morgan with Edith O'Brien, whom he identified as an official in MF Global's Chicago treasury office. Mr. Corzine said he also spoke with MF Global's general counsel, Laurie Ferber, about the shift of funds, which has come under the spotlight as regulators probe an estimated $1.2 billion in missing customer funds at the firm.
Ms. O'Brien couldn't be reached for comment. Ms. Ferber declined to comment through a spokeswoman.
During the hearing, CME Group officials provided documents that for the first time give a detailed timeline of the last week before MF Global's bankruptcy filing. The following is CME's account of key events in MF Global's final days.
On Oct. 24, an MF Global controller named Mike Bolan notified a CME official that the firm's debt was about to be downgraded. Mr. Bolan told the CME official the next day that there hadn't been "a customer run on the bank," according to the CME documents provided to the House subcommittee. Mr. Bolan couldn't be reached.
The same day, Ms. Ferber told CME executive Kim Taylor that "the rumor about problems at MF Global" stemming from derivatives trades was "not accurate" and that the firm didn't "have any large losses" from over-the-counter derivatives. That afternoon, Mr. Bolan told a group of CME auditors that the firm was "well capitalized," despite a sharp drop in MF Global's stock price.
On Oct. 26, Ms. Ferber and Henri Steenkamp, MF Global's chief financial officer, said to CME that they were working to keep customers from fleeing the firm. After MF Global debt was downgraded to "junk" status Oct. 27, CME said it "is starting to have concerns" that MF Global's "liquidity is drying up." CME then sent two of its auditors, Silmar Ramirez and Jason Guch, to MF Global's offices.
That evening, Ms. Ferber and Mr. Steenkamp assured CME officials that MF Global had enough money and that the company was working to sell assets.
On the morning of Friday Oct. 28, CME Group Executive Chairman Terrence Duffy took a call from Gary Gensler, chairman of the Commodity Futures Trading Commission, and the CFTC's clearinghouse expert Ananda Radhakrishnan. Mr. Gensler said he had concerns about MF Global and asked for Mr. Duffy's opinion. Mr. Duffy said he didn't have the information they wanted and referred them to the CME's clearinghouse staff.
Around 5 p.m. Eastern time that day, MF Global submitted a regulatory statement showing that it had about $200 million of excess cash in its customer funds as of Oct. 27. That statement would later turn out to be incorrect, according to CME. Mr. Duffy told the House subcommittee Thursday that the inaccurate report was "a telling sign that regulators were being kept in the dark" about MF Global's customer accounts.
On Saturday, Oct. 29, and early on Sunday, Oct. 30, CME and CFTC officials monitored MF Global's efforts to sell itself to another brokerage firm. At around 3 p.m. Sunday, a CFTC official at MF Global's Chicago office informed a CME official that the Oct. 28 customer funds statement "shows a deficiency."
Meanwhile, MF Global officials moved forward on a deal to sell the firm to Interactive Brokers Group Inc., sending CME officials a draft news release about the deal at about 7 p.m. Eastern time. At the same time, MF Global's Mr. Bolan and Ms. Ferber said they believe the customer-funds deficit is "an accounting error."
Around 10 p.m., Ms. O'Brien, the treasury official at MF Global, and an MF Global finance executive, Christine Serwinski, told CME official Mike Procajlo "that the deficiency must be an accounting error," in part because "it is too big to be anything else." But CME officials doubted that, with Mr. Procajlo sending an email saying MF Global's explanation was "unsubstantiated. Ms. Serwinski couldn't be reached."
Around 10:30 p.m. Sunday, Mr. Corzine was told about the customer-account deficit by MF Global's finance chief, he testified this month. At midnight, Ms. Ferber emailed CME clearinghouse executive Kim Taylor saying "we may have it."
But the firm didn't. Soon after, Mr. Procajlo participated in a phone call with Ms. Serwinski, who said that Mr. Corzine was aware of a $175 million loan of customer money to the firm's U.K. affiliate, according to people familiar with the matter.
On Oct. 31, shortly after midnight, Mr. Procajlo emailed fellow regulators, stating the shortfall estimated then at $950 million was still "a huge issue." After 2 a.m., CME learned the deficiency was real, after Ms. Serwinski and Ms. O'Brien called Mr. Procajlo into Ms. Serwinski's office to tell him there was an actual shortfall of about $700 million.
At 8:06 p.m. Monday, CME received a statement showing that MF Global's customer funds on Oct. 28 had been short by $891,465,650.
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