Hire Wire Feb 27 2012

Another MF Global Money Transfer Draws Interest

By julie steinberg, mike spector and aaron lucchetti

As MF Global Holdings Ltd. struggled to stay alive, mid-level finance officials in Chicago moved $325 million from customer accounts, according to internal firm emails, documents and people familiar with the matter.

The transfer was one of a number of chaotic moves made during MF Global's frantic final days, and what happened to the money remains unclear. But internal MF Global emails and documents, as well as interviews with people with knowledge of the circumstances surrounding the securities firm's final days, provide new details about the $325 million transaction. The New York Times earlier reported that federal investigators are looking into the $325 million transfer.

The move, made in the middle of MF Global's final week, is among several transactions revealed in MF Global emails and other documents. The other transactions -- a transfer of $165 million and $175 million -- are being scrutinized by federal investigators.

The $325 million transaction began during the middle of MF Global's final week. On Wednesday, Oct. 26, the firm's treasury department sent $325 million from customer accounts to MF Global's fixed-income desk, people familiar with the matter said.

The funds were meant to return to customer accounts that afternoon, but MF Global wasn't able to complete the transfer. Bank of New York Mellon Corp., a middleman handling the transaction, held the funds in a segregated account for customers overnight, according to people familiar with the matter.

MF Global Assistant Treasurer Edith O'Brien, who was based in Chicago, and employees of MF Global's fixed-income desk who were based in New York, both requested the funds anew the morning of Oct. 27, said a person familiar with the matter.

Just before noon, an MF Global official in New York, Dominick DeLucia, forwarded an email from Bank of New York to Ms. O'Brien's team asking for approval for the money to be released to the fixed-income group.

"Give me ten minutes," Ms. O'Brien responded in an email, a minute later. "I need it."

The money went to the fixed-income desk, according to people familiar with the matter. It remains unclear whether the funds were later returned to customer accounts. One person familiar with the matter says the funds remained missing on the eve of MF Global's bankruptcy filing. Another person said the funds returned to customer accounts four days before MF Global filed for bankruptcy, by the evening of Oct. 27.

Still, the $325 million transfer was listed in a packet given to CME Group, the exchange group and regulator, meant to explain the shortfall in customer funds, said another person familiar with the matter. A CME spokesperson declined to comment.

Write to Julie Steinberg at Julie.Steinberg@dowjones.com

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