4th UPDATE: Corzine Denies Knowledge Of Improper Shifting Of Customer Funds

Former MF Global Holdings Ltd. chief Jon Corzine denied Thursday having any knowledge of improper shifting of customer funds prior to the hours before the firm's collapse, saying the firm's back-office staff told him "explicitly" that transfers were legal.

His remarks come in response to CME Group Inc. (CME) Executive Chairman Terrence Duffy, who testified at a separate hearing Tuesday that Corzine might have known MF Global improperly shifted customer funds to a European affiliate before its Oct. 31 bankruptcy.

Duffy said Tuesday that a CME auditor learned of the shift of funds, and Corzine's knowledge of the move, from a senior MF Global executive during a telephone call before the firm's collapse. Duffy testified again Thursday afternoon along with other regulators and repeated his remarks from earlier in the week.

On Thursday, Corzine said he was unaware of the conversation Duffy referred to, and stressed he was unaware of any improper transfer.

"I did not in any way know about the use of customer funds on any loan or transfer," he said in testimony before a House Financial Services panel.

Corzine was making his third appearance on Capitol Hill in the past week as lawmakers inquire about the causes for the collapse of the brokerage firm. He said Thursday he didn't learn of the shortfalls until the evening of Oct. 30.

Regulators are investigating whether the brokerage improperly tapped into customer-segregated accounts for its proprietary trading. No one at the firm has been charged.

Corzine suggested a connection between the transfer mentioned by Duffy and MF Global's attempts to resolve an overdraft with an account it held with J.P. Morgan Chase in London. On the morning of Oct. 28, Corzine said he was trying to sell "billions" of bonds to J.P. Morgan to reduce MF Global's balance sheet and generate liquidity, but J.P. Morgan wouldn't engage in the transactions until Corzine's firm fixed the overdrafts.

Though Corzine instructed staff to resolve the issue, J.P. Morgan called him again on Oct. 28 seeking assurances that the transfer of funds didn't violate Commodity Futures Trading Commission rules.

"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," Corzine said, adding that he spoke about the transfer with Edith O'Brien, who is identified as MF Global's assistant treasurer on LinkedIn.

Testifying late Thursday, Duffy repeated prior testimony that CME isn't participating in the investigations of MF Global. He said CME was asked by someone at the CFTC not to investigate.

Rep. Bill Posey (R., Fla.) asked Dan Berkovitz, general counsel of the CFTC, who was on the panel with Duffy, why CME was the only regulator not involved. Berkovitz quipped that he didn't know the answer and couldn't talk about it if he did.

-By Andrew Ackerman, Dow Jones Newswires; 202-569-8390; andrew.ackerman@dowjones.com

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