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TheStreet Open House

Jon Corzine Faces 'Nixon Moment' (Update 1)

Stock quotes in this article: MF, JPM

Updated with information from Bloomberg report on regulators' investigations and comments by the MF Global bankruptcy trustee on his investigation of JPMorgan.

WASHINGTON ( TheStreet) -- Once again, the question is "what did he know, and when did he know it."

The words of Tennessee Republican Senator Howard Baker during the Senate Watergate Committee hearing may have a ghostly echo for former MF Global (MF) CEO and former New Jersey Senator and Governor Jon Corzine.

In testimony that appeared to contradict what Corzine said earlier, CME Group Executive Chairman Terrence Duffy said on Tuesday that Corzine knew that segregated customer funds had been transferred "to the firm's broker-dealer accounts."

MF Global filed for bankruptcy on Oct. 31.

Here's the full quote from Duffy's opening statement before the Senate Agricultural Committee Committee, which was not included in his written testimony: "A CME auditor also participated in a phone call with senior MF Global employees wherein one employee indicated that Mr. Corzine knew about the loans that had been made from the customer segregated accounts."

Duffy added that CME group had provided the names of the people involved in the phone call to the Justice Department and the Commodities Futures Trading Commission and the Justice Department.

CME Group operates the CME, CBOT, NYMEX, and COMEX exchanges, facilitating trading of many asset classes, including futures, options and currencies.

Duffy's statement appeared to contradict Corzine's testimony in front of the House Committee on Agriculture last week, when Corzine said he was "stunned when I was told on Sunday, October 30, 2011, that MF Global could not account for many hundreds of millions of dollars of client money."

When Senator Debbie Stabenow (D-Mich) -- the Chairwoman of the Senate Agricultural Committee -- said that Duffy had made a "serious allegation" and asked why it had not been included in Duffy's written testimony, Duffy said he had "received this information this past Saturday."

In his written testimony, Duffy said the CME found "only immaterial discrepancies" during an unannounced audit of MF Global on Oct. 27, with "no indication that segregated funds were missing as of Wednesday October 26th." After receiving segregation reports for Oct. 27 and Oct. 28 asserting "that the firm remained in full compliance with segregation requirements," ME Group auditors returned to MF Global on Oct. 30, because they had "learned from the CFTC that the draft segregation report for Friday, October 28th, which had been provided to the CFTC that day, showed a $900 million dollar shortfall in segregation caused by an 'accounting error.'"

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