EXCLUSIVE: Justice Department memo reveals legal case for drone strikes on Americans
A secretive memo from the Justice Department, provided to NBC News, provides new information about the legal reasoning behind one of the Obama administration’s controversial policies. Now, John Brennan, Obama’s nominee for CIA director, is expected to face tough questions about drone strikes on Thursday when he appears before the Senate Intelligence Committee. NBC’s Michael Isikoff reports.
By Michael Isikoff
National Investigative Correspondent, NBC News
A confidential Justice Department memo concludes that the U.S. government can order the killing of American citizens if they are believed to be “senior operational leaders” of al-Qaida or “an associated force” — even if there is no intelligence indicating they are engaged in an active plot to attack the U.S.
The 16-page memo, a copy of which was obtained by NBC News, provides new details about the legal reasoning behind one of the Obama administration’s most secretive and controversial polices: its dramatically increased use of drone strikes against al-Qaida suspects abroad, including those aimed at American citizens, such as the September 2011 strike in Yemen that killed alleged al-Qaida operatives Anwar al-Awlaki and Samir Khan. Both were U.S. citizens who had never been indicted by the U.S. government nor charged with any crimes.
The secrecy surrounding such strikes is fast emerging as a central issue in this week’s hearing of White House counterterrorism adviser John Brennan, a key architect of the drone campaign, to be CIA director. Brennan was the first administration official to publicly acknowledge drone strikes in a speech last year, calling them “consistent with the inherent right of self-defense.” In a separate talk at the Northwestern University Law School in March, Attorney General Eric Holder specifically endorsed the constitutionality of targeted killings of Americans, saying they could be justified if government officials determine the target poses “an imminent threat of violent attack.”
But the confidential Justice Department “white paper” introduces a more expansive definition of self-defense or imminent attack than described by Brennan or Holder in their public speeches. It refers, for example, to what it calls a “broader concept of imminence” than actual intelligence about any ongoing plot against the U.S. homeland.
Michael Isikoff, national investigative correspondent for NBC News, talks with Rachel Maddow about a newly obtained, confidential Department of Justice white paper that hints at the details of a secret White House memo that explains the legal justifications for targeted drone strikes that kill Americans without trial in the name of national security.
“The condition that an operational leader present an ‘imminent’ threat of violent attack against the United States does not require the United States to have clear evidence that a specific attack on U.S. persons and interests will take place in the immediate future,” the memo states.
Read the entire ‘white paper’ on drone strikes on Americans
Instead, it says, an “informed, high-level” official of the U.S. government may determine that the targeted American has been “recently” involved in “activities” posing a threat of a violent attack and “there is no evidence suggesting that he has renounced or abandoned such activities.” The memo does not define “recently” or “activities.”
As in Holder’s speech, the confidential memo lays out a three-part test that would make targeted killings of American lawful: In addition to the suspect being an imminent threat, capture of the target must be “infeasible, and the strike must be conducted according to “law of war principles.” But the memo elaborates on some of these factors in ways that go beyond what the attorney general said publicly. For example, it states that U.S. officials may consider whether an attempted capture of a suspect would pose an “undue risk” to U.S. personnel involved in such an operation. If so, U.S. officials could determine that the capture operation of the targeted American would not be feasible, making it lawful for the U.S. government to order a killing instead, the memo concludes.
The undated memo is entitled “Lawfulness of a Lethal Operation Directed Against a U.S. Citizen who is a Senior Operational Leader of Al Qa’ida or An Associated Force.” It was provided to members of the Senate Intelligence and Judiciary committees in June by administration officials on the condition that it be kept confidential and not discussed publicly.
Although not an official legal memo, the white paper was represented by administration officials as a policy document that closely mirrors the arguments of classified memos on targeted killings by the Justice Department’s Office of Legal Counsel, which provides authoritative legal advice to the president and all executive branch agencies. The administration has refused to turn over to Congress or release those memos publicly — or even publicly confirm their existence. A source with access to the white paper, which is not classified, provided a copy to NBC News.
“This is a chilling document,” said Jameel Jaffer, deputy legal director of the ACLU, which is suing to obtain administration memos about the targeted killing of Americans. “Basically, it argues that the government has the right to carry out the extrajudicial killing of an American citizen. … It recognizes some limits on the authority it sets out, but the limits are elastic and vaguely defined, and it’s easy to see how they could be manipulated.”
In particular, Jaffer said, the memo “redefines the word imminence in a way that deprives the word of its ordinary meaning.”
Khaled Abdullah / Reuters
Tribesmen this week examine the rubble of a building in southeastern Yemen where American teenager Abdulrahmen al-Awlaki and six suspected al-Qaida militants were killed in a U.S. drone strike on Oct. 14, 2011. Al-Awlaki, 16, was the son of Anwar al-Awlaki, who died in a similar strike two weeks earlier.
A Justice Department spokeswoman declined to comment on the white paper. The spokeswoman, Tracy Schmaler, instead pointed to public speeches by what she called a “parade” of administration officials, including Brennan, Holder, former State Department Legal Adviser Harold Koh and former Defense Department General Counsel Jeh Johnson that she said outlined the “legal framework” for such operations.
Pressure for turning over the Justice Department memos on targeted killings of Americans appears to be building on Capitol Hill amid signs that Brennan will be grilled on the subject at his confirmation hearing before the Senate Intelligence Committee on Thursday.
On Monday, a bipartisan group of 11 senators — led by Democrat Ron Wyden of Oregon — wrote a letter to President Barack Obama asking him to release all Justice Department memos on the subject. While accepting that “there will clearly be circumstances in which the president has the authority to use lethal force” against Americans who take up arms against the country, it said, “It is vitally important … for Congress and the American public to have a full understanding of how the executive branch interprets the limits and boundaries of this authority.”
Anticipating domestic boom, colleges rev up drone piloting programs
The completeness of the administration’s public accounts of its legal arguments was also sharply criticized last month by U.S. Judge Colleen McMahon in response to a lawsuit brought by the New York Times and the ACLU seeking access to the Justice Department memos on drone strikes targeting Americans under the Freedom of Information Act. McMahon, describing herself as being caught in a “veritable Catch-22,” said she was unable to order the release of the documents given “the thicket of laws and precedents that effectively allow the executive branch of our government to proclaim as perfectly lawful certain actions that seem on their face incompatible with our Constitution and laws while keeping the reasons for the conclusion a secret.”
In her ruling, McMahon noted that administration officials “had engaged in public discussion of the legality of targeted killing, even of citizens.” But, she wrote, they have done so “in cryptic and imprecise ways, generally without citing … any statute or court decision that justifies its conclusions.”
In one passage in Holder’s speech at Northwestern in March, he alluded – without spelling out—that there might be circumstances where the president might order attacks against American citizens without specific knowledge of when or where an attack against the U.S. might take place.
“The Constitution does not require the president to delay action until some theoretical end-stage of planning, when the precise time, place and manner of an attack become clear,” he said.
But his speech did not contain the additional language in the white paper suggesting that no active intelligence about a specific attack is needed to justify a targeted strike. Similarly, Holder said in his speech that targeted killings of Americans can be justified if “capture is not feasible.” But he did not include language in the white paper saying that an operation might not be feasible “if it could not be physically effectuated during the relevant window of opportunity or if the relevant country (where the target is located) were to decline to consent to a capture operation.” The speech also made no reference to the risk that might be posed to U.S. forces seeking to capture a target, as was mentioned in the white paper.
The white paper also includes a more extensive discussion of why targeted strikes against Americans does not violate constitutional protections afforded American citizens as well as a U.S. law that criminalizes the killing of U.S. nationals overseas.
It also discusses why such targeted killings would not be a war crime or violate a U.S. executive order banning assassinations.
“A lawful killing in self-defense is not an assassination,” the white paper reads. “In the Department’s view, a lethal operation conducted against a U.S. citizen whose conduct poses an imminent threat of violent attack against the United States would be a legitimate act of national self-defense that would not violate the assassination ban. Similarly, the use of lethal force, consistent with the laws of war, against an individual who is a legitimate military target would be lawful and would not violate the assassination ban.”
Statistics: Posted by DIGGER DAN — Thu Feb 07, 2013 11:40 am
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Yesterday, a memo describing the president’s legal justifications for drone attacks against U.S. citizens was obtained and published by NBC’s Michael Isikoff. The memo is a disturbing assertion of discretionary executive power that should concern and frighten all Americans. Unfortunately, the secretive use of drone attacks is one of the few areas of bi-partisan consensus in this highly divisive town, and the public still seems to resoundingly support current counter-terrorism policies.
Not being a foreign policy expert, I will not get into the broader questions of counter-terrorism policies. I agree, as I think most Americans would, that there are times in which the government can justifiably use lethal force against even its own citizens. As always, however, the devil is in the details, and here the details are encapsulated in the broad, discretionary language of the memo. Abstractly agreeing that there are times where a killing is justified does not answer who will determine when to use such force, what standards they are expected to uphold, and what possibilities of review exist for mistakes.
These standards—the “who,” the “how,” and the “possibility of review”—are at the core of the Western legal tradition. Putting process—that is, how something is determined—on equal level with substance—what is determined—is one of the Western legal tradition’s most important contributions. The goal of a legal system is not just to reach the correct result, but to reach that result via a just, open, and reviewable process. Fundamentally, these principles are concessions to our inevitable predilection for errors in thinking, judgment, and fact-gathering. The lynching of an obviously guilty child molester is problematic not just because of the disturbing result, but for how that result was determined.
Those are the principles that we should hold dear when analyzing the memo. Perhaps every drone attack has been the correct call (something we know isn’t true), and high-level officials certainly care about civilian casualties. Nevertheless, if we believe in the principles of the Western legal tradition, we shouldn’t okay with this power if it were in the hands of Mother Theresa.
When the memo is parsed out, the possibilities of error and misuse are obvious. In the most head-scratching line in the memo, the authors redefine the concept of “imminence”: “the condition that an operational leader presents an ‘imminent’ threat of violent attack against the United States does not require the United States to have clear evidence that a specific attack on U.S. persons will take place in the immediate future.”
This redefines “imminence” as a mere “possibility.” In both international law and at common law, “imminence” defines the situation where an individual or a nation can justifiably use self-defense. As Daniel Webster defined it in the Caroline Affair, it is a threat that is “instant, overwhelming, and leav[es] no choice of means, and no moment for deliberation.”
The memo defines an “operational leader” as someone who
is personally continually involved in planning terrorist attacks against the United States. Moreover, where the al-Qa’ida member in question has recently been involved in activities posing an imminent threat of violent attack against the United States, and there is no evidence suggesting that he has renounced or abandoned such activities, that member’s involvement in al-Qa’ida’s continuing terrorist campaign against the United States would support the conclusion that the member poses an imminent threat.
In the emphasized section, the looser definition of “imminent” is presumably being used. Thus, to be subject to a kill order, someone need only to have “recently” been involved in “activities” posing the mere possibility of a violent attack against the United States, a broad and expensive definition indeed. Moreover, the words “recently” and “activities” are incredibly vague. There are holes here you could easily drive a truck through—or a drone.
Obviously, the best rejoinder to my argument is that there are people out there who wish to do us serious harm, even possibly using nuclear weapons, and therefore our interests are particularly acute and thus our margin for error should be bigger. I agree that such people exist. I am not so optimistic, however, that drone strikes are being confined to even those broader individuals within the margin of error. Yet, even if they were, I would still have a problem with the discretionary and unreviewable decisions being made.
Drones pose a particularly acute problem from a public-choice standpoint. Currently, the president and other high-level officials suffer almost no costs for drone attack mistakes. Conversely, the costs to them, politically, personally, and in their legacies, of allowing a terrorist attack on U.S. soil are quite high. Many people will blame President Obama for any attack that occurs over the next four years. Intelligence reports after a future attack will inevitably point out when the U.S. could have acted but chose not to. Perhaps a drone had the eventual terrorist in its sights but the kill order was not given, maybe because innocents were in the area. Therefore, we can reasonably expect high-level officials to err on the side of overkill, and perhaps this is a defensible policy.
But we should not and cannot ignore the costs incurred by the civilian living under constant fear of drone attacks. A recent report, Living Under Drones, from Stanford and NYU law schools estimates that between 474 and 881 civilians have died in U.S. drone attacks, including 176 children. Moreover, the constant presence of drones over northwest Pakistan has caused “considerable and under-accounted-for harm to the daily lives of ordinary civilians,” including the undermining of “cultural and religious practices related to burial, and made family members afraid to attend funerals” out of fear that drones will attack large gatherings of people.
These costs to innocent civilians must always be considered. Yet, the memo disturbingly omits a crucial element of the Supreme Court’s due process test that would give these costs more weight. In Mathews v. Eldridge, the Court articulated the test for how much process is due a citizen who the government seeks to deprive of some vested right. That case dealt with depriving Mr. Eldridge of his social security benefits, but the test used by the Court is generally applied to all possible “deprivations,” including life. The test is three-pronged: 1) the nature of the private interest; 2) the risk of error in the procedures used and “probable value, if any, of additional or substitute procedural safeguards”; 3) the nature of the government interest. Astoundingly, even while citing Mathews, the memo omits the second factor entirely. As Lawfare’s Steve Vladeck writes:
There’s no discussion–none–of the risk of false positives under the existing procedures, or the potential cost of additional process. This turns the Mathews test on its head, for it suggests that the relevant question in any case is simply whether the balancing of the interests supports the already provided level of process–and not whether the error rate and/or cost of more process is at all relevant to that determination. Not only has the Supreme Court never so understood the Mathews test, but such an approach would convert an already controversial metric for “measuring” due process into a completely standardless one–and completely obfuscate the underlying principle that the government has an obligation to provide as much process as can reasonably be expected under the circumstances.
Ultimately, this is the omitted factor that Americans should care about. There are certainly heightened interests when it comes to protecting Americans from violent attacks, and the government can act swiftly to counter a truly imminent threat, but it must take into account the risk of error and whether more procedures could help minimize those errors. And we must be clear: sometimes these “errors” are dead children.
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Obama’s memo on “insider threats”
- Doug Hagmann (Bio and Archives) Monday, November 26, 2012
On the day before Thanksgiving, Barack Hussein Obama issued a Presidential Memorandum, or an unofficial directive to the heads of departments and agencies under the executive branch. This Presidential Memorandum, the text of which is only 183 words, directs agency and department heads to establish a program “to deter, detect, and mitigate actions by employees who may represent a threat to national security.”
Much like all of Obama’s other directives, Executive Orders and findings, there is a disturbing level of ambiguity contained within this memorandum. One could correctly state that the obvious intent of this directive is to stop government employees from leaking classified information that would endanger the safety and security of our nation. While true, there appears to be a deliberate lack of specificity concerning the exact elements that constitute such an “insider threat.”
There is, however, a more important aspect to this memorandum that will be undoubtedly missed by many who report on it. It is reflected by a word that appears toward the end of the directive and should be considered the “key” to understanding the intent and action of Barack Hussein Obama. The word is “centrally,” and when it is considered in the context of Obama’s agenda we’ve seen being implemented over the last four years, it is chilling.
The key to understanding this memorandum is to understand that we are witnessing the greatest consolidation of power and control under the Executive branch of the government in recent U.S. history. This consolidation of power makes it possible for a select number of highly political “czars” and appointed officials to observe, control and report on the activities of people within their various departments to the Executive branch. This process creates a closed system of surveillance that cannot be easily penetrated by other branches of our government.
Accordingly, it becomes a self-policing network that has the ability to silence critics and individuals opposing a particular agenda or activity, even if such dissent is lawful. Taken to its extreme, it gives Barack Hussein Obama the ability to redefine what constitutes a threat to the government, including treason. It’s no longer about the rule of law and one’s allegiance to the United States. It’s now about allegiance to the agenda of the Executive branch, assured by active surveillance of government employees by Obama’s hand-picked appointees.
This memorandum quietly inserts yet another plank in the framework for absolute control by Barack Hussein Obama. It is he, not laws enacted by congress or the workings of the judicial branch, who will now determine who and what constitutes an “insider threat.” The mechanisms for reporting such threats are now in place, and actual or perceived threats to our government are to be identified and reported on by the very people he appointed to key government positions. It is the very essence of “Big Brother” within the government itself.
Everyone needs to wake up and understand exactly what’s happening not only in the U.S., but across the world. We are witnessing the con
Statistics: Posted by yoda — Mon Nov 26, 2012 12:50 pm
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By Alan Reynolds
Speaking of the “fiscal cliff,” a November 11 Wall Street Journal interview of the Senate minority leader asked, “What kind of a deal would Mr. [Mitch] McConnell accept? The senator’s top priority is long-term entitlement reform. ‘Changing the eligibility for entitlements is the only thing that can possibly fix the country long term.’ He wants means-testing for programs like Medicare. ‘Warren Buffett’s always complaining about not paying enough in taxes,’ he says. ‘What really irritates me is I’m paying for his Medicare.’”
In reality, means-testing entitlements would be a nonsensical “top priority” in fiscal cliff negotiations because (1) the fiscal cliff is not about fixing long-term problems but about preventing rather than postponing an imminent $536 billion tax hike, and because (2) the U.S. already imposes means-testing for both Social Security and Medicare.
With Social Security, the ratio of benefits to “contributions” is lowest for those who paid the most payroll taxes for the most years and highest for those who paid the least. Making matters much worse, up to 85 percent of benefits are now taxable for seniors who either saved for retirement or keep working, but tax-exempt for others. That highly-progressive 1993 tax on benefits is another devious way of means-testing after-tax retirement benefits.
Thanks to new redistributionist rules from the Obama administration, monthly Medicare premiums now rise from $99.90 on single seniors with less than $85,000 in income to $229.70 (including drug coverage) at incomes from $107,000 to $160,000, and to $386.10 above $214,000. Since President Clinton removed any ceiling on income subject to Medicare payroll tax, those who had relatively high salaries while working paid many thousands more in Medicare taxes than they can ever expect to receive in benefits – assuming they are foolish enough to sign up (as I did not) for benefits that also cost nearly four times as much as others pay.
The most money that Medicare might save by denying benefits to the “top 1 percent” would be roughly 1 percent. That would leave 99 percent of Medicare spending untouched. If high-income people were denied benefits, however, they would also be relieved of the steeply-progressive new Medicare premiums. Medicare would then lose all that revenue they are now expecting to collect by charging much higher premiums at higher incomes. The net effect of eliminating both benefits and premiums of high-income seniors offers no solution to the nation’s long-term fiscal problems. It is certainly no solution to the very-near-term threat of a series of massive tax increases on January 1.
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The White House Office of the Press Secretary For Immediate Release
November 21, 2012 Presidential Memorandum — National Insider
Threat Policy and Minimum Standards for
Executive Branch Insider Threat Programs MEMORANDUM FOR THE HEADS OF
EXECUTIVE DEPARTMENTS AND AGENCIES SUBJECT: National Insider Threat Policy and Minimum Standards for Executive Branch Insider
Threat Programs This Presidential Memorandum transmits the National Insider Threat Policy and Minimum Standards for Executive Branch Insider Threat Programs (Minimum Standards) to provide direction and guidance to promote the development of effective insider threat programs within departments and agencies to deter, detect, and mitigate actions by employees who may represent a threat to national security. These threats encompass potential espionage, violent acts against the Government or the Nation, and unauthorized disclosure of classified information, including the vast amounts of classified data available on interconnected United States Government computer networks and systems. The Minimum Standards provide departments andagencies with the minimum elements necessary to establish effective insider threat programs. These elements include the capability to gather, integrate, and centrally analyze and respond to key threat-related information; monitor employee use of classified networks; provide the workforce with insider threat awareness training; and protect the civil liberties and privacy of all personnel. The resulting insider threat capabilities will strengthen the protection of classified information across the executive branch and reinforce our defenses against both adversaries and insiders who misuse their access and endanger our national security. BARACK OBAMA
Statistics: Posted by yoda — Mon Nov 26, 2012 12:53 pm
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MF’s Corzine Ordered Funds Moved to JP Morgan, Memo Says
By Phil Mattingly and Silla Brush – Mar 23, 2012
Jon S. Corzine, MF Global Holding Ltd. (MFGLQ)’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in a brokerage account with JPMorgan Chase & Co. (JPM), according to a memo written by congressional investigators.
Edith O’Brien, a treasurer for the firm, said in an e-mail quoted in the memo that the transfer was “Per JC’s direct instructions,” according to a copy of the memo obtained by Bloomberg News. The e-mail, dated Oct. 28, was sent three days before the company collapsed, the memo says. The memo does not indicate whether that phrase was the full text of the e-mail or an excerpt.
March 23 (Bloomberg) — Bloomberg News reporter Phil Mattingly and Seth Berenzweig, managing partner at Berenzweig Leonard, talk about a Bloomberg News report that Jon S. Corzine, MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. They speak with Trish Regan and Adam Johnson on Bloomberg Television’s "Street Smart." (Source: Bloomberg)
March 23 (Bloomberg) — Bloomberg News reporter Phil Mattingly, Jay Pelosky, consultant at J2Z Advisory, Bloomberg View columnist William Cohan, Robert Brusca, president of Fact & Opinion Economics, and Bloomberg Television markets correspondent Joshua Lipton talk about a Bloomberg News report that Jon S. Corzine, MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. They speak with Pimm Fox on Bloomberg Television’s "Taking Stock." (Cohan is a Bloomberg View columnist. The opinions expressed are his own. Source: Bloomberg)
March 23 (Bloomberg) — Jon S. Corzine , MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. Bloomberg’s Julie Hyman reports on Bloomberg Television’s "Street Smart." (Source: Bloomberg)
March 23 (Bloomberg) — Bart Chilton, a commissioner at the U.S. Commodity Futures Trading Commission, talks about the investigation into bankrupt commodities broker MF Global Inc. and prospects for regulations that would place tighter restrictions on firms’ use of investor funds. Chilton speaks with Scarlet Fu on Bloomberg Television’s "InBusiness With Margaret Brennan." (Source: Bloomberg)
O’Brien’s internal e-mail was sent as the New York-based broker found intraday credit lines limited by JPMorgan, the firm’s clearing bank as well as one of its custodian banks for segregated customer funds, according to the memo, which was prepared for a March 28 House Financial Services subcommittee hearing on the firm’s collapse. O’Brien is scheduled to testify at the hearing after being subpoenaed this week.
“Over the course of that week, MF Global (MFGLQ)’s financial position deteriorated, but the firm represented to its regulators and self-regulatory organizations that its customers’ segregated funds were safe,” said the memo, written by Financial Services Committee staff and sent to lawmakers.
Steven Goldberg, a spokesman for Corzine, said in a statement that Corzine “never gave any instruction to misuse customer funds and never intended anyone at MF Global to misuse customer funds.”
Vinay Mahajan, global treasurer of MF Global Holdings, wrote an e-mail on Oct. 28 that said JPMorgan was “holding up vital business in the U.S. as a result” of the overdrawn account, which had to be “fully funded ASAP,” according to the memo.
Barry Zubrow, JPMorgan’s chief risk officer, called Corzine to seek assurances that the funds belonged to MF Global and not customers. JPMorgan drafted a letter to be signed by O’Brien to ensure that MF Global was complying with rules requiring customers’ collateral to be segregated. The letter was not returned to JPMorgan, the memo said.
The money transferred came from a segregated customer account, according to congressional investigators. Segregated accounts can include customer money and excess company funds.
Corzine, 65, in testimony in front of the House panel in December, said he did not order any improper transfer of customer funds. Corzine also testified that he never intended a misuse of customer funds at MF Global, and that he doesn’t know where client funds went.
“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,” Corzine told lawmakers in December.
In his statement, Goldberg said Corzine did not specify which funds should be used to replenish the JPMorgan account.
“He never directed Ms. O’Brien or anyone else regarding which account should be used to cure the overdrafts, and he never directed that customer funds should be used for that purpose,” Goldberg said. “Nor was he informed that customer funds had been used for that purpose.”
The bankruptcy trustee overseeing the liquidation of the company’s brokerage subsidiary has estimated a $1.6-billion shortfall between customer claims and assets available.
Lawmakers and investigators from the Commodity Futures Trading Commission, Securities and Exchange Commission and Department of Justice have been reviewing events leading up to MF Global’s bankruptcy filing. Executives including Corzine, a Democrat who served in the Senate before he was elected governor of New Jersey, gave testimony on the collapse at three congressional hearings last year.
“If client funds were transferred at his direction, it raises new questions,” Seth Berenzweig, managing partner at Berenzweig Leonard LLP, a law firm in McLean, Virginia, said in an interview with Bloomberg Television. “This is a new storm cloud that is now headed for Jon Corzine and it raises a lot of issues.”
Representative Randy Neugebauer, a Texas Republican and chairman of the Financial Services oversight and investigations subcommittee, is preparing a final report on his investigation into the firm’s failure.
‘What Went Wrong’
“One of the goals of our investigation is not only to find out where the money went but to identify what went wrong in order to prevent this from happening again,” Neugebauer said in a statement.
O’Brien is scheduled to appear before lawmakers with Christine Serwinski and Laurie Ferber, two other MF Global executives named by Corzine as being involved in the transaction, according to the memo. Henri Steenkamp , the firm’s chief financial officer, is also scheduled to testify, as is a representative from JPMorgan who has not yet been identified.
MF Global and its brokerage sought Chapter 11 bankruptcy after a $6.3 billion bet on the bonds of some of Europe’s most indebted nations prompted regulator concerns and a credit rating downgrade. Corzine quit MF Global Nov. 4.
During his testimony, O’Brien was identified by Corzine as someone with knowledge of a transfer of funds from customer accounts before the firm sought bankruptcy protection Oct. 31.
Reid H. Weingarten, O’Brien’s lawyer, did not immediately respond to a phone call and e-mail seeking comment.
The memo’s account of the e-mail exchanges aligns with what Terrence Duffy, the executive chairman at CME Group Inc. (CME), told lawmakers during a December congressional hearing. Auditors at CME, which had authority to oversee MF Global, learned from an employee of the brokerage that Corzine knew about the loans involving a European affiliate, Duffy told committee members.
Statistics: Posted by yoda — Sat Mar 24, 2012 2:29 am
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