The House hearing is the third the panel has convened to probe events in the firm's final days when its executives discovered a nearly $1 billion deficit in customer segregated funds. The bankruptcy trustee overseeing the liquidation of the company's brokerage subsidiary has estimated the total shortfall between customer claims and assets available at $1.6 billion.

Neugebauer, a Texas Republican, said he is looking to find out when — and how — the firm first dipped into customer funds.

“To get $1 billion upside-down, that's a pretty good size of money,” he said. “So we're all trying to figure how long that had been going on and when it started.”

Attention on O'Brien heightened in recent days after the release of a memo drafted by congressional staff. The memo cites an e-mail from O'Brien noting that a transfer made in the days before the firm's bankruptcy was done “Per JC's [Jon Corzine's] direct instructions.”

Committee staff, in a second memo circulated yesterday, said that it remains unclear how much Corzine knew when the transfer was made. “When Mr. Corzine allegedly directed MF Global employees to move $175 million to cover the overdraft, he may or may not have known the source of funds,” the second memo said.

The account could have contained both client and company funds, the memo noted. Whether the transferred funds were those of the company, its clients or both is not known.

'Never Intended'

A spokesman for Corzine, Steven Goldberg, said last week that the former MF Global CEO “never gave any instruction to misuse customer funds and never intended anyone at MF Global to misuse customer funds.”

Lawmakers said they remain uncertain what, if anything O'Brien will say when she appears before the committee. She declined an invitation to testify, forcing the subcommittee to subpoena her last week. Reid Weingarten, O'Brien's lawyer, didn't respond to a call or e-mail requesting comment.

“A lot of folks thought Mr. Corzine wouldn't testify and he did,” Neugebauer said, adding that it's not clear whether O'Brien will be a cooperative witness. “There's some anticipation of whether she will or she won't be, but we will not know that for sure until Wednesday.”

Christine Serwinski, chief financial officer of the firm's North American broker-dealer, first learned on Oct. 27 that there was a “substantial deficit” the previous day in funds kept in segregated accounts including customer money, according to testimony prepared for the hearing.

The deficit stemmed from an intraday loan to the securities brokerage arm from the futures broker and wasn't repaid by the close of business, she said. The segregation report for Oct. 27 showed that the funds had returned to a positive level, “which I believed at the time reflected the return of the borrowed funds, as promised,” she said.

Serwinski said that on Oct. 30 she was “still operating under the belief that there must have been an accounting error because such a large deficit was simply inconceivable to me.” She said she didn't realize the shortfall was real until the morning of Oct. 31, hours before the company filed for bankruptcy.

It was at that point, according to the congressional memo, that O'Brien approached Serwinski with a document outlining a shortfall of nearly $1 billion as a result of three different groups of transactions. Among those transactions was a $175 million transfer to MF Global's London office, the memo says.

Two-Stage Transfer

Another MF Global executive scheduled to testify today, General Counsel Laurie Ferber, will draw attention to the two-stage transfer referred to in the congressional memo — first, a $200 million transfer from a segregated account at the firm's brokerage to a “house” account, followed by the move of $175 million from the house account to a London subsidiary's account at JPMorgan Chase & Co.

The transfers drew the interest of JPMorgan during the final week, Ferber said in testimony prepared for the hearing.

The New York-based bank was “specifically interested in two transfers,” Ferber said in her prepared remarks. Ferber resisted the bank's efforts to obtain a letter assuring that the firm was complying with rules to segregate customers' collateral, saying the language in drafts provided by JPMorgan were too broad.

“I then spoke to the person in Chicago whom JPMorgan identified in the certificate and was given the understanding that she would sign the certificate if it were limited to the two transactions the bank had expressed interest in,” she said. In her prepared testimony, Ferber doesn't identify the individual in Chicago.

At one point, Barry Zubrow, JPMorgan's chief risk officer, personally called Corzine to seek assurances that the funds belonged to MF Global and not customers, according to the House memo.

Corzine, 64, told lawmakers last year the firm's back-office staff had “explicitly” informed him that the $175 million transfer made before the company filed for bankruptcy was legal.

“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.

After rejecting two drafts of the JPMorgan letter, Ferber said a third draft focused specifically on the two transfers was “in satisfactory form.” She then turned the matter over to a colleague and does not recall further involvement, she said in her prepared remarks.

The letter was never returned to JPMorgan, according to the congressional staff memo. JPMorgan was given verbal assurance that the transfer followed the rules, according to a person familiar with the transaction.

The assurance was given by O'Brien or someone in her office, said the person, who declined to be identified because the communications were private.

Bloomberg News

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