The Commodity Futures Trading Commission sued former MF Global Holdings Ltd. Chief Executive Officer Jon Corzine for failing to properly oversee the company as it spiraled toward bankruptcy in 2011.
The regulator also sued MF Global’s former assistant treasurer Edith O’Brien and said it reached a settlement with subsidiary MF Global Inc. to pay all funds due to customers and impose a $100 million penalty. That settlement is subject to court approval.
“Turning a profit is not the only job of the person at the top of a CFTC-regulated firm,” CFTC Enforcement Director David Meister said in a statement on the regulator’s website. “Particularly in times of crisis, the person in control, like the CEO here, must do what’s necessary to prevent unlawful uses of customer money, so that customers’ money is still there if and when the music stops.”
MF Global’s collapse led to billions of dollars in missing client funds at the broker dealer and the eighth-biggest bankruptcy in U.S. history.
Corzine, who served as a senator and governor from New Jersey and was once a co-chairman of Goldman Sachs Group Inc., presided over MF Global before it filed for bankruptcy on Oct. 31, 2011. Wrong-way $6.3 billion trades on bonds of some of Europe’s most-indebted nations helped destroy the company and its brokerage unit, MF Global Inc., which listed assets of $41 billion and debt of $39.7 billion in its Chapter 11 filing.
Class Action
Corzine, 66, has been faulted by Congressional lawmakers, former customers who have named him in a class-action lawsuit and the trustees overseeing the wind-down of MF Global. The Federal Bureau of Investigation also started a probe of the events leading to the bankruptcy, when as much as $1.6 billion in client funds went missing. No charges have been filed in the case.
“I think Corzine clearly has to decide whether to fight to the end or make a quick exit and resolve the matter,” said Michael Weinstein, a former trial attorney with the U.S. Department of Justice. Weinstein, speaking before the lawsuit was filed, said Corzine’s defense may include an argument that the regulator is suing for political reasons rather than trying to resolve a dispute.
‘Intense Emotion’
Corzine wasn’t informed that customer funds were at risk or were being used improperly, and there is no evidence that he failed to work with management to try and turn around a failing company, Corzine spokesman Steve Goldberg said in a statement before the complaint was filed.