“Although the intense emotion and anger expressed by individuals who were affected by the collapse of MF Global is compelling and not to be understated, justice would not be served if Mr. Corzine were to be blamed for alleged mistakes that were made without his knowledge and that he did not cause or direct,” Goldberg said.
He cited CFTC comments from as early as November 2011 that blamed Corzine as evidence that the agency is bowing to “political pressure to hold someone liable for the failure of MF Global.”
The CFTC has itself been blamed at times for contributing to MF Global’s downfall. The regulator, chaired by Corzine’s ex- Goldman Sachs colleague Gary Gensler at the time of MF Global’s collapse, failed to coordinate with the Securities and Exchange Commission, according to a 101-page report last November by U.S. House Republicans.
Leadership Faulted
The report faulted Corzine’s leadership at MF Global and said the CFTC also didn’t inform the SEC that the broker was using an alternative method for calculating customer funds.
The SEC didn’t include the CFTC in several meetings in 2011 about the brokerage’s capital and business strategy that would have been helpful for oversight, according to the report.
The current lawsuit shows the CFTC is flexing its enforcement muscle, which it has been doing more often since former federal prosecutor David Meister joined the agency in 2010, said Weinstein, of chairman of Cole Schotz’s white collar practice in Hackensack, New Jersey.
“This is a watershed moment for them, in how they want to be perceived in the marketplace,” he said of the regulator.
Ignoring Deficiencies
Corzine has also been sued along with senior executives Bradley Abelow and Henri Steenkamp in U.S. Bankruptcy Court by Louis J. Freeh, a trustee winding down the brokerage. Freeh alleged in the complaint that they failed to act in good faith and implemented strategies that caused the company to fail. It seeks unspecified damages to be determined at trial, as well as legal fees.