Former New Jersey Governor Jon Corzine will be sued today by the Commodity Futures Trading Commission for failing to properly oversee MF Global Holdings Ltd., according to a person familiar with the matter.
MF Global’s 2011 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 also served as a U.S. senator 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.
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.
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.
"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.