Jon Corzine, the former chairman of MF Global Holdings Ltd., must face some claims in a lawsuit filed by commodities customers over his role in the collapse of the brokerage company, a judge ruled.
MF Global filed for bankruptcy on Oct. 31, 2011, after a $6.3 billion bet on bonds of some of Europe’s most indebted nations. Customers claim that more than $1.6 billion of their funds that should have been segregated went missing, transferred to other parts of the company during the liquidity crisis, and accuse the executives of failing in their oversight.
U.S. District Judge Victor Marrero in Manhattan today permitted aiding-and-abetting and negligence claims against Corzine, Edith O’Brien, MF Global’s former assistant treasurer, and other officers and directors to proceed.
If the customers’ allegations are accurate, it’s reasonable to conclude that "a massive collapse such as that which MF Global experienced does not occur in a vacuum, nor in a corporate environment characterized by diligent management and vigilant oversight," the judge wrote.
The suit is one of several pending before Marrero involving the collapse of MF Global. The judge has also denied bids by Corzine, a former governor of New Jersey and onetime co-chairman of Goldman Sachs Group Inc., to dismiss those cases. Marrero criticized the pace of the lawsuits in his ruling today.
"While this wasteful and rancorous litigation unfolds, investment customers harmed by these unfortunate events must wait for any compensation due them, without knowing how much they will recover or when they will receive any assets they wrongfully lost because of the violations of law claimed in this litigation," he said.
The judge dismissed a claim that Corzine and O’Brien directly violated the Commodity Exchange Act, saying the plaintiffs failed to establish that either had direct liability just because the funds were deposited with MF Global’s brokerage unit. The judge also threw out claims the defendants breached their fiduciary duty.
Marrero last month refused to throw out a related suit filed by the U.S. Commodity Futures Trading Commission, saying it was too soon in the case to rule on whether the agency can prove its claims.