Corzine, banks push to end MF Global fraud lawsuit

NEW YORK, Mon Oct 22, 2012 – Jon Corzine’s lawyers say allegations that he fraudulently ran MF Global Holdings Ltd. make “no sense” and that a lawsuit seeking to hold him and others responsible for the futures brokerage’s bankruptcy must be thrown out.

Corzine, former colleagues and several banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., filed papers on Friday night to dismiss investor litigation over MF Global’s collapse. The company’s Oct. 31, 2011, bankruptcy was Wall Street’s biggest meltdown since 2008.

Plaintiffs led by the Virginia Retirement System and the province of Alberta, Canada, have accused MF Global in the U.S. District Court in Manhattan of inflating its ability to manage risk, obscuring risks from a big bet on European sovereign debt and improperly accounting for deferred tax assets.

But lawyers for Corzine, MF Global’s former chairman and chief executive officer, said there was no securities fraud. They said the allegations merely suggested that Corzine mismanaged the company, was too optimistic, or failed to predict a liquidity squeeze prompted in part by credit rating downgrades.

Corzine’s lawyers also said the former New Jersey governor’s ownership of 441,960 MF Global shares, including some bought in August 2011 when the exposure to European sovereign debt had peaked, showed that he had no motive to commit securities fraud.

“Plaintiffs have not alleged any facts from which it could be inferred that Mr. Corzine knew prior to Oct. 30, 2011 that MF Global would not be able to survive,” Corzine’s lawyers wrote. “Plaintiffs’ theory that Mr. Corzine had fraudulent intent or participated in a fraud makes no sense.”

MF Global trustee sees possible claims vs Corzine

NEW YORK, Mon Jun 4, 2012 – The trustee liquidating MF Global Holdings Ltd. issued a blistering report on Monday about how former CEO Jon Corzine ran the broker-dealer and said he saw possible civil claims against top executives for breach of duties to customers.

In a written report to the U.S. Bankruptcy Court in Manhattan, trustee James Giddens said liquidity at the commodities firm had been a concern long before MF Global tumbled into bankruptcy last October.

Yet before and throughout Corzine’s tenure as CEO, “systems and tools that would enable accurate real-time monitoring of liquidity were never implemented,” Giddens concluded.

The trustee said he had been in discussions with customers’ lawyers about legal action against former MF Global managers and others. He said his report drew no conclusions about possible criminal liability.

Giddens had earlier said he was mulling filing claims against certain executives, but did not name them. Monday’s report identifies Corzine, as well as former Chief Financial Officer Henri Steenkamp and former Assistant Treasurer Edith O’Brien, as possible targets for civil claims.

A spokesman for Corzine had no immediate comment. Lawyers for Steenkamp and O’Brien were not immediately available.

The report serves as a status update on Giddens’ efforts to recover money for customers who lost funds when MF Global collapsed. Giddens has estimated that about $1.6 billion disappeared from customer accounts when the company improperly mixed client funds with its own money.

Giddens also said he was prepared to litigate against JPMorgan Chase & Co, one of MF Global’s main banks, if unable to reach a settlement within 60 days. That dispute centers on claims over whether the bank played a role in the disappearance of customer funds.

JPMorgan has already returned about $89 million in customer funds and $518 million in general MF Global assets, Giddens’ report said.

Former chief Corzine apologizes for collapse of MF Global

WASHINGTON ― Former MF Global chief Jon Corzine apologized to customers, employees and investors who have suffered because of the brokerage firm’s collapse, but said he does not know where missing customer money is.

“Their plight weighs on my mind every day — every hour,” Corzine said in lengthy remarks prepared for delivery on Thursday before a hearing of the U.S. House of Representatives Agriculture Committee.

“I simply do not know where the money is, or why the accounts have not been reconciled to date,” he said.

In separate testimony, a top executive of futures exchange operator CME Group Inc said MF Global misused hundreds of millions of dollars of customer funds by moving the money to its own accounts, the strongest accusation yet against the bankrupt futures brokerage.

“Transfers of customer funds for the benefit of the firm constitute serious violations of our rules and of the Commodity Exchange Act,” CME Executive Chairman Terrence Duffy said in prepared remarks.

CME, the biggest U.S. futures exchange operator, was a hands-on regulator of MF Global. Duffy said the brokerage admitted during a call with regulators that customer money was transferred out of segregation to the firm’s own accounts.

MF Global collapsed in late October after it was forced to reveal that it had made a $6.3 billion bet on European sovereign debt.

The court-appointed trustee has estimated the shortfall of customer money at $1.2 billion, but CME has disputed that figure as being too high. In his prepared testimony, Duffy indicated the shortfall was roughly half that amount.

Nine witnesses are scheduled at the hearing, but Corzine, a former governor of New Jersey, is the star. He is breaking his silence for the first time since MF Global’s Oct. 31 bankruptcy and his resignation days later.

Neither MF Global nor any of its executives has been charged with wrongdoing, but the failure of the firm — which froze the money of thousands of customers — has attracted the attention of the FBI and federal prosecutors.

Corzine said he believes “it is appropriate” for him to attempt to respond to lawmakers’ questions on Thursday, but said he may be unable to answer certain inquiries because he had limited access to documents since he left the firm.

He also distanced himself from some hands-on aspects of the firm’s business practices.

“Even when I was at MF Global, my involvement in the firm’s clearing, settlement and payment mechanisms and accounting was limited,” Corzine said.

He did say he accepts responsibility for the repo-to-maturity trades that related to the firm’s European sovereign debt exposure.

“At the time that MF Global entered into the transactions, I believed that its investments in short-term European debt securities were prudent,” he said.

MF Global CEO Jon Corzine resigns under fire after bankruptcy filing

NEW YORK ― Jon Corzine has resigned as MF Global Holdings Ltd’s chairman and chief executive officer four days after the futures brokerage filed for bankruptcy protection, culminating a rapid downfall for one of Wall Street’s best-known executives.

Corzine said his decision was voluntary and was best for the company and its stakeholders.

“I feel great sadness for what has transpired at MF Global and the impact it has had on the firm’s clients, employees and many others,” Corzine said. “I intend to continue to assist the company and its board in their efforts to respond to regulatory inquiries and issues related to the disposition of the firm’s assets.”

Friday’s resignation is the latest development in a stunning downfall for Corzine, 64, who ran Goldman Sachs & Co in the late 1990s and was subsequently a U.S. senator from New Jersey and governor of that state. MF Global, which Corzine joined in March 2010, had been his ticket back to Wall Street.

Corzine is not seeking severance, the company said. He had been entitled to a $9 million payout if he were let go without cause, a July regulatory filing shows.

The bankruptcy filing came after MF Global’s bets on European sovereign debt scared away clients, counterparties and investors. It was accelerated after major credit rating agencies downgraded the company to “junk” status last week.

U.S. regulators, meanwhile, are conducting a broad review of the company’s business as they try to track down more than $600 million of missing customer money.

In a statement, MF Global said Bradley Abelow, its chief operating officer, and Edward Goldberg, its lead director, will remain in their positions.

Brokerages such as MF Global are required to keep customer money segregated from their own cash. Questions about whether this took place at MF Global have attracted the attention of the Federal Bureau of Investigation as well as regulators.

Neither MF Global nor Corzine has been accused of wrongdoing.

Corzine has hired leading white-collar defense lawyer Andrew Levander of Dechert LLP to represent him in cases that might stem from the bankruptcy filing, a legal source briefed on the matter said on Thursday.

Levander has represented outside directors of Lehman Brothers Holdings Inc and former Merrill Lynch & Co chief John Thain, among others. Corzine has hired separate counsel for the bankruptcy case.

“We will look at every aspect of how the firm conducted business,” Mary Schapiro, chairman of the U.S. Securities and Exchange Commission, told Reuters on Thursday.