Trustee Freeh says Corzine's risky deals sped MF Global's fall
WASHINGTON — A trustee overseeing MF Global says a risky trading strategy and “negligent conduct” by former CEO Jon Corzine and his top managers contributed to the brokerage firm's collapse in late 2011.
A report issued on Thursday by the trustee, former FBI Director Louis Freeh, said Corzine and his team ignored the advice of MF Global's chief risk officer regarding trading strategy.
The report said they failed to fix gaps in the firm's system for monitoring its cash flows and customer funds.
MF Global made a calamitous $6.3 billion bet on debt issued by Italy, Spain and other European nations with troubled economies. The firm filed for bankruptcy protection in October 2011. It was the eighth-largest corporate American bankruptcy. More than $1 billion in customer money was discovered to be missing.
Freeh acted on behalf of MF Global creditors. His findings echo those of reports issued last year by another MF Global trustee and a U.S. House panel.
“The negligent conduct identified in this report foreseeably contributed to MF Global's collapse,” Freeh's report says. While the difficult economic climate at the time and other factors may have hastened the firm's failure, the risky business strategy and conduct by Corzine and his team helped fuel its demise, it says.
Corzine, a former Democratic senator and governor of New Jersey, stepped down as MF Global CEO in November 2011.
Steven Goldberg, a spokesman for Corzine, called the trustee's report “a clear case of Monday morning quarterbacking.” The report “intentionally ignores” the failure of banks and other firms that were MF Global's trading partners to pay what they owed MF Global “and the profound impact this failure had on MF Global's customers,” Goldberg said in a statement.
“There simply is no basis for the suggestion that Mr. Corzine breached his fiduciary duties or was negligent,” the statement said.
Much of the missing customer money belonged to farmers, ranchers and other business owners who used MF Global to reduce their risks from the fluctuating prices of commodities such as corn and wheat.