Trustee sues ex-N.J. Gov. Corzine over MF Global failure
NEW YORK — The trustee in the MF Global Holdings bankruptcy case has sued ex-CEO Jon Corzine and other former executives, alleging that they pushed the company into risky practices that ultimately led to its collapse.
The lawsuit, filed by former FBI director Louis Freeh Monday in bankruptcy court in New York, says Corzine and two other top executives “dramatically changed” the company's business plan when he became CEO in 2010. They then failed to update controls and other systems that were weak, the lawsuit says.
Corzine pushed the company into making big bets on bonds issued by European countries, the lawsuit says, a move that proved disastrous during the implosion of the debt crisis the next summer. MF Global collapsed in October 2011.
There have been no charges against Corzine or anyone else in the MF Global case.
On Tuesday, a spokesman for Corzine called the lawsuit “a clear case of Monday morning quarterbacking.” The spokesman, Steven Goldberg, said the lawsuit intentionally ignored the fact that some of MF Global's trading partners failed and didn't pay what they owed to MF Global.
According to the lawsuit, however, the company's controls were so poor that it couldn't determine its liquidity levels in real time. It portrays Corzine and others as aware of the risks but purposefully ignoring them. Corzine, who stepped down as MF Global CEO soon after the collapse, is the former co-chairman of Goldman Sachs, a former Democratic U.S. senator and the former governor of New Jersey.
Corzine and two of his top executives, the chief operating officer and the chief financial officer, “were repeatedly warned — in reports, meetings, emails and in-person exchanges — of the failures and need for improvements in the company's procedures and controls,” the lawsuit says. “Yet, instead of taking necessary steps to fix those problems,” the suit says, Corzine and his deputies “pursued an even riskier business plan.”