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Corzine May Face CFTC Lawsuit Over MF Global, NYT Reports

Former MF Global Holdings Ltd. Chairman and Chief Executive Officer Jon S. Corzine may soon face a lawsuit from U.S. regulators over the brokerage’s collapse, the New York Times reported.

The Commodity Futures Trading Commission, the federal agency that regulated the firm until its bankruptcy in 2011, is set to approve a lawsuit as soon as this week, the newspaper said, citing unidentified law enforcement officials. Corzine, the former co-chairman of Goldman Sachs Group Inc., could face millions of dollars in fines and a ban from trading commodities if he is found liable, the newspaper reported.

The agency has informed Corzine’s lawyers that it plans to file the case without giving him an opportunity to settle, which may result in a protracted legal fight, the Times said. The suit against Corzine, 66, would be another blow to the Wall Street veteran, once a senator and governor of New Jersey.

“The CFTC apparently intends to bring what would be an unprecedented and meritless civil enforcement action against Mr. Corzine,” Steven Goldberg, a spokesman for the former governor, said in an e-mailed statement. “The CFTC has not alleged that Mr. Corzine engaged in any wrongdoing or directed anyone to engage in any wrongdoing with regard to customer funds.”

Photographer: Andrew Harrer/Bloomberg

Former MF Global Holdings Ltd. Chairman and Chief Executive Officer Jon S. Corzine spent 24 years at Goldman Sachs, rising to become co-head of the firm with Henry Paulson, who later became Treasury secretary. Close

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Photographer: Andrew Harrer/Bloomberg

Former MF Global Holdings Ltd. Chairman and Chief Executive Officer Jon S. Corzine spent 24 years at Goldman Sachs, rising to become co-head of the firm with Henry Paulson, who later became Treasury secretary.

Steve Adamske, a CFTC spokesman, didn’t immediately respond to a request for comment outside of normal business hours.

Client Funds

The commission will probably blame the CEO for not preventing MF Global’s misuse of customer money, without directly linking him to the disappearance of more than $1 billion in client funds in the firm’s final days, the newspaper said, citing the officials.

Corzine spent 24 years at Goldman Sachs, rising to become co-head of the firm with Henry Paulson, who later became Treasury secretary. Corzine left Goldman Sachs in 1999 with an estimated $400 million as the firm went public. He then turned to politics, winning election to the Senate in 2000.

After five years in Washington, he became New Jersey’s governor in 2006 until his November 2009 loss to Republican Chris Christie in the governor’s race. Corzine was named chairman and CEO of MF Global in March 2010, remaking the futures brokerage into a smaller version of an investment bank.

“It’s a huge fall from grace,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd., said by telephone. “In a certain sense, he is already tainted because his company failed.”

Porous Controls

Following almost two years of gathering evidence, criminal investigators concluded that porous risk controls at the firm, rather than fraud, allowed the customer money to disappear, the newspaper said, citing the law enforcement officials with knowledge of the case.

The commission hasn’t told other top MF Global executives that they will be sued, the Times reported, citing lawyers briefed on the case. The CFTC is more likely to focus on lower-level employees in charge of protecting customer accounts, the newspaper said.

“In essence, the CFTC intends to allege that Mr. Corzine was negligent in failing to supervise experienced professionals who were in MF Global’s back office in Chicago and who did not report to Mr. Corzine,” Goldberg said. “This allegation is nothing more than another example of Monday morning quarterbacking and is without any factual or legal basis.”

To contact the reporter on this story: James Gunsalus in Tokyo at jgunsalus@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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