Jon Corzine, the former head of MF Global Holdings Ltd., said a lawsuit brought by the firm’s trustee should be dismissed because he can’t be sued for what turned out to be a failed business strategy.
The trustee, Louis Freeh, sued Corzine and senior executives Bradley Abelow and Henri Steenkamp in April, accusing them of failing to oversee the futures broker, leading to its bankruptcy. Lawyers for the defendants countered in court papers filed yesterday in U.S. Bankruptcy Court in Manhattan that they “were at all times working to transform MF Global into a profitable business.”
The Freeh lawsuit is based on hindsight and can’t overcome the presumption that corporate officers in making business decisions act on an informed basis and in good faith, the defendants said in their court filing.
“That the company failed after multiple ratings agency downgrades and a run on the company’s assets does not give rise to a claim,” the defendants said.
The parent company of brokerage MF Global Inc. filed for bankruptcy on Oct. 31, 2011, after a wrong-way $6.3 billion trade on its own behalf on bonds of some of Europe’s most-indebted nations.
A report by Freeh blamed Corzine and his management team for bungling an expansion of the company’s traditional business model while ignoring deficiencies in its risk controls.
Corzine, a Democrat and former governor and senator from New Jersey, once served as a co-chairman of Goldman Sachs Group Inc. He was sued in June by the Commodity Futures Trading Commission, which accused him of failing to supervise employees.
The case is Louis J. Freeh v. Jon S. Corzine, 13-01333; U.S. Bankruptcy Court, Southern District of New York (Manhattan).