According to bankruptcy trustee Louis Freeh, former MF Global Holdings (MFGLQ) CEO Jon Corzine and other former executives did not act in good faith when they were in charge of the company. The ex-FBI director is suing them in bankruptcy court for gross negligence and breach of fiduciary duty. (Corzine is also a former Goldman Sachs (GS) CEO and he previously served as a US Senator and the Governor of New Jersey). Also named as defendants are the firm’s ex-COO Bradley I. Abelow and ex-CFO Henri J. Steenkam. MF Global’s collapse left customers wondering where about $1.6 billion dollars of their funds had gone missing.
Per Freeh’s lawsuit, after becoming CEO, Corzine and the other executives “dramatically changed” MF Global’s business plan but failed to update certain systems, including poor controls that made it impossible for the company to figure out liquidity levels. Corzine then allegedly made the company place large bets on bonds put out by countries in Europe. Freeh believes that the executives knew the risks involved but ignored them.
The case comes after Freeh submitted a report about Corzine and other executives. The former FBI director had said he was going to hold off and try resolving the securities claims via mediation, but even with this process still ongoing, Freeh believes that moving ahead with the lawsuit is in creditors’ best interest.
Meantime, MF Global customers and shareholders are also suing Corzine. Another MF Global bankruptcy trustee, James Giddens, even has joined customers’ securities lawsuit against the executives. He is tasked with getting back the money for clients of MF Global’s MF Global Inc., its brokerage operation. Approximately 89% of the funds have been recovered for US customers. Foreign customers have gotten back 18%.
Despite the losses, no criminal charges have yet to be filed in the MF Global debacle. The Commodity Futures Trading Commission’s investigation into what happened continues.
MF Global Trustee Sues Former CEO Jon Corzine, CBS, April 23, 2013
Corzine Sued Over Collapse, The Wall Street Journal, April 24, 2013
More Blog Posts:
Ex-MF Global CEO John Corzine Says Bankruptcy Trustee’s Bid to Join Investors’ Class Action Securities Litigation is Hurting His Defense, Institutional Investor Securities Blog, September 5, 2012
Regulators Also At Fault in MF Global Debacle, Says House Report, Stockbroker Fraud Blog, November 16, 2012
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