Corzine will face civil charges over collapse of financial firm in 2011

Former New Jersey governor and senator Jon Corzine will face charges over the collapse of financial firm MF Global, regulators said Thursday.

The Commodity Futures Trading Commission (CFTC) announced that it had filed charges against Corzine and was seeking to impose a trading ban on him. 

The charges would ban Corzine and Edith O’Brien, the former assistant treasurer for the firm, from the financial industry.

The CFTC asserts that, as head of the firm, Corzine was responsible for MF Global’s insufficient controls and failed to properly supervise actions the firm took. The result was a failure to prevent “unlawful uses of customer money,” according to the regulators.

{mosads}The charges mark the latest downturn in the long side of Corzine, a Democrat. His bid to turn MF Global into a high-powered investment company after his gubernatorial defeat at the hands of Chris Christie (R) in 2009 ended up in one of the largest bankruptcies in U.S. history.

The 2011 collapse also attracted heavy congressional scrutiny, primarily due to the fact that nearly $1 billion in customer funds that should have been segregated went missing during the firm’s hectic final days. Most of those funds have since been recovered.

“Turning a profit is not the only job of the person at the top of a CFTC-regulated firm. Particularly in times of crisis, the person in control, like the CEO here, must do what’s necessary to prevent unlawful uses of customer money, so that customers’ money is still there if and when the music stops,” said David Meister, the CFTC’s enforcement director. 

“The allegations in our Complaint serve as a stark reminder that we will enforce the law against responsible individuals at all levels of a firm to ensure that customer funds are properly safeguarded every minute of every day.”

Rep. Randy Neugebauer (R-Texas), who headed the House investigation into MF Global’s collapse, said he was heartened by the CFTC’s action, particularly against Corzine.

“He didn’t act in good faith as a steward of these funds, and he violated his legal obligations by failing to adequately oversee MF Global’s operations,” he said. “He should bear the responsibility for these unlawful and harmful actions.”

Sen. Debbie Stabenow (D-Mich.), chairwoman of the Senate Agriculture Committee, called the charges “an important step forward.”

“There must be accountability in this case and we need to do all we can to help MF Global customers get their money back. The loss of $1.2 billion in customer funds represents an extraordinary breach of trust,” she said in a statement.

The CFTC complaint charges that Corzine pushed MF Global into increasingly risky investments, many in high-risk European debt, in his efforts to boost its profile. A former Goldman Sachs partner, Corzine served only one term as governor before losing to Christie. Corzine had previously served as a Democratic senator representing New Jersey from 2001-2006.

The complaint finds that Corzine and other board members replaced their chief risk officer when he raised concerns about the investment strategy and consistently pushed to take on more and more risk in the company’s investments.

As public perception began to sour, the firm’s treasurer told its chief financial officer, “we need to take the keys away” from Corzine.

“We have to tell Jon that enough is enough,” he said, according to the complaint.

The complaint also alleged that Corzine was aware of the cash shortages the firm was facing in its final days but continued to push to make large payments without inquiring how the firm could come up with the money to do so.

Corzine resigned from MF Global shortly after it went bankrupt, and was subpoenaed to testify before several congressional committees about the collapse. He repeatedly testified under oath that he had no idea where the missing money went or how it disappeared.

The CFTC is seeking full restitution and penalties against Corzine and other top MF Global officials, and has also fined the firm $100 million.

Tags Debbie Stabenow Randy Neugebauer

Copyright 2024 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed..

 

Main Area Top ↴

Testing Homepage Widget

 

Main Area Middle ↴
Main Area Bottom ↴

Most Popular

Load more

Video

See all Video