Corzine sued by MF Global trustee over firm's collapse

Tue Apr 23, 2013 2:43pm EDT
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By Jonathan Stempel

(Reuters) - Jon Corzine was sued by the bankruptcy trustee liquidating MF Global Holdings Ltd MFGLQ.PK, who accused the former chief executive of negligently pursuing a high-risk business strategy that culminated in the commodities brokerage's destruction.

The trustee, Louis Freeh, said in the lawsuit that Corzine and two top deputies overhauled MF Global's business without addressing "systemic weaknesses" in oversight and monitoring.

Freeh said the officials breached their fiduciary duties to shareholders and failed to act in good faith, wiping out more than $1 billion in value by the time of MF Global's October 31, 2011, bankruptcy.

"The company's procedures and controls for monitoring risk were lacking and in disrepair," Freeh said in the lawsuit, filed on Monday night in U.S. Bankruptcy Court in Manhattan. "Corzine engaged in risky trading strategies that strained the company's liquidity and could not be properly monitored."

The lawsuit seeks unspecified damages that could be used to pay creditors of MF Global, whose bankruptcy remains the eighth-largest in U.S. history, according to

Freeh's case adds to legal troubles for Corzine, who faces lawsuits in U.S. District Court in Manhattan by former shareholders of MF Global and by former commodity customers of its brokerage unit. The latter case has drawn support from James Giddens, the trustee recovering money for commodities customers.

Corzine, 66, is a former Goldman Sachs (GS.N: Quote) chairman and former Democratic governor and senator from New Jersey.

The other defendants in Freeh's lawsuit are Bradley Abelow, who was MF Global's chief operating officer, and Henri Steenkamp, its former chief financial officer.   Continued...

Former MF Global CEO Jon Corzine testifies before a House Financial Services Committee Oversight and Investigations Subcommittee hearing on the collapse of MF Global, at the U.S. Capitol in Washington, December 15, 2011. REUTERS/Jonathan Ernst