CFTC likely to charge MF Global execs beyond Corzine: legal experts

Tue Jun 25, 2013 3:33pm EDT
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By Karen Freifeld and Emily Flitter

NEW YORK (Reuters) - The lawsuit that the U.S. Commodity Futures Trading Commission is considering filing against MF Global chief executive Jon Corzine would require the CFTC also to charge other former MF Global employees, legal experts said on Tuesday.

The CFTC is preparing to recommend to its commissioners that a civil complaint against Corzine be filed in federal court, a person familiar with the matter said. The potential suit was first reported by the New York Times on Tuesday.

Two former CFTC officials, one of whom declined to be named, said other people who were working at MF Global when the brokerage firm collapsed in October 2011 will have to be charged if the commission plans to accuse Corzine, a former New Jersey governor, of violating his responsibilities as the person in control of the firm.

MF Global made a $6.3 billion bet on European sovereign debt and went bankrupt after dipping into customer accounts to try to meet margin calls, a violation of industry rules.

Although the identities and specific job descriptions aren't yet clear, the other people likely to be charged would be the individuals close to the transfer of nearly $900 million in customer funds to the firm's account just before the collapse.

Under the legal concept of a "control person," a violation occurs when the person in charge - Corzine in this case - does not stop those under his control from illegal acts. For Corzine to be liable, people under his control would have to be charged with wrongdoing, like inappropriately transferring customer money into the firm's accounts.

The firm's collapse prompted investigations by the CFTC and the Federal Bureau of Investigation. Early last year, Reuters first reported it was unlikely that criminal charges would be filed against Corzine or others associated with MF Global. (here)

In an interview with Reuters on Monday before news of the potential lawsuit broke, Corzine's lawyer, Andrew Levander, said Corzine couldn't be held responsible for actions by MF Global employees he did not directly supervise. "Whatever mistakes were made in the back office in Chicago," Levander said, "he doesn't know what they did or didn't do."   Continued...

Former MF Global CEO Jon Corzine gestures as he 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