MF Global trustee may sue Corzine, others over collapse: judge

Tue Mar 25, 2014 10:08am EDT
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By Jonathan Stempel

NEW YORK (Reuters) - Jon Corzine, the former MF Global Holdings Ltd chief executive, and two former colleagues failed to win the dismissal of a lawsuit by a trustee seeking to hold them responsible for the futures brokerage's rapid demise and bankruptcy.

U.S. District Judge Victor Marrero in Manhattan said on Monday the trustee may pursue damages over claims that Corzine, former chief operating officer Bradley Abelow and former chief financial officer Henri Steenkamp breached their duties of care and loyalty to the company.

"Defendants and other MF Global officers repeatedly increased the company's exposure to risky bets on sovereign debt and shuffled funds among MF Global's subsidiaries to cover a growing liquidity crisis," Marrero wrote. "These facts give rise to reasonable inferences that defendants acted in bad faith."

The judge did not rule on the case's merits.

MF Global went bankrupt on October 31, 2011 in the wake of margin calls, market worries about its $6.3 billion sovereign debt wager, and the discovery by regulators that money in customer accounts had been used to cover liquidity shortfalls.

Lawyers for Corzine, Abelow and Steenkamp did not immediately respond on Tuesday to requests for comment.

Corzine is a former state governor and U.S. senator from New Jersey, and former co-chairman of Goldman Sachs.

In court papers, the defendants had argued that the trustee could not prevail simply by second-guessing their decisions, and that his claims showed not that they consciously disregarded their duties, but instead "actively fulfilled" them.   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