NEW YORK (Reuters) - A turf war may be brewing between two high-profile U.S. prosecutors over who will take the lead in a criminal probe of collapsed futures brokerage MF Global Holdings Ltd MFGLQ.PK.
U.S. Attorney Patrick Fitzgerald in Chicago and Preet Bharara, his counterpart in Manhattan, are examining how hundreds of millions of dollars went missing from the futures brokerage, sources familiar with the matter have told Reuters.
No charges have been brought, and no one at MF Global has been accused of wrongdoing.
Fitzgerald and Bharara are hard-charging prosecutors whose careers briefly overlapped in the criminal division of the Manhattan U.S. Attorney’s office a decade ago.
Now their paths are crossing again. Along with regulators and the FBI, they are trying to unravel what went wrong at MF Global, a commodities and derivatives company that collapsed into bankruptcy on October 31 after bad bets on European bonds.
The company was run by Jon Corzine, who resigned last month and is expected to appear on Thursday before a congressional panel examining the bankruptcy and the hunt for missing client funds. Corzine is a former head of Goldman Sachs, a former U.S. senator from New Jersey and a one-term governor of the state.
MF Global had operations in New York and Chicago, giving each federal prosecutor’s office a basis for an investigation.
Fitzgerald’s office has sent subpoenas to parties tied to MF Global, a person familiar with the matter said. Bharara’s office has started a investigation and tapped two assistant U.S. attorneys to oversee it, according to another source. These people declined to be identified because the investigations are not public.
Both New York and Chicago likely will want the lead role if their investigations progress. But the Department of Justice in Washington may have to decide ultimately who gets the case.
When two separate offices in the Justice Department work on a single investigation, the supervising prosecutors discuss internally which one will eventually run it. If they cannot reach agreement, it becomes a decision for the U.S. deputy attorney general in Washington.
“Every once in a while that’s the kind of battle that winds its way up to Washington. Other times it gets resolved,” said Columbia University law professor Daniel Richman, a former federal prosecutor.
He said it’s not just a matter of which office is best suited to run a case. The strengths of the field offices of other investigative agencies involved are also considered.
Bharara’s spokeswoman, Ellen Davis, declined to comment on MF Global or the office’s decision-making process. Fitzgerald’s spokesman, Randall Samborn, also declined to comment.
Of the two prosecutors, Fitzgerald is the more experienced. But Bharara and his team, whose offices are in the shadow of Wall Street, have a deeper background in white-collar financial cases.
Bharara became Manhattan U.S. attorney in August 2009. This year, he notched victories against multimillionaire hedge fund manager Raj Rajaratnam and other defendants in the first prosecution to make widespread use of FBI phone taps in an insider-trading probe.
Before becoming U.S. attorney, Bharara was counsel to New York Democratic Senator and then Judiciary Committee chairman Charles Schumer. During the Bush administration, Bharara helped lead the 2007 investigation into the mid-term dismissal of seven U.S. attorneys.
In Chicago, Fitzgerald prosecuted former Illinois Governor Rod Blagojevich, who was sentenced to 14 years in prison on Wednesday for political corruption that included an attempt to sell the U.S. Senate seat vacated by Barack Obama after he was elected president.
Fitzgerald also secured a perjury conviction in 2007 as special prosecutor of former top White House aide Lewis “Scooter” Libby over who leaked the identity of CIA officer Valerie Plame. Her U.S. diplomat husband had questioned evidence used to justify the Iraq war.
Fitzgerald earlier made his reputation prosecuting Islamic militants who bombed the World Trade Center in 1993 and two U.S. embassies in east Africa in 1998. He was confirmed as U.S. attorney for Chicago in October 2001, weeks after the September 11 hijacked plane attacks.
Both Fitzgerald, who turns 51 this month, and Bharara, 43, are known to inject humor into their work, according to lawyers who know them.
The son of an Irish immigrant doorman, Brooklyn, New York-born Fitzgerald also has a reputation for being a workaholic and once called his colleagues from a New Hampshire mountaintop while he was on vacation, recalled Eric Sussman, who as an assistant U.S. attorney in Chicago prosecuted Canadian media magnate Conrad Black with Fitzgerald.
On the mountain, Fitzgerald placed a call from a satellite phone, relaying through the static his idea for the opening statement at the trial, said Sussman, now in private practice at law firm Kaye Scholer.
Bharara, who is married and has three children, was born in Ferozepur, India and raised in New Jersey after his parents immigrated when he was an infant. He laces his conversation with jokes and sometimes introduces his speeches with amusing and endearing references to his family.
But in contrast, one of his now familiar, clever and cutting statements was delivered at a press conference on the day of Rajaratnam’s October 2009 arrest:
“Greed, sometimes, is not good.”
He also sent a warning to Wall Street: “Today, tomorrow, next week, the week after, privileged Wall Street insiders who are considering breaking the law will have to ask themselves one important question: ‘Is law enforcement listening?'”
Additional reporting by Matthew Goldstein; Editing by Martha Graybow and Steve Orlofsky