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Breach-of-duty suit vs. Corzine possible
Trustee: MF Global didn’t have capital for the risks he led it to take
James Giddens, the trustee overseeing the liquidation of the company, said in a bankruptcy court filing Monday that he may sue Mr. Corzine, who also served in the Senate, for breach of fiduciary duty and negligence.
Mr. Giddens said his investigation found that Mr. Corzine, who took over as MF Global CEO in March 2010, led the company to trade in unsafe securities and take on far greater risk than comparable companies did.
Mr. Corzine declined comment through a spokesman.
He hoped to remake MF Global from a modest brokerage firm into a Wall Street powerhouse. But it filed for bankruptcy protection, crippled by disastrous bets on European debt, less than two years after Mr. Corzine took the top job.
The bankruptcy was the eighth-largest in the United States and the largest on Wall Street since the 2008 collapse of Lehman Brothers.
Mr. Giddens, in a 275-page report filed with the bankruptcy court, said MF Global’s business “dramatically changed” after Mr. Corzine took over and began trading European debt securities under his own “personal direction.”
It was a very risky bet, and it turned out to be a bad one. European countries were teetering under massive debt loads, and some ultimately had to be saved by bailouts. The value of the securities fell dramatically.
About $1.6 billion was found to be missing from client accounts when the company failed. Much of the missing money belonged to farmers, ranchers and other business owners who used MF Global to reduce their risks from fluctuating prices of commodities such as corn and wheat. The FBI and federal regulators are investigating.
Mr. Corzine has told Congress he did not know customer money was missing until the day before MF Global collapsed. But Mr. Giddens said in his report that top management was partly responsible for the disappearance of customer money.
The trustee also threatened to sue JPMorgan Chase if he does not reach an agreement in his discussions to retrieve money that was transferred to the bank from MF Global. JPMorgan held MF Global funds in several accounts and also processed the firm’s securities trades.
The bank already has returned $608 million to the firm since the filing. JPMorgan declined comment on the report.
The trustee’s report painted a damning portrait of MF Global as a company that was in over its head as it experienced explosive growth. Worries about liquidity only increased after Mr. Corzine joined the firm and pursued a plan to transform the company into a global economic force. But MF Global never had the capital to underwrite Mr. Corzine’s plans, according to Mr. Giddens.
Why such hatred toward America's freedom of religion?
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Independent voices from the The Washington Times Communities
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