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CFTC Expected to Recommend Civil Suit Against Former MF Global CEO Jon Corzine

Source: Dow Jones

Posted on 26 Jun 2013 by Neilson

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civil suit against CorzineThe U.S. Commodity Futures Trading Commission is expected to recommend a civil lawsuit against former MF Global Holdings Ltd. chief executive Jon S. Corzine for his role in overseeing the now-bankrupt securities brokerage.

CFTC officials have told lawyers for Mr. Corzine the commission would recommend the agency file a suit as early as this week, a person familiar with the case said. Commissioners at the CFTC would have to vote on any recommendation to file charges against Mr. Corzine.

In this case, only four of the five commissioners would vote to approve the action. CFTC Chairman Gary Gensler recused himself from the investigation shortly after it started because of his ties with Mr. Corzine at Goldman Sachs Group Inc. (GS), where the two were co-workers in the 1990s.

A civil suit would be another chapter in a long ordeal for former MF Global customers and Mr. Corzine, a former New Jersey governor and senator who also served as chairman of Goldman during the 1990s. Criminal and civil investigations have swirled around the firm and its former officials after an estimated $1.6 billion in money was improperly moved from customer accounts in the days before the firm's Oct. 31, 2011 bankruptcy.

The criminal case hasn't progressed to date, but the civil case is moving ahead at the CFTC, which regulates brokerages like MF Global that specialize in futures contracts.

In multiple Congressional hearings, Mr. Corzine denied any role in the movement of customer money, saying he didn't know about it until after the fact.

Mr. Corzine's lawyers have pointed out that MF Global's collapse, and the subsequent shortfall in customer funds, occurred in part because of the actions of MF Global's counterparties and bankers. Lawyers also have noted that much of the customer money has been returned.

A civil case against Mr. Corzine is likely to focus on his supervision of the firm, not details of money movement in the final days before the firm's bankruptcy filing, the person familiar with the case noted. If the CFTC files civil charges against Mr. Corzine, it could be because the CFTC decided not to pursue a settlement with him or because settlement talks were unsuccessful.

In a statement, a spokesman for Mr. Corzine, Steven Goldberg said: "The CFTC apparently intends to bring what would be an unprecedented and meritless civil enforcement action against Mr. Corzine. There is no legal or factual basis for the CFTC's attempt to blame Mr. Corzine for alleged mishandling of customer funds in the last days of MF Global." The potential CFTC lawsuit was reported earlier in the New York Times.