Tuesday, April 23, 2013

Reuters: Bankruptcy News: UPDATE 1-Ex-MF Global CEO Corzine sued by trustee

Reuters: Bankruptcy News
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UPDATE 1-Ex-MF Global CEO Corzine sued by trustee
Apr 23rd 2013, 13:18

Tue Apr 23, 2013 9:55am EDT

  * Corzine accused of breach of duties, lack of good faith      * Ex-COO, ex-CFO also sued      * MF Global filed for bankruptcy in October 2011          By Jonathan Stempel      April 23 (Reuters) - Jon Corzine was sued by the bankruptcy  trustee liquidating MF Global Holdings Ltd, who  accused the former chief executive of engineering a high-risk  business strategy that culminated in the commodities brokerage's  destruction.      Louis Freeh, the trustee, accused Corzine of breaching his  duties to shareholders and failing to act in good faith, causing  MF Global under his stewardship to lose well over $1 billion in  value prior to its October 2011 bankruptcy.      "The company's procedures and controls for monitoring risk  were lacking and in disrepair," Freeh said in a lawsuit filed  Monday night in U.S. bankruptcy court in Manhattan. "Corzine  engaged in risky trading strategies that strained the company's  liquidity and could not be properly monitored."      Also named as defendants were former MF Global President and  Chief Operating Officer Bradley Abelow and former Chief  Financial Officer Henri Steenkamp.      A spokesman for Corzine had no immediate comment. Lawyers  for the defendants did not immediately respond to requests for  comment.      The lawsuit seeks damages from the defendants. It was not  immediately clear whether insurance covered potential payouts.      MF Global filed for Chapter 11 protection less than two  years after Corzine, a former Goldman Sachs chief and  former New Jersey governor and senator, became chief executive.      The collapse came after markets were spooked by the  company's $6.3 billion bet on European sovereign debt.      Corzine sought to transform MF Global into a global  investment bank, with a strategy that included bets on sovereign  debt of Belgium, Ireland, Italy, Portugal and Spain.      But as Europe's economy weakened in 2011, MF Global was  required to meet margin calls on its trades, and regulators  found that money in customer trading accounts was used to cover  liquidity shortfalls.      MF Global became a cause celebre in Washington after it was  discovered that about $1.6 billion was missing from accounts of  its commodities customers. Much of the money has been recovered.      On April 5, MF Global won court approval of its liquidation  plan, with unsecured creditors recovering as much as 34 cents on  the dollar.       In an April 4 report, Freeh found that reporting systems  were lacking, and failed to alert MF Global officials that  customer money was being misused.       Freeh indicated that he had been preparing to sue Corzine  and others, but chose at the time to wait pending the outcome of  mediation in separate securities class-action litigation.      The case is Freeh et al v. Corzine et al, U.S. Bankruptcy  Court, Southern District of New York, No. 13-ap-01333. The main  bankruptcy case is In re: MF Global Holdings Ltd in the same  court, No. 11-15059.  
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