Corzine Flayed as MF Global Class Action Moves Forward
MANHATTAN (CN) - Former New Jersey Gov. Jon Corzine must bear the brunt of another class action related to the "spectacular financial collapse" of MF Global, a federal judge ruled in a scathing, 79-page order.
About $1.6 billion in customer money disappeared when MF Global collapsed in October 2011, and the fund then failed to account for more than $750 million of that figure. The Commodity Futures Trading Commission filed suit this past June against MF Global Inc., MF Global Holdings Ltd., Corzine as CEO and the assistant treasurer, Edith O'Brien.
Regulators said Corzine had run the company in an arrogant manner and horrified his underlings with bad bets, particularly on European sovereign debt.
A federal judge meanwhile consolidated shareholders suits as one 14-count action against Corzine and 22 other MF Global directors, officers and underwriters in Manhattan.
One of the complaints at issue in the latest ruling is a 198-page class action filed by commodities customers of MF Global represented by a trustee appointed under the Securities Investor Protection Act.
U.S. District Judge Victor Marrero gave that lawsuit a green light on Tuesday.
"In a spectacular financial collapse of the magnitude that plaintiffs exhaustively detail in their amended complaint, an account that draws from and is supported by reports issued by legislative and regulatory bodies on the public record, it is reasonable to infer that someone, somewhere, at some time did something wrong to set in motion such an extraordinary chain of events causing such extensive harm to so many people and interests," the 79-page order states.
Marrero took no stock in defendant MF Global's insistence that it is implausible to accuse their executives of any liability.
"To the grim portrait of those events that plaintiffs depict, defendants' response, stripped down to its essence, suggests that there is nothing wrong with this picture," he wrote.
But MF Global executives "cannot overcome the inconvenient reality that the facts contained in the CAC, if true, give rise to two reasonable inferences: that a massive collapse such as that which MF Global experienced does not occur in a vacuum, nor in a corporate environment characterized by diligent management and vigilant oversight by officers and directors; and that in this case senior MF Global and MFGI officers failed in exercising their legal responsibilities to MFGI's customers," Marrero added.
Some of the judge's barbs flew at the plaintiffs who filed certain claims that "fly in the face of clear precedent from the Second Circuit and the New York Court of Appeals, and they have brought other claims against some defendants who could not plausibly bear responsibility for any of the harm plaintiffs allege," according to the ruling.
This led Marrero to toss claims against PricewaterhouseCoopers (PwC), which audited MF Global from 2010 to 2011.
Marerro also dismissed 10 other counts against MF Global executives, though six others remain. He urged the parties to move forward in a "just and efficient way."
"While this wasteful and rancorous litigation unfolds, investment customers harmed by these unfortunate events must wait for any compensation due them, without knowing how much they will recover or when they will receive any assets they wrongfully lost because of the violations of law claimed in this litigation," Marrero wrote.
Corzine's spokesman Steven Goldberg emphasized the dismissal of "half of the commodities customers' claims against Mr. Corzine on the grounds that they were meritless as a matter of law."
"We believe that discovery in the case will reveal that the remaining claims also are without merit, and that ultimately we will prevail on all counts," Goldberg added.
Attorneys for the other parties did not immediately respond to email requests for comment.