Corzine faces trading ban as CFTC sues in MF Global failure

A U.S. regulator’s lawsuit against Jon Corzine could make him the first former leader of Goldman Sachs Group Inc. to be banned from trading, the industry he returned to after serving as a New Jersey senator and governor.

The complaint filed yesterday by the Commodity Futures Trading Commission seeks to punish Corzine for failing to supervise employees at MF Global Holdings Ltd., which transferred client funds to pay debts in a failed effort to save the firm. Less than a year after the October 2011 bankruptcy, Corzine considered starting a hedge fund, the New York Times reported in August, citing people with knowledge of his plans.

If the CFTC prevails against Corzine, “he’ll face a very serious challenge if he ever wants to be involved in the money-management business again,” said Gregory Bruch, a law partner at Bruch Hanna LLP in Washington and former assistant enforcement director at the Securities and Exchange Commission. “They’re trying to bar him from the business, and that’s going to be a huge fight.”

Corzine, 66, who replaced Stephen Friedman as Goldman Sachs’s leader in 1994, handed off to Henry Paulson in 1999 and became MF Global’s chief executive officer in March 2010 after losing his bid for a second term as New Jersey governor to Republican Chris Christie, 50. The move to MF Global was a step down from Goldman Sachs, once Wall Street’s most profitable securities firm.

Paulson, 67, later became U.S. Treasury secretary and Friedman, 75, served as director of the National Economic Council and chairman of the Federal Reserve Bank of New York. Senior government roles are so common for former Goldman Sachs leaders that current CEO Lloyd C. Blankfein, 58, said last year that he could stay “forever” if he doesn’t land such a job.

Restitution, Penalty

The CFTC also sued former Assistant Treasurer Edith O’Brien and reached a settlement with the company’s brokerage unit, MF Global Inc., which agreed to pay about $1 billion in restitution to clients and a $100 million penalty. The settlement is subject to court approval.

“This is an unprecedented lawsuit based on meritless allegations that Mr. Corzine failed to supervise an experienced back-office professional who was located in a different city and who did not report to Mr. Corzine or even to anyone who reported to Mr. Corzine,” his lawyer, Andrew Levander, said in a statement, referring to O’Brien, who was based in Chicago. “No evidence has been found that contradicts Mr. Corzine’s sworn testimony before Congress.”

Evan T. Barr, a lawyer for O’Brien, wasn’t available for comment.

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