Corzine bears responsibility for MF Global’s unlawful acts, the CFTC said yesterday in its complaint. The suit, which requests a jury trial, also seeks monetary penalties and disgorgement of all benefits received, including salaries and bonuses, from the defendants.
“He held and exercised direct or indirect control over MF Global and Holdings and either did not act in good faith or knowingly induced these violations,” the agency said in the complaint, referring to the brokerage unit and the parent company.
Corzine failed to supervise the company’s officers, employees and agents, the regulator said.
“If the CFTC can prove that Mr. Corzine had a sense that the firewall between firm and customer money was at risk, control-person liability would become a viable weapon of the CFTC,” said Seth Taube, a partner at Baker Botts LLP in New York. “Where companies cause great damage, the law recognizes that the man at the top should bear some responsibility, absent evidence of strong internal controls.”
The complaint cites recorded phone conversations between MF Global employees in the firm’s final weeks.
In one conversation on Oct. 6, 2011, about three weeks before the firm’s bankruptcy, the global treasurer said, “We have to tell Jon that enough is enough,” according to the complaint. “We need to take the keys away from him.”
Corzine sought to turn the brokerage firm into a global investment bank that reaped revenue from proprietary trading, according to the complaint. His plans included making larger and riskier investments from MF Global’s funds, the CFTC said.
To achieve that goal, Corzine caused the firm to make significant investments in instruments such as the sovereign debt of European countries, the CFTC said. The plan faltered by late 2011, placing “significant strains on the firm’s capital and liquidity,” the CFTC said.