Five years after MF Global's collapse after big, levered bets on European bonds blew up leaving a $1.6 billion shortfall in customer funds, WSJ reports former New Jersey Gov. and Goldman Sachs CEO Jon Corzine is nearing a deal to pay $5 million to end a U.S. regulator’s lawsuit.
Ending what The Wall Street Journal calls a long and messy chapter in a four-decade career which touched the pinnacles of Wall Street and politics...
Mr. Corzine reached the tentative settlement with the Commodity Futures Trading Commission in June, submitting to a ban from trading client money in commodities and others assets regulated by the commission, the people said. A final deal has been on hold as the commission negotiates a resolution to its case against another former executive at MF Global, the people said. The terms may still shift ahead of a final deal, several people said.
Mr. Corzine has denied wrongdoing and said he never directed anyone to dip into customer funds.
Criminal prosecutors investigated the roles Mr. Corzine and other executives played in the shortfalls, but brought no charges. A federal judge approved a $132 million settlement between former MF Global executives, including Mr. Corzine, and the firm’s customers earlier this month, resolving most of the legal headaches stemming from MF Global. Only the CFTC case remained unresolved.
The CFTC sued Mr. Corzine and a top lieutenant in 2013 in a civil case and accused them of overseeing the misuse of nearly $1 billion in customer funds. In the lawsuit, regulators said Mr. Corzine “bears responsibility” for the New York firm’s unlawful actions and said the two violated the Commodity Exchange Act, which requires brokers to segregate customer funds.
The CFTC case against Mr. Corzine and MF Global’s treasurer, Edith O’Brien, had been scheduled to go to trial next month, but that date was canceled as both former executives worked to reach a deal with the agency, according to court records.
It's good to have friends.
Mr. Corzine’s agreement was presented to the three-member commission in June, but was met with questions from both Democratic commissioner Sharon Bowen and Republican J. Christopher Giancarlo, according to people familiar with the discussions. At least one of the commissioners asked whether the deal sufficiently punished Mr. Corzine and whether his agreement was fair compared with a deal that Ms. O’Brien would receive, the people said.
Finally, we note that, as of May, MF Global’s insurers had covered $97 million worth of legal defense costs for the company’s sued executives, court papers say. The earlier settlement relied on the remaining insurance coverage of $184 million, with some funds reserved for the CFTC action.
As WSJ concludes, it is also unclear if Mr. Corzine can use insurance money to cover the CFTC penalty.