A bankruptcy trustee has sued Jon S. Corzine and other former MF Global executives, claiming they were “grossly negligent†in the lead up to the brokerage firm’s collapse.
The action by the trustee, Louis J. Freeh, comes just weeks after he agreed to postpone the lawsuit and enter mediation with Mr. Corzine. It is unclear when those talks broke down.
In the complaint filed in United States Bankruptcy Court late Monday, Mr. Freeh took aim at Mr. Corzine, a former senator and New Jersey governor who became MF Global’s chief executive in 2010. Mr. Freeh, the trustee for MF Global’s parent company and a former director of the F.B.I., also sued two of Mr. Corzine’s top deputies: Bradley I. Abelow, MF Global’s chief operating officer, and Henri J. Steenkamp, the chief financial officer.
“Defendants, in their capacities as officers, breached their fiduciary duties of care, loyalty, and oversight over the company, and failed to act in good faith,†Mr. Freeh wrote.
The lawsuit echoes a report Mr. Freeh issued this month that blamed MF Global executives for engineering a “risky business strategy†and ignoring “glaring deficiencies†in internal controls. The report and the lawsuit also blamed the executives for allowing more than $1 billion in customer money to disappear from the firm.
The lawsuit, which could help Mr. Freeh recover money for MF Global’s creditors, blamed Mr. Corzine for ramping up a risky bet on European debt. While the bonds were not by themselves to blame for the fall of MF Global, the wager spooked the firm’s investors and ratings agencies, helping to send it into a tailspin.
“Corzine engaged in risky trading strategies that strained the company’s liquidity and could not be properly monitored by the company’s inadequate controls and procedures,†Mr. Freeh said.
A spokesman for Mr. Corzine did not immediately respond to a request for comment. But in response to Mr. Freeh’s earlier report, the spokesman for Mr. Corzine argued that “there simply is no basis for the suggestion that Mr. Corzine breached his fiduciary duties or was negligent.†The spokesman, Steven Goldberg, added that “the trustee’s report, with its allegations of negligent conduct, is a clear case of Monday morning quarterbacking.â€
Mr. Corzine, he noted, inherited a firm in 2010 that lost money in each of the previous three years. “Mr. Corzine worked tirelessly and in good faith to turn the business around,†Mr. Goldberg said.
The lawsuit from Mr. Freeh comes on top of other litigation facing Mr. Corzine. Lawyers for Mr. Corzine are also in negotiations with another MF Global trustee and some of the firm’s investors who filed a separate suit against him in 2011
Federal authorities also continue to investigate the misuse of customer money. Mr. Corzine has not been accused of any wrongdoing, and internal e-mails suggest he was not aware that at least some of the customer money was improperly sent to the firm’s banks.
In recent months, customers have recovered much of their missing money. By early April, MF Global’s customers in the United States had recovered about 89 percent of the shortfall.
