Bloomberg News

Corzine Sued for RICO Violation by MF Global Customers

February 03, 2012

(Updates with JPMorgan in third paragraph.)

Jan. 20 (Bloomberg) -- Jon Corzine, MF Global Holdings Ltd.’s former chief executive officer, was sued under U.S. racketeering law by commodity customers alleging he and other executives “unlawfully” took money from their accounts and failed to segregate their money as the law requires.

The suit alleges that hundreds of millions of dollars were transferred from customers’ accounts to other MF Global units, at a time when the company was short of cash and faced calls for collateral as its risky Eurobond and other investments fell in value.

Named in the suit, JPMorgan Chase & Co., the company’s banker, should have noticed the “depletion” of customer money, and should have investigated, according to the plaintiff. The customers are seeking unspecified restitution and damages.

The suit, filed in federal court in Manhattan today on behalf of Robert Marcin and other MF Global segregated account holders by Grant & Eisenhofer PA of New York, is one of at least 10 against Corzine and other MF Global executives. Plaintiffs including the Virginia Retirement System have been competing to lead a consolidated lawsuit seeking so-called class-action status.

Mary Sedarat, a JPMorgan spokeswoman, declined to comment on the suit. Andrew Levander, a lawyer for Corzine, didn’t immediately respond to an e-mail seeking comment.

Following the Rules

JPMorgan did contact MF Global on at least one occasion when customer money was used to pay an overdraft and was reassured the transaction followed all the necessary rules, according to a person familiar with the transfer. Corzine has said his staff told him that a transfer of customer money was following the rules, which allowed for some use of segregated assets.

MF Global filed for bankruptcy listing $41 billion in assets after making bets on European sovereign debt and getting margin calls. The brokerage trustee is giving customers 72 percent of their assets after calculating that $1.2 billion or more is missing from their accounts. The holding company is the parent of a futures brokerage that is being liquidated in a separate court proceeding.

The case is Marcin v. Corzine, 12-cv-0499, U.S. District Court, Southern District of New York (Manhattan).

--With assistance from Bob Van Voris in New York. Editors: John Pickering, Glenn Holdcraft

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


Too Cool for Crisis Management
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus