Former New Jersey governor and CEO of MF Global Inc Jon Corzine has agreed on a deal with the U.S. Commodity Futures Trading Commission (CFTC) to pay $5 million to end the regulator’s lawsuit stemming from the 2011 collapse of commodities brokerage MF Global Holdings, according to a CFTC statement.
In addition to Corzine’s penalty, MF Global Assistant Treasurer Edith O’Brien will also pay $500,000 to settle charges over her role in mishandling the affairs of MF Global, which was liquidated in bankruptcy. The CFTC accused Corzine of failing to implement necessary risk controls and monitor how customer funds were used, and O’Brien of aiding and abetting the misuse of those funds that totaled nearly one billion dollars.
The accord closes a messy chapter in Mr. Corzine’s four-decade career, which also encompasses serving as a former U.S. senator and former co-chairman of Goldman Sachs. The federal court Consent Order also requires Corzine to undertake that he will never act as a principal, agent, officer, director, or employee of a Futures Commission Merchant (FCM) and that he will never register with the CFTC in any capacity.
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The tentative settlement with the CFTC also includes a ban on seeking or accepting reimbursement or indemnification from any insurance policy with regard to the penalty amount. MF Global’s insurers had covered $97 million of legal defense costs for the company’s sued executives, court papers said. The earlier settlement relied on the remaining insurance coverage of $184 million, with some funds reserved for the CFTC action.
MF Global originally filed for bankruptcy back in October 2011 amidst investor worry over its repeated credit rating downgrades and margin calls. Corzine’s unsuccessful $6.3 billion wager on European sovereign debt was largely seen as the last straw. The investment strategy was championed by Mr. Corzine, who rose through the ranks as a bond trader at Goldman.
Earlier in July, the MF Global reached a $132 million accord to help end the majority of remaining litigation over the brokerage’s 2011 upheaval and eventual collapse. On a related note, a federal judge in August paved the way for the MF Global Holdings Ltd.’s bankruptcy administrator after rejected PricewaterhouseCoopers’ bid to dismiss a $1 billion lawsuit.
The suit accused PwC of dispensing bad accounting advice on how MF Global should handle foreign investments made on highly leveraged European instruments that generated short-term income but saddled it with significant future liabilities.