‘No sense’ to fraud case in Wall St. meltdown
Alberta government part of suit over MF Global bankruptcy
NEW YORK – Jon Corzine’s lawyers say allegations that he fraudulently ran MF Global Holdings Ltd. make “no sense” and that a lawsuit seeking to hold him and others responsible for the bankruptcy of the futures brokerage must be thrown out.
Corzine, former colleagues and banks including JPMorgan Chase & Co. and Goldman Sachs Group Inc. filed papers on Friday to dismiss investor litigation over the company’s Oct. 31, 2011 bankruptcy, which has cost investors an estimated $1.6 billion.
The U.S. Department of Justice and the Commodity Futures Trading Commission are investigating what has been Wall Street’s largest meltdown since 2008.
Plaintiffs led by the Virginia Retirement System and the government of Alberta have accused MF Global in the U.S. District Court in Manhattan of inflating its ability to manage risk, obscuring risks from a big bet on European sovereign debt and improperly accounting for deferred tax assets.
The Alberta government, through the Alberta Investment Management Corp. (AIMCo), a Crown corporation, said it oversaw about $70 billion of pension fund and government assets.
The Virginia Retirement System said it had managed about $53 billion of pension fund and other assets as of June 30.
Their lawsuit, which seeks class-action status, covers investors in MF Global common stock, convertible bonds and senior notes between May 20, 2010, and Nov. 21, 2011.
Leo de Bever, AIMCo’s chief executive, said Tuesday that the corporation would not comment on developments in the case.
Lawyers for Corzine, MF Global’s former chairman and chief executive, said there was no securities fraud.
They said the allegations merely suggested that Corzine mismanaged the company, was too optimistic or failed to predict a liquidity squeeze prompted in part by credit rating downgrades.
Corzine’s lawyers also said that the former New Jersey governor’s ownership of 441,960 MF Global shares, including some bought in August 2011 when the exposure to European sovereign debt had peaked, showed that he had no motive to commit securities fraud.
“Plaintiffs have not alleged any facts from which it could be inferred that Mr. Corzine knew prior to October 30, 2011 that MF Global would not be able to survive,” Corzine’s lawyers wrote.
“Plaintiffs’ theory that Mr. Corzine had fraudulent intent or participated in a fraud makes no sense.”
The bank defendants, in a separate court filing, contended that MF Global’s business strategy and risks were fully disclosed in public filings.
Salvatore Graziano and Jonathan Plasse, lawyers who represent the lead plaintiffs, did not immediately respond to requests for comment.