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Freeh: Corzine negligence led to MF Global collapse

Jon Corzine, former chairman of MF Global, in

Jon Corzine, former chairman of MF Global, in a photo during his days as New Jersey governor (Oct. 20, 2009) Photo Credit: AP

The "negligent conduct" of Jon Corzine and other officers of MF Global Holdings Ltd. contributed to the brokerage firm's dramatic collapse in 2011, according to a report filed Thursday by the bankruptcy trustee.

The report by former FBI director Louis Freeh, filed in U.S. Bankruptcy Court in Manhattan, said the failure of MF Global's officers contributed to losses of as much as $2.1 billion and adds to the growing number of reports and investigations pointing to their liability.

Freeh's 124-page report blamed the collapse on "the risky business strategy engineered and executed by Corzine and other officers and their failure to improve the company's inadequate systems." While the report was sharply critical of Corzine's conduct, it did not focus on one of the biggest mysteries of the MF Global collapse: the misappropriation of funds from customer trading accounts.

MF Global collapsed into bankruptcy in October 2011, less than two years after Corzine, a former New Jersey governor and Goldman Sachs chief, became CEO.

Corzine sought to transform the business into a global investment bank and pursued an aggressive strategy of betting on the sovereign debt of European countries such as Ireland and Portugal.

As Europe's economies weakened in the middle of 2011, MF Global was required to meet margin calls on its trades.

Regulators have found that there was an unprecedented use of money in customer trading accounts to cover liquidity gaps as the company teetered on the brink.

Freeh's report found that reporting systems were lacking and failed to alert the company that customer money was being used.

"These glaring deficiencies were long known to Corzine and management, yet they failed to implement sufficient corrective measures promptly," Freeh wrote in the report.

Corzine has denied any wrongdoing, and his spokesman did not immediately return a call for comment.

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