June 4, 2012 at 11:32 AM ET
MF Global management, including Jon Corzine, failed to institute sufficient controls over its business to prevent it from using customer money to keep itself afloat during a liquidity crisis, according to a scathing report from the trustee overseeing the defunct brokerage's bankruptcy.
The report by James W. Giddens, released Monday, opened the possibility that former Goldman Sachs managing director and New Jersey governor Corzine and other officials of MF Global could be hit with claims over the losses that amounted to about $1.6 billion. The report said it drew no conclusions about any criminal liability.
"My investigation has concluded that management's actions, along with the lack of sufficient monitoring and systems, resulted in customer property being used during the liquidity crisis to fund the extraordinary liquidity drains elsewhere in the business, including margin calls on European sovereign debt positions," Giddens' report to the U.S. Bankruptcy Court in New York City said.
"In light of these conclusions, I have determined there may be valid claims against individuals and entities," it added.
The report said Corzine, former Chief Financial Officer Henri Steenkamp and former Global Assistant Treasurer Edith O'Brien, among others, could be targeted for breach of fiduciary duty and negligence. It said Corzine's rush to develop MF into a global investment banking powerhouse made increased demands on its liquidity that its treasury department could not keep up with.
"The firm often tracked liquidity and ability to transfer funds by informal means that were derived from several different reports, both computerized and oral," said the report.
MF Global filed for bankruptcy last October. Reuters said that a spokesman for Corzine had no immediate comment and that lawyers for Steenkamp and O'Brien were not immediately available.