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Jon Corzine may be about to be charged with being a bad CEO. Ben Protess reports that the Commodity Futures Trading Commission is planning a civil suit against the former head of MF Global, charging him with failing to meet his responsibilities as the person in control of the brokerage firm. The charges, Protess writes, could result in millions of dollars in fines and a lifetime ban from commodities trading.
Breaking with the tendency of financial regulators to stop short of taking cases to trial, the CFTC will not allow Corzine to settle before filing the lawsuit. The agency may also sue other former MF Global employees, including ex-assistant Treasurer Edith O’Brien.
Kevin Roose observes that the “notable bit of news is what won’t happen to [Corzine]: namely, criminal charges”. That’s not necessarily a surprising development. Reuters reported last year that the criminal investigation was “going cold”.
A spokesman for Corzine said the charges “would be an unprecedented and meritless civil enforcement action”. Insofar as this case is unprecedented, of course, many might cheer regulators’ new prosecutorial zeal: someone needs to be the first.
On the merit of the case, Corzine would seem to be missing one big defense: Jonathan Weil does not think that the ex-New Jersey Governor can argue that “MF’s regulators knew about the company’s problems or had blessed its financial reporting”. As Felix wrote, one of the big takeaways from bankruptcy trustee James Giddens’ report on MF Global’s downfall is that “when regulators started asking him to raise more capital against his risky European bond positions, he just moved a chunk of those positions out of MF Global proper”.
Weil doesn’t expect a quick trial. Corzine, he says, is “fighting for his legacy. Don’t look for any quick resolutions. This case could drag on for years”. Regardless, this isn’t how Corzine imagined his return from Hamptons exile. He reportedly wanted to run a hedge fund, where he would be free to trade European sovereign debt on his Blackberry during meetings without having to worry about running a firm with hundreds of employees. — Ben Walsh
On to today’s links: