A new report from the trustee for the liquidation of MF Global places blame for the broker-dealer’s demise on management, moving forward the potential for litigation to recover customer assets. A press release detailed the findings of an independent investigation by the United States Bankruptcy Court for the Southern District of New York into the failure. The trustee noted that “claims, including claims for breach of fiduciary duty and negligence, may be asserted against former MF Global CEO Jon Corzine, former MF Global CFO Henri Steenkamp, and former MF Global assistant treasurer Edith O'Brien, among others.”
The report also cited the change of direction at the broker-dealer after Jon Corzine’s appointment as CEO and Chairman of the Board of MF Global Holdings in March 2010 and his personal direction for MF Global to begin trading European sovereign debt securities. According to James W. Giddens, trustee, “Despite the increased demands on global money management and liquidity, the firm’s Treasury Department did not expand or modernize and the firm never implemented systems or tools for accurate real-time monitoring of liquidity.”
The trustee is quoted as saying, “As attempts were made to transform MF Global into a full-service global investment bank, management failed to add to its Treasury Department and technology infrastructure, which was needed to meet the demands on global money management and liquidity. 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.”
While the trustee is working with law enforcement and regulatory agencies investigating MF Global, it doesn’t act as law enforcement or a regulatory body. The trustee offered no conclusions about possible criminal liability or sanctionable regulatory violations.