CME vice chairman sues Corzine
BY DAVID ROEDER Business Reporter firstname.lastname@example.org December 15, 2011 6:06PM
Former MF Global Holdings Ltd. Chairman and Chief Executive Officer Jon Corzine testifies on Capitol Hill in Washington, Thursday, Dec. 15, 2011, before the House Financial Services Committee. (AP Photo/Susan Walsh)
Updated: January 17, 2012 8:27AM
A trading firm led by the vice chairman of Chicago-based CME Group Inc. has sued Jon Corzine, former head of MF Global, alleging that he broke laws that bar brokerages from raiding customer funds.
The federal lawsuit is among the first to be filed over the MF Global collapse and bankruptcy filing, which have kept customers from accessing their money and left an estimated $1.2 billion deficit in their accounts.
The plaintiffs in the case show that the MF Global scandal has reached deeply into Chicago futures markets. Two of them are board members of CME, which owns the markets where MF Global did most of its business, the Chicago Mercantile Exchange and the Chicago Board of Trade.
The board members are Charles Carey, who is CME vice chairman, and Joseph Niciforo. They are partners in the firm Henning-Carey Proprietary Trading LLC.
The lawsuit lists six other traders as plantiffs and asks for certification as a class-action case. Peter Carey, one of the lawyers who filed it, said the plantiffs collectively may have “the high seven figures” tied up in MF Global. Peter Carey is Charles Carey’s cousin.
CME is not involved in the suit, which was filed Dec. 8. It has come to light as the exchange operator has used appearances before congressional committees to cast a critical eye on Corzine. CME Executive Chairman Terrence Duffy has said a CME employee reported being told that Corzine “knew about the loans” made from some customer accounts.
In an appearance Thursday before a House subcommittee, Corzine responded to Duffy. Corzine denied advance knowledge of customer funds being tapped as the brokerage’s fiscal state was spiraling downward.
“I did not instruct anyone to lend customer funds to MF Global or any of its affiliates,” Corzine said in his third appearance before a congressional committee in just over a week.
He also said Duffy may be confused in his story, referring instead to an overdrawn MF Global account in which the shortfall was covered with the company’s funds.
But Corzine’s continued claim that he knows nothing about the size of the shortfall or who’s responsible for it drew an incredulous reaction from congressmen.
Besides Corzine, who quit MF Global after its bankruptcy filing Oct. 31, the Carey suit names four other officers of the brokerage: Bradley Abelow, Henri Steenkamp, Michael Stockman and Laurie Ferber.
All executives “willfully aided and abetted” the firm in violating federal law and regulations that apply to futures trading, the suit charged.
A bankruptcy trustee is working to restore money to holders of some 38,000 commodity trading accounts. The trustee has said the process is expected to be finished in a few days and should result in customers getting at least two-thirds of their money back.
But getting the rest may be difficult. The trustee has said his estimate of a $1.2 billion shortfall could be conservative.
Duffy also testified before the House subcommittee Thursday and took another verbal swipe at Corzine. Duffy said that while Corzine claimed to have reduced leverage ratios at MF Global, he also dramatically raised the brokerage’s debt to $6.3 billion from $1 billion.