We mean business
Comprehensive legal services for businesses
in New Jersey and New York

COVID-19 Notice: In order to best serve you, while being mindful of your health and safety, we are available for consultations and conferences via telephone and video. We can arrange for documents to be prepared, reviewed, signed and exchanged electronically. We are ready to assist you with all of your legal needs.

We are open and ready to assist you. Go to our COVID-19 Updates page to see our latest statement on the crisis and a list of recent news and developments during this challenging time.
comprehensive legal services for businesses

Did brokerage firm’s CEO purposely put customers at risk?

The CEO of a now-collapsed brokerage firm could face criminal charges as well as civil commercial litigation if investigators prove he knew customer funds might be included in a $200 million transfer of funds to an account in the U.K.

MF Global Holding Ltd. CEO John Corzine, also a former governor of New Jersey, gave “direct instructions” to transfer the money to cover an overdraft with JPMorgan Chase & Co. shortly before the brokerage filed for bankruptcy Oct. 31, investigators said. After the firm collapsed, there was an estimated $1.6 billion gap between customer claims and available assets.

To make a criminal case against him, the U.S. Department of Justice would have to prove he deliberately used customer funds to cover the shortfall. But for a civil lawsuit, investors would only have to show that customer funds were in fact used.

An email from the treasurer of the brokerage specified that the $200 million transfer was “Per JC’s direct instructions.” The chief risk officer for JP Morgan, which is the firm’s clearing bank and one of its custodian banks for segregated customer funds, called Corzine to make sure the funds being transferred didn’t belong to customers. The bank was given verbal but not written assurance, according to an inside source. Who gave that assurance isn’t yet clear. But a spokesman for Corzine said the CEO believed the company had hundreds of millions of dollars available to transfer and that he never gave any instruction to misuse customer funds.

Even if he didn’t deliberately put customers’ money at risk, he may be legally liable for his employees’ actions. If he’s found to have directed the transfer of customer funds, he could be tried for fraud. That intent could be shown through direct evidence, such as memos to staffers or their own testimony. If the government can show through circumstantial evidence that Corzine should have known there wasn’t enough company money to avoid dipping into customer accounts, the government still could have a strong case against him. In fact, the circumstantial evidence would make a stronger case because it wouldn’t rely on employee testimony, which could be tainted by bias, memory problems or hidden motivations by workers.

At a time when more and more financial companies are being taken to task for their irresponsibility, it will be interesting to see whether this CEO is held liable both by the government and his customers, who are still out an estimated $1.6 billion.

Source: Blooberg, “MF Global’s Corzine May be Liable if Customer Risk Known,” Linda Sandler and Phil Mattingly, March 25, 2012

Office Location

Dunn Lambert, LLC
East 80 Route 4 Suite 170
Paramus, NJ 07652

Paramus Law Office Map

Dunn Lambert, LLC
1745 Broadway, 17th Floor
New York, NY 10019
New York Law Office Map

Phone: 201-957-0874
Fax: 201-291-0140

Phone: 201-291-0700
Fax: 212-519-9804
Best Lawyers | Best Law Firms | U.S.News & world report | 2017

GET ANSWERS from a firm
with a sense of business.


Review US
FindLaw Network