By Douwe Miedema
WASHINGTON - A top U.S. regulator charged former MF Global chief Jon Corzine over the collapse of the futures brokerage, placing the former New Jersey governor firmly at the heart of one of the country's 10 biggest bankruptcies.
The Commodity Futures Trading Commission said on Thursday it will seek to ban Corzine and former Assistant Treasurer Edith O'Brien from the industry in a civil case, and also seek penalties against the two.
"Mr. Corzine is charged with being more than a passive actor in the downfall of MF Global," CFTC enforcement head David Meister said on a call with journalists. "He lacked good faith and ... violated his supervision obligations."
The CFTC also settled with MF Global Inc, which agreed to pay a $100 million penalty and all the funds still owed to customers.
MF Global collapsed in October 2011 under the weight of aggressive bets on sovereign debt, after Corzine -- a former Goldman Sachs co-chief executive and New Jersey governor -- sought to transform the brokerage into a global investment bank.
But investors quickly lost confidence in the company's health when the European economy weakened in the middle of 2011, asking MF Global to put up more money to secure the trades, and causing its remaining cash to rapidly vanish.
Customers were left reeling after it was discovered that about $1.6 billion was missing from their accounts, something that is explicitly banned under futures regulation, and which caused a political fire storm.
In its investigations, the CFTC found that MF Global's company treasurer was describing the liquidity situation as "skating on the edge" and recommended to "take the keys away" from Corzine, which did not happen.
Andrew Levander, a lawyer for Corzine, did not immediately respond to a request for comment. Neither did a Corzine spokesman. O'Brien's lawyer had no immediate comment.
Corzine has often struck a defiant tone when testifying before lawmakers about the debacle, pointing the finger at back-office dealings he had no insight in and denying knowledge of any instructions to misuse customer funds.
O'Brien invoked her constitutional right against self-incriminated and refused to answer questions when called to testify. But the CFTC's complaint places the two firmly at the heart of the $41 billion bankruptcy.
"Our investigation also recovered an audio recording of (O'Brien) saying to a colleague that it could be 'game over' from a regulatory perspective if the customer funds weren't returned," Meister said on the call.
Four years after the end of the financial crisis, there have been few prosecutions, and there is increasing pressure on regulators to bring more of those responsible for the credit collapse to task.
The CFTC said it would continue to press charges against MF Global's holding company.
Louis Freeh, the trustee liquidating MF Global, has said in the past he believes customers would get all their money back when the company in April won court approval to liquidate its assets, and end its $40 billion bankruptcy.
Most customers have already been reimbursed for about 93 percent of the value of their accounts.