By Dow Jones Business News, November 04, 2013, 02:37:00 PM EDT
By Joseph Checkler
Jon S. Corzine wants a judge to dismiss the amended lawsuit against him and other former MF Global Holdings Ltd.
executives, saying it is filled with "disparaging characterizations" of old facts.
In a Friday filing with U.S. Bankruptcy Court in Manhattan, lawyers for Mr. Corzine and his co-defendants said the
amended complaint, filed in September by MF Global's litigation trustee, doesn't show they ignored risks or breached
their fiduciary duty when MF Global's sour foreign debts brought the company down.
"Rather than rely on factual allegations, the Amended Complaint insinuates the Defendants' bad faith through
allegations of half-truths," said lawyers for Mr. Corzine, the company's former chairman and chief executive, as well as
former MF Global Chief Operating Officer Bradley I. Abelow and former Chief Financial Officer Henri J. Steenkamp. A
lawyer for Nader Tavakoli, the litigation trustee, didn't respond to a request for comment.
MF Global's litigation trustee in September filed a suit saying the executives acted "recklessly" and with "gross
negligence" by using customer funds to cover for the foreign debt bets gone bad and drove the company into Chapter 11.
Mr. Tavakoli, chief executive of investment firm EagleRock Capital Management, said Mr. Corzine was the mastermind of a
"scheme" to buy the debt with borrowed money and artificially inflate MF Global's revenue.
In seeking dismissal, lawyers for Mr. Corzine and the others said that because they didn't intend for the customer
funds to be misused, they didn't act in bad faith. They also said the positive revenue generated by their "repurchase-
to-maturity" financing transactions weren't artificial, but rather were part of the company's new business plan.
Mr. Tavakoli's suit amended--and went further than--one filed earlier this year by Louis J. Freeh, the former Federal
Bureau of Investigation director who served as MF Global 's Chapter 11 trustee but has since been discharged from his
duties because the company is officially out of bankruptcy. Messrs. Corzine, Abelow and Steenkamp also sought dismissal
of that suit before it was amended.
MF Global collapsed into bankruptcy on Oct. 31, 2011, after Mr. Corzine's big bets on European sovereign debt went
bad. In the aftermath, an estimated shortfall of $1.6 billion was found in brokerage customer accounts.
Since that time, however, trustees for both the company and its brokerage business has worked to recover money for
creditors, and the shortfall is all but gone.
Individual customers of MF Global's brokerage, which is being managed by James W. Giddens, have already recovered most
of the funds that were caught up in the firm's collapse. This week, Mr. Giddens will ask a judge if he can pay out the
rest of the customer money.
For creditors of the brokerage's parent company, a judge approved a proposal earlier this year that would pay holders
of about $1 billion in MF Global 's unsecured bonds between 12 cents and 42 cents on the dollar for their claims, with
claims stemming from a $1.2 billion revolving loan recovering between 27% and 80%.
Still, Mr. Corzine, a former Goldman Sachs Group Inc. ( GS ) chairman and New Jersey governor, is facing multiple
lawsuits over the implosion, including the one from the litigation trust, another one from former customers, and one
from the Commodity Futures Trading Commission. Mr. Corzine and other accused executives have denied any wrongdoing.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to
Write to Joseph Checkler at firstname.lastname@example.org.
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