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Corzine’s spokesman, Steven Goldberg, said in a statement the blame for MF Global’s collapse rested with those outside the company.
He said the report “intentionally ignores the failure of counterparties to fulfill their commercially contracted obligations to MF Global and the profound impact this failure had on MF Global’s customers and other stakeholders.”
Freeh was appointed by the U.S. Bankruptcy Court in Manhattan to oversee the company’s liquidation for the benefit of creditors.
His responsibilities include pinpointing possible legal liabilities of the management, and he singled out the “failures” of Corzine, former chief operating officer Bradley Abelow and former chief financial officer Henri Steenkamp.
The three “contributed to the losses suffered by Holdings Ltd and FinCo, which the trustee estimates to be between $1.5 billion and $2.1 billion.”
Freeh’s report follows several investigations by regulators as well as by a separate trustee appointed to recover funds for customer trading accounts. An attorney who is leading a class action on behalf of trading clients said Freeh’s report did not reflect that it is unprecedented to have a shortfall in customer trading accounts in the failure of a brokerage.
“Negligence isn’t strong enough to describe the conduct of Corzine and the other officers,” said Merrill G. Davidoff, an attorney with Berger & Montague. “I think he is understating the scope of the problem.”
Freeh’s report does not use the word “criminal,” although Edith O’Brien, an assistant treasurer at MF Global’s brokerage business, invoked her Fifth Amendment right against self-incrimination when called to appear before lawmakers last year.
Freeh said in a footnote in the document that he believed the customer shortfall was as small as $6 million and that there might even be a $120 million surplus. Davidoff said the shortfall was in the “hundreds of millions dollars.”
The trustee for the trading clients, James Giddens, has said he expects to recover at least 93 percent of their funds.
His spokesman said in a statement on Thursday that the remaining shortfall may be reduced by recovering money from former officers and directors of MF Global Holdings, the auditors and the Chicago Mercantile Exchange.
Many of the lawsuits over MF Global’s collapse have been consolidated in federal court in Manhattan.
On Friday, U.S. Bankruptcy Judge Martin Glenn will be asked to approve MF Global’s plan of liquidation. General unsecured creditors of the holding company are expected to collect between 14.7 cents and 34 cents on the dollar of what they are owed, according to court documents.
The case is MF Global Holdings Ltd, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059