* Employees say stock purchase plans were misleading
* Seeking class-action status
* MF Global declared bankruptcy Oct. 31
By Nick Brown
Dec 5 Past and present MF Global
employees sued ex-CEO Jon Corzine and other executives over
alleged misrepresentations they say destroyed the value of the
Two former employees are seeking class-action status on
behalf of any current or former MF Global worker who bought
company shares through stock purchase plans since mid-2010.
Corzine, the former New Jersey governor and Goldman Sachs chief who resigned as MF Global's CEO on Nov. 4, is one
of 12 defendants in the lawsuit, filed on Monday in federal
court in Manhattan.
Former head of retail Randy MacDonald, Chief Operating
Officer Bradley Abelow and Chief Financial Officer Henri
Steenkamp were also named in the filing.
MF Global, a commodities broker that had been transitioning
to a full-fledged investment bank under Corzine, filed for
bankruptcy on Oct. 31 after losing on about $6.3 billion worth
of bets on European debt.
The employees say Corzine and fellow executives "did not
disclose the crippling effect" of those bets. Steenkamp said in
a May conference call that the positions carried only "minimal"
risk, according to the complaint.
Corzine, meanwhile, said during conference calls that MF
Global had "robust" risk-management strategies in place, and
that he had taken steps to ensure the company would not be
undercapitalized, according to the lawsuit.
In reality, MF Global was severely undercapitalized and
overleveraged, and had been warned about its capital levels by
the Financial Industry Regulatory Authority, the employees
The complaint, which seeks damages and attorneys' fees,
asserts two federal securities counts and a state law claim
that the defendants breached a fiduciary duty.
The employees say Corzine and his staff may have improperly
mixed customer funds with the firm's own money. Regulators
discovered funds missing from customer accounts at the firm's
brokerage, a revelation now at the center of a federal
investigation into whether improper commingling occurred.
The shortfall could be as high as $1.2 billion, according
to an estimate from the trustee liquidating MF's broker-dealer
The employees say MF Global's stock price was about $8 on
May 20, 2010, the earliest purchase date for inclusion in the
proposed class action. The price dipped to $.23 by Nov. 3, a
week after being downgraded to junk status by Moody's
and Fitch Ratings, according to the lawsuit.
The plaintiffs bought MF Global shares through employee
purchase plans at about 15 percent below market value, the
A spokesman for Corzine declined to comment on the lawsuit.
MF Global is not a defendant in the case because of rules
barring certain actions against bankrupt companies.
A spokeswoman for the company could not immediately be
reached Monday evening.
The case is Rodriguez et al v. Corzine et al, U.S. District
Court, Southern District of New York, No. 11-8815.
The MF Global bankruptcy is In Re MF Global Holdings Ltd,
in the same court, No. 11-15059.