(Reuters) - Jon Corzine and two of his top executives at defunct commodities brokerage MF Global sought Monday to have dismissed a lawsuit accusing them of hastening the firm’s 2011 collapse.
In court papers filed on Monday in U.S. Bankruptcy Court in Manhattan, lawyers for Corzine, former Chief Operating Officer Bradley Abelow and former Chief Financial Officer Henri Steenkamp lambasted allegations that they acted with gross negligence as the company teetered on the brink.
Louis Freeh, the trustee that wound down MF Global’s bankrupt parent, filed the lawsuit in April, accusing Corzine of pursuing a high-risk business strategy that culminated in the brokerage’s destruction.
“Each of the defendants is protected by the business judgment rule, which serves to bar claims based precisely on the kind of Monday morning quarterbacking in which the trustee is now engaged,” the defendants said in Monday’s filing.
Corzine, formerly the New Jersey governor and head of Goldman Sachs, has also been sued by MF Global’s former commodities trader customers, and by the Commodity Futures Trading Commission. None of the lawsuits pursue criminal charges.
Freeh’s lawsuit paints MF Global’s risk-monitoring procedures as “lacking and in disrepair,” and says Corzine “engaged in risky trading strategies that strained the company’s liquidity and could not be properly monitored.”
Investors were spooked by MF Global’s exposure to $6.3 billion in European sovereign debt, and as MF Global sunk, it dipped into customer accounts to plug liquidity shortfalls, ultimately causing a $1.6 billion gap in customer accounts.
That gap has largely been closed through litigation and other efforts to repay customers.
Freeh accused Corzine, Steenkamp and Abelow of breaching fiduciary duties to shareholders and failing to act in good faith.
The defendants in Monday’s filing said Freeh has no evidence of bad faith, pointing out that they tried to save MF Global.
“On virtually every page of the complaint, the trustee describes the many procedures and controls that the defendants put into place,” they said. “Indeed, the complaint ... shows that the defendants were at all times working to transform MF Global into a profitable business.”
No trial date has been set.
Reporting by Nick Brown; Editing by Cynthia Osterman