By Jonathan Stempel
NEW YORK, Oct 22 (Reuters) - Jon Corzine's lawyers say
allegations that he fraudulently ran MF Global Holdings Ltd make
"no sense" and that a lawsuit seeking to hold him and others
responsible for the futures brokerage's bankruptcy must be
thrown out.
Corzine, former colleagues and several banks, including
JPMorgan Chase & Co and Goldman Sachs Group Inc, filed papers on
Friday night to dismiss investor litigation over MF Global's
collapse. The company's Oct. 31, 2011, bankruptcy was Wall
Street's biggest meltdown since 2008.
Plaintiffs led by the Virginia Retirement System and the
province of Alberta, Canada, have accused MF Global in the U.S.
District Court in Manhattan of inflating its ability to manage
risk, obscuring risks from a big bet on European sovereign debt
and improperly accounting for deferred tax assets.
But lawyers for Corzine, MF Global's former chairman and
chief executive officer, said there was no securities fraud.
They said the allegations merely suggested that Corzine
mismanaged the company, was too optimistic, or failed to predict
a liquidity squeeze prompted in part by credit rating
downgrades.
Corzine's lawyers also said the former New Jersey governor's
ownership of 441,960 MF Global shares, including some bought in
August 2011 when the exposure to European sovereign debt had
peaked, showed that he had no motive to commit securities fraud.
"Plaintiffs have not alleged any facts from which it could
be inferred that Mr. Corzine knew prior to October 30, 2011 that
MF Global would not be able to survive," Corzine's lawyers
wrote. "Plaintiffs' theory that Mr. Corzine had fraudulent
intent or participated in a fraud makes no sense."
The bank defendants, in a separate court filing, contended
that MF Global's business strategy and risks were fully
disclosed in public filings.
Salvatore Graziano and Jonathan Plasse, lawyers who
represent the lead plaintiffs, did not immediately respond to
requests for comment.
The Virginia Retirement System said it had managed about
$53.1 billion of pension fund and other assets as of June 30.
Alberta, through its Alberta Investment Management Corp unit,
said it oversaw about C$70 billion (US$70.4 billion) of pension
fund and government assets.
Their lawsuit, which seeks class-action status, covers
investors in MF Global common stock, convertible bonds and
senior notes between May 20, 2010, and Nov. 21, 2011.
Among the other defendants are former MF Global Chief
Financial Officers J. Randy MacDonald and Henri Steenkamp, seven
former independent directors, and units of Bank of America Corp,
Citigroup Inc, Deutsche Bank AG and Royal Bank of Scotland Group
Plc.
The U.S. Department of Justice and Commodity Futures Trading
Commission are also investigating MF Global's collapse, which
has left an estimated $1.6 billion of customer funds missing.
Criminal charges stemming from the collapse are unlikely,
and civil cases are the more likely outcome, people familiar
with the matter have said.
The case is DeAngelis et al v. Corzine et al, U.S. District
Court, Southern District of New York, No. 11-07866.
For Virginia Retirement System, and Alberta, Canada:
Salvatore Graziano of Bernstein Litowitz Berger & Grossmann and
Jonathan Plasse of Labaton Sucharow.
For Jon Corzine: Benjamin Rosenberg of Dechert.
For bank underwriters: Mark Kirsch of Gibson Dunn &
Crutcher.
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