Stalking Jon Corzine; Meet the Hedge Fund Manager Who Will Not Rest until the Former Governor of New Jersey Is in Prison

By Goodman, Leah McGrath | Newsweek, April 10, 2015 | Go to article overview

Stalking Jon Corzine; Meet the Hedge Fund Manager Who Will Not Rest until the Former Governor of New Jersey Is in Prison


Goodman, Leah McGrath, Newsweek


Byline: Leah McGrath Goodman

Few of the financial titans who ran firms into the ground over the past decade are as deeply connected on Wall Street and in Washington, D.C., as Jon Corzine, onetime New Jersey governor and U.S. senator and the former CEO of both Goldman Sachs and the now-defunct brokerage house MF Global.

A testament to that may be how easily he bounced back from his grilling in Congress over the 2011 bankruptcy of MF Global--the eighth-largest bankruptcy in U.S. history--to be welcomed back into society circles. In August, Corzine hosted a "Ready for Hillary" party in the Hamptons with his new wife, psychotherapist Sharon Elghanayan, along with a group of well-heeled co-hosts that included actress Ashley Judd.

Yet James Koutoulas, CEO of $100 million Chicago hedge fund Typhon Capital Management, is determined to see Corzine get his comeuppance. "I am going to keep fighting until Corzine is in jail," he says. "The evidence we need to charge him is there. We need to make clear as a society that the next time a sociopath CEO says, 'Do I go out of business or do I cheat?' and chooses to cheat, he is going to be thinking about it in an orange jumpsuit in state prison."

Koutoulas, 34, faces formidable headwinds. Corzine, a former Democratic politician, has powerful friends, including President Barack Obama and Hillary Clinton, for whom he has raised hundreds of thousands of dollars in donations, including his own money.

And the former MF Global CEO has made it clear he is not about to give in. While many have forgotten about Corzine's legal travails, he is awaiting trial in U.S. District Court on civil charges brought by watchdog agency the Commodity Futures Trading Commission (CFTC), which accuses him of failing "repeatedly and unlawfully" to prevent more than $1 billion in customer funds from being misused as MF Global unraveled in the fall of 2011. With no trial date set, though, the civil suit could take years and will not result in jail time.

The Department of Justice (DOJ) and the FBI worked with the CFTC on the investigation but opted not to pursue criminal charges against Corzine for his actions as MF Global went bankrupt.

Criminal convictions are much harder to win than civil ones. "Criminal actions have a higher standard; you have to prove your case beyond a reasonable doubt," says Ron Filler, a New York Law School professor who specializes in derivatives, futures and options law. He adds that it looks as if the DOJ "did not think it had enough evidence to do that." Also, a high-level Washington lawyer, who agreed to speak to Newsweek on background, points out that Corzine hasn't agreed to settle with the CFTC, which could mean he thinks he has a strong defense. In 2014, he failed to win a dismissal of the case the CFTC had brought against him.

This much is established: Tens of thousands of ordinary Americans lost their money as MF Global fought insolvency--and the paper trail indicates the top brass who used customer money illegally were receiving instructions from Corzine.

Perhaps the most astounding fact of the MF Global case is that the wire transfers of customer money for improper reasons is not in question, nor is there any question which executives were calling the shots in the final days.

Corzine joined MF Global as CEO in the spring of 2010, after losing his bid for a second term as New Jersey governor in 2009 and being ousted from Goldman in a palace coup a decade earlier. The CFTC said he had "a plan to transform the firm from a futures broker into a major investment bank."

"Corzine's strategy called for making increasingly risky and larger investments of the firm's money," the CFTC said. Just over a year into his tenure, MF Global was already in trouble, as the multibillion-dollar bets he made on Spanish, Italian and other European bonds cratered during the eurozone crisis. Losses mounted and ate into MF Global's cash position. …

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