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NY judge: Regulator's lawsuit can proceed against ex-governor of New Jersey over MF Global

NEW YORK, N.Y. - A U.S. regulatory agency's lawsuit can proceed against former New Jersey Gov. Jon Corzine over the collapse of a brokerage firm in one of the nation's largest bankruptcies, a federal judge said Tuesday.

The judge said allegations by the agency, the Commodity Futures Trading Commission, provide "reasonable inferences" that Corzine illegally transferred funds from customer-segregated accounts while he was chief executive officer of the New York City-based MF Global Holdings Limited. More than $1 billion in customer money vanished. A former MF Global assistant treasurer is also accused.

The judge, Victor Marrero, rejected efforts by Corzine's lawyers to dismiss the lawsuit and other lawsuits making similar claims. He said he must accept the claims as true at this early stage of the litigation.

Corzine is a former co-chairman of Goldman Sachs, a former Democratic U.S. senator and the former governor of New Jersey. He became MF Global's CEO in March 2010 until bankruptcy proceedings began in October 2011.

In an updated version of its lawsuit filed last month, the Commodity Futures Trading Commission accused Corzine, other executives and MF Global of damaging thousands of customers in the last week of October 2011 by using nearly $1 billion of their money to support its own proprietary operations and the operations of its affiliates.

"Corzine bears responsibility for MF Global's unlawful acts," the lawsuit said. "He held and exercised direct or indirect control over MF Global and Holdings and either did not act in good faith or knowingly induced these violations."

In a response to the lawsuit in late December, Corzine's lawyers said their client denied the claims, saying the allegations were "overly broad, vague, conclusory, or contain terms which are undefined and susceptible to different meanings."

They said Corzine had no duty to disclose information he was accused of withholding and did not knowingly participate in any alleged misconduct.

"At all relevant times, Mr. Corzine acted without intent to defraud and without recklessness or negligence," the papers said. "Mr. Corzine justifiably relied on information and advice provided to him by others."

The lawyers said any losses were "not caused by Mr. Corzine" but could fairly be blamed on "macroeconomic, market and financial industry events ... that constrained MF Global's access to the credit and capital markets and affected its liquidity."

They said that if the allegations which Corzine denies are true, then Corzine was the "victim of fraud, deceit, misrepresentations, concealment, negligence, breach of contract, and/or breach of duties practiced upon him by others."

Lawyers for Corzine did not immediately respond to messages seeking comment Tuesday.

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