Ruling upholds Virginia Retirement System, AIMCo complaint against MF Global

Corzine
Jon S. Corzine

Virginia Retirement System and Alberta Investment Management Corp. may proceed with their class-action securities lawsuit against MF Global Holdings Ltd.; Jon S. Corzine, who was its chairman and CEO; and Goldman Sachs among other defendants, after a ruling Tuesday in U.S. District Court.

In denying a motion to dismiss the case, Judge Victor Marrero of the U.S. District Court in New York likened MF Global's collapse to a train wreck, including $1.6 billion in customer funds that were “improperly commingled and used to cover questionable company transaction.”

The $59.7 billion Richmond-based VRS and the province of Alberta, whose C$70 billion (US$66.9 billion) in pension, endowment and government funds Edmonton-based AIMCo oversees, sued MF Global and underwriters of notes it offered over losses in stock and debt securities caused by the firm's collapse, revelations of missing assets and bankruptcy filing.

“Defendants seem convinced that no one named in this lawsuit could possibly have done anything wrong,” Mr. Marrero wrote in his decision, denying their motion.

VRS and Alberta allege MF Global's offering documents contained inaccuracies and omissions, said Salvatore J. Graziano, partner in law firm Bernstein Litowitz Berger & Grossmann, representing VRS.

MF Global and the underwriters “had a legal obligation to make sure the offering documents are accurate,” Mr. Graziano said.

The lawsuit doesn't specify the losses of VRS and AIMCo. In all, stock- and debtholders' losses were in the hundreds of millions of dollars, Mr. Graziano said.

Because of the ruling, VRS and Alberta may now proceed to take discovery and seek court certification of the lawsuit as a class action; both activities had been on hold because of the motion, Mr. Graziano said. He had no time frame for proceeding.

VRS and Alberta were appointed co-lead plaintiffs in December 2011, he said.

Other defendants include Citigroup Global Markets; Deutsche Bank Securities; J.P. Morgan Securities; Merrill, Lynch, Pierce, Fenner & Smith; RBS Securities; BMO Capital Markets; Commerz Markets; Jefferies & Co.; Lebenthal & Co.; Natixis Securities North America; Sandler O'Neill & Partners; and U.S. Bancorp Investments.

Jeanne Chenault, VRS director of public relations, couldn't be reached for comment. Denes Nemeth, AIMCo manager, corporate communications, said he was unable to respond by press time.