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Director & Officers: D&O Risks In the News with MF Global’s Alleged Fraud


The bankruptcy of commodities brokerage MF Global Holdings headed by former New Jersey Governor Jon Corzine has put the spotlight on how accounting maneuvers a la Enron and Lehman Brothers can keep certain financial obligations off a company’s books, making a firm look less indebted and thus less a risk than it really was. In fact, the SEC is now investigating the accounting treatment that helped to mask MF Global’s exposure to risky foreign sovereign debt.

MF Global sought Chapter 11 bankruptcy after a $6.3 billion bet on the bonds of some of Europe’s most indebted nations prompted regulator concerns and a credit rating downgrade. Since then, a number of clients have had their funds frozen and an on-going investigation has yet to account for missing client funds that were mishandled by the firm. Estimates of the amount of money “missing” have ranged from $200 million to $1.6 billion.

Many are asking where was the MF Global’s board of directors and what did Corzine know? One firm, Block & Leviton, LLP in Boston, filed a lawsuit that claims that Corzine and other top officers “engaged in a scheme to deceive the market and a course of conduct that artificially inflated the company’s stock price, and operated as a fraud or deceit” with respect to its common stock buyers.

It’s been reported that MF Global has $250 million in Directors & Officers insurance coverage, and we’ll see how this all will play out. In the meantime, Jon Corzine has been MIA, with many waiting for a public explanation of what happened.

Axis provides D&O insurance to a variety of companies, including asset management firms and investment funds, public entities, non-profits, healthcare organizations, community associations, educational institutions, and many more. We can guide you through the complexities of D&O coverage based on our vast experience. Our team of experts and specialists will keep you informed of the latest industry news and what to look out for. D&O insurance provides much needed protection against the costs of legal defense and indemnity coverage for the business, directors and officers, and employees in suits alleging internal mismanagement. Call us at (877) 787-5258 to discuss your D&O needs.

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Blogged on: December 20, 2011 by Mike Smith
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