Former New Jersey Governor Corzine Near $5 Million CFTC Settlement

Features Dow Jones Newswires

Former New Jersey Governor and Goldman Sachs Group Inc. Chief Executive Jon Corzine is nearing a deal to pay $5 million to end a U.S. regulator's lawsuit stemming from the 2011 collapse of his commodities brokerage, MF Global Holdings Ltd., according to people familiar with the matter.

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Mr. Corzine reached the tentative settlement with the Commodity Futures Trading Commission in June, submitting to a ban from trading client money in commodities and others assets regulated by the commission, the people said. A final deal has been on hold as the commission negotiates a resolution to its case against another former executive at MF Global, the people said. The terms may still shift ahead of a final deal, several people said.

An accord would close a long and messy chapter in Mr. Corzine's four-decade career, which touched the pinnacles of Wall Street and politics before ending abruptly with the failure of MF Global.

MF Global collapsed in 2011 after a series of big bets on European bonds during a volatile stretch for the markets alarmed investors and raised questions from regulators. The investment strategy was championed by Mr. Corzine, who rose through the ranks as a bond trader at Goldman.

In MF Global's final days, a $1.6 billion shortfall in customer funds emerged. It took more than two years for the trustee overseeing the liquidation of MF Global's brokerage unit to collect and return the money to customers. Mr. Corzine has denied wrongdoing and said he never directed anyone to dip into customer funds.

Criminal prosecutors investigated the roles Mr. Corzine and other executives played in the shortfalls, but brought no charges. A federal judge approved a $132 million settlement between former MF Global executives, including Mr. Corzine, and the firm's customers earlier this month, resolving most of the legal headaches stemming from MF Global. Only the CFTC case remained unresolved.

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The CFTC sued Mr. Corzine and a top lieutenant in 2013 in a civil case and accused them of overseeing the misuse of nearly $1 billion in customer funds. In the lawsuit, regulators said Mr. Corzine "bears responsibility" for the New York firm's unlawful actions and said the two violated the Commodity Exchange Act, which requires brokers to segregate customer funds.

The CFTC case against Mr. Corzine and MF Global's treasurer, Edith O'Brien, had been scheduled to go to trial next month, but that date was canceled as both former executives worked to reach a deal with the agency, according to court records.

Ms. O'Brien's lawyer has said the case against his client was "meritless."

It is unclear what the settlement will mean for Mr. Corzine's interests in the markets. He is currently investing his own money through a family office.

The negotiations come during a difficult political environment for Wall Street´┐Żand a presidential election year. Mr. Corzine is a Democrat and a former elected official, and a one-time head of Goldman, which has faced criticism by both major parties for its actions during the financial crisis.

Mr. Corzine's agreement was presented to the three-member commission in June, but was met with questions from both Democratic commissioner Sharon Bowen and Republican J. Christopher Giancarlo, according to people familiar with the discussions.

At least one of the commissioners asked whether the deal sufficiently punished Mr. Corzine and whether his agreement was fair compared with a deal that Ms. O'Brien would receive, the people said.

As of May, MF Global's insurers had covered $97 million worth of legal defense costs for the company's sued executives, court papers say. The earlier settlement relied on the remaining insurance coverage of $184 million, with some funds reserved for the CFTC action. It is unclear if Mr. Corzine can use insurance money to cover the CFTC penalty.

Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com, Justin Baer at justin.baer@wsj.com and Andrew Ackerman at andrew.ackerman@wsj.com