Publicity looms over PwC, MF Global trial in New York

By By Jonathan StempelFeaturesReuters

Publicity over the recent Academy Awards and Wall Street hung over a Manhattan courtroom on Monday as lawyers struggled to find jurors to decide whether PricewaterhouseCoopers helped cause the collapse of MF Global Holdings Ltd, a commodity brokerage once headed by former New Jersey Governor Jon Corzine.

Continue Reading Below

MF Global's bankruptcy plan administrator is seeking roughly $3 billion in damages, accusing PwC of negligence for approving an accounting method that let Corzine, also former Goldman Sachs co-chairman, make a huge, ill-fated wager on European sovereign debt.

PwC plans to argue that its accounting advice was reasonable, and that decisions by Corzine and others at MF Global led to the company's October 2011 bankruptcy.

Jury selection began eight days after the Academy Awards fiasco when a PwC accountant mistakenly handed over the wrong envelope for Best Picture award to the actor Warren Beatty, who then wrongly said that "La La Land" rather than "Moonlight" won the Oscar. PwC later apologized. Before prospective jurors arrived, U.S. District Judge Victor Marrero admonished lawyers to refrain from mentioning the blunder.

"I gave no authority to make any reference, direct or indirect, to any Hollywood production," he said.

Later, Marrero dismissed at least four prospective jurors after asking if they had heard about PwC.

The judge and lawyers also questioned many prospective jurors behind closed doors about what they knew about Corzine, who is expected to testify during the roughly five-week trial.

Corzine, a former U.S. senator, has never been accused of fraud or intentional misconduct related to MF Global.

The MF Global administrator is expected to argue that investors were spooked by Corzine's $6.3 billion bet on European sovereign debt, which together with a large quarterly loss, credit rating downgrades and margin calls helped spur the brokerage's rapid descent into Chapter 11.

MF Global's collapse sparked federal probes, after it emerged that $1.6 billion of customer funds had gone missing and the company had improperly used customer money to shore up liquidity. The money was later recovered.

The firm in April 2015 reached a $65 million settlement with former MF Global shareholders and bondholders but denied wrongdoing.

Corzine agreed in January to pay a $5 million civil fine to settle a U.S. Commodity Futures Trading Commission lawsuit.

(Reporting By Jonathan Stempel in New York; Editing by Noeleen Walder and Cynthia Osterman)