Union Pensions Sue Bulge-Bracket Banks Over MF Global

(November 19, 2011) – Two union pension plans have sued Goldman Sachs, JP Morgan, Bank of America/Merrill Lynch, Citigroup, Deutsche Bank, RBS, and Jeffries & Co., alleging that the banks made misleading statements about the exposure of now-failed investment house MF Global.

Jon Corzine—the former Goldman Sachs CEO and head of MF Global—is also named in the lawsuit alongside the banks and MF Global itself. The IBEW Local 90 Pension Fund and the Plumbers & Pipefitters’ Local #562 Pension Fund filed the suit, and are attempting to gain class action status, according to reports from Bloomberg. The case is IBEW Local 90 Pension Fund v. Corzine, 11-8401, U.S. District Court, Southern District of New York.

The suit alleges that MF Global was able to raise upwards of $900 million because its exposure to European debt—which eventually led to its collapse—was being hidden.

MF Global filed for bankruptcy protection in late October. It had made large bets on European sovereign debt under the leadership of Corzine, and questions have been raised over the firm’s use of customer money in the firm’s proprietary trading accounts. The firm is currently under investigation over the issue of customer fund use by the Federal Bureau of Investigations, the CFTC, and the Securities and Exchange Commission (SEC).

Union pension funds have been prodigious launchers of lawsuits following the financial crisis. In March 2011, the Arkansas Teachers Retirement System, the West Virginia Investment Management Board, and the Plumbers and Pipefitters National Pension Group were named as co-lead plaintiffs in an investor lawsuit against Goldman Sachs Group which alleged that the banking giant had misled investors over its ABACUS credit derivative, over which Goldman had already paid a $550 million settlement to the SEC. In March 2010, the Plumbers and Steamfitters Local 773 Pension Fund sought class-action status in a lawsuit accusing Canadian bank CIBC of securities fraud relating to mortgage-backed securities.