Corzine may have violated rules he helped establish

While it’s too soon to tell whether former New Jersey Gov. Jon Corzine violated the law while he was CEO at the securities firm MF Global Holdsings Ltd., experts in corporate governance say he may have violated the Sarbanes-Oxley reform act he helped bring about.

While serving as a U.S. senator, before he was elected governor, Corzine was one of the sponsors of the 2002 Sarbanes-Oxley reform act that requires top executives to certify the accuracy of financial statements.

“Sarbanes-Oxley contains both civil and criminal sanctions. The huge issue with Sen. Corzine is whether there is going to be a criminal prosecution,” said Wayne Eastman, who teaches business law and ethics at Rutgers University. “Sen. Corzine would be very happy if he is only civilly sued.”

Eastman said the U.S. Attorney’s office should make investigating whether Corzine committed fraud before resigning from MF Global a priority.

While executives are required to review a company’s internal controls, they don’t necessarily detect all fraud, according to Jill Fisch, a University of Pennsylvania law school professor.

Fisch said she questions whether securities laws really are enough to reduce the incentives for improper conduct.

“I think one of the questions that it raises is whether Sarbanes-Oxley and even Dodd-Frank reduces the incentives for this kind of conduct,” said Fisch noting that MF Global is one of a series of financial scandals in the last few years.

Without some official action, Eastman said, there will be a suspicion that the rules are stacked in favor of the big guys, especially when they happen to be powerful politicians.