Bloomberg News

MF Global Trustee Seeks to Subpoena Directors, Officers

November 05, 2011

Nov. 4 (Bloomberg) -- MF Global Inc.’s trustee asked a judge for permission to subpoena the company’s directors and officers, saying he needs to find out if fraud or misconduct led to the bankruptcy and what lawsuits he might bring.

The subpoena would grant the authority to demand documents and question the brokerage firm’s officers, directors, lenders and trading partners, trustee James W. Giddens said yesterday.

“In order for the trustee timely and efficiently to conduct a comprehensive investigation and fulfill his fiduciary and statutory duties, it is imperative that the trustee gain immediate and complete access to information,” he said in a court filing.

Commodity customers of the brokerage formerly run by former Goldman Sachs Group Inc. co-chief executive Jon Corzine have a shortfall of $633 million, or about 12 percent, the Commodity Futures Trading Commission said Nov. 2. Getting information and interviews with “certain business and governmental entities” may require a subpoena, Giddens said.

Using bankruptcy law, a trustee can demand return of transfers made just before the bankruptcy, and other transfers if he can show they weren’t taken “in good faith,” said Stephen Harbeck, president of the Securities Investor Protection Corp., which is overseeing the liquidation of MF Global.

‘Money Back’

“That is what trustees do -- they get the money back,” he said in a phone interview yesterday.

Giddens froze 150,000 customer accounts on Oct. 31, including 50,000 commodities accounts that he aims to transfer to other futures brokers before the weekend, he said yesterday.

CME Group Inc., which runs a futures exchange, is working with other exchanges to match the commodity accounts with brokers, Giddens said through a spokesman in an e-mail.

Corzine hired lawyers from Perkins Coie LLP in New York to represent him in the brokerage liquidation and the reorganization of the parent holding company, Perkins Coie said in a filing in bankruptcy court.

Corzine also has retained Andrew Levander, a Dechert LLP partner, to represent him in the fallout from MF’s collapse into bankruptcy, according to a person with knowledge of the matter. Levander didn’t immediately return an e-mail seeking comment after regular business hours yesterday.

An MF Global investor sued Corzine and the company’s board yesterday for allegedly making misleading statements about the firm’s financial condition before its collapse. Corzine issued statements touting the company’s internal financial controls and liquidity levels that were “materially misleading or untrue,” according to the complaint filed in Manhattan federal court.

Power, Influence

Joseph DeAngelis, who filed a the lawsuit on behalf of himself and other MF Global shareholders, also named as defendants Henri Steenkamp, the New York-based company’s chief financial officer, and Bradley Abelow, its president.

“Defendants had the power and influence -- and exercised such power and influence -- as to cause MF Global to engage in the unlawful conduct and practices,” DeAngelis said. “Each of the defendants is liable as a participant in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of MF Global common stock.”

MF Global sought bankruptcy court protection after making bets on European sovereign debt. The firm listed liabilities of $39.7 billion and assets of $41 billion in Chapter 11 papers.

Diana Desocio, a spokeswoman for MF Global, didn’t immediately return a voice-mail message left at her office seeking comment on the lawsuit yesterday.

The brokerage case is In re MF Global Inc., 11-ap-2790, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The investor case is DeAngelis v. Corzine, 11-cv- 7866, U.S. District Court, Southern District of New York (Manhattan).

--With assistance from Edvard Pettersson in Los Angeles and William Rochelle in New York. Editors: Charles Carter, John Pickering

To contact the reporters on this story: Linda Sandler in New York at lsandler@bloomberg.net; Patricia Hurtado in New York at pathurtado@bloomberg.net

To contact the editors responsible for this story: John Pickering at jpickering@bloomberg.net; Michael Hytha at mhytha@bloomberg.net.


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