Bloomberg News

MF Global Subpoenas Said to Be Issued by U.S. Attorney

November 18, 2011

(Updates with FBI investigation in sixth paragraph.)

Nov. 17 (Bloomberg) -- U.S. Attorney Patrick Fitzgerald in Chicago issued subpoenas in a probe of MF Global Holdings Ltd., the broker-dealer parent that filed for bankruptcy Oct. 31, a person familiar with the matter said.

MF Global, which was run by former New Jersey Governor Jon Corzine, sought Chapter 11 bankruptcy after a $6.3 billion bet on the bonds of some of Europe’s most indebted nations prompted regulator concerns and a credit rating downgrade.

The Wall Street Journal reported yesterday that the office of U.S. Attorney Preet Bharara in Manhattan also issued subpoenas in a probe of MF Global.

The person familiar with the matter, who didn’t want to be identified because the investigation isn’t public, said federal prosecutors in New York haven’t issued criminal subpoenas. He said Fitzpatrick’s office sent subpoenas early in the process and no more have been issued.

Randall Samborn, Fitzgerald’s spokesman, declined to comment yesterday on whether the office had issued subpoenas in the probe. Carly Sullivan, a spokeswoman for Bharara’s office, said the office doesn’t confirm the issuance of subpoenas and declined to comment further.

MF Global also is the subject of a formal FBI investigation, a person familiar with the matter said earlier this month. Federal Bureau of Investigation agents are working with U.S. prosecutors in the inquiry, said the person, who declined to be identified because the matter isn’t public.

Liquidator Subpoenas

The liquidator of the company’s broker-dealer unit, MF Global Inc., also has served an examination subpoena on the parent, according to a previous court filing.

Trustee James W. Giddens won a judge’s permission on Nov. 4 to subpoena directors and officers of MF Global Holdings, saying he needs to find out if fraud or misconduct led to its bankruptcy and what lawsuits he might bring. He is working with regulators to find out how much of customers’ assets are missing, and where they are.

U.S. Bankruptcy Judge Martin Glenn denied a request by the parent to share the information gathered, saying Giddens must probe without interference management’s possible involvement in the alleged shortfall in its collateral for segregated accounts.

Commodity customers of the brokerage have a shortfall of about $593 million, according to a person with knowledge of regulatory probes into the failure of the New York-based firm.

“There have already been serious allegations of misconduct,” Glenn said, citing company lawyers who told the SEC on Oct. 31, when the company filed for bankruptcy, that there was a significant shortfall in its collateral for segregated accounts.

The subpoenas grant the authority to demand documents and question the brokerage firm’s officers, directors, lenders and trading partners, according to the trustee’s court filing. Corzine, who once served as a Goldman Sachs Group Inc. co-chief executive officer, quit MF Global Nov. 4.

The bankruptcy case is MF Global Holdings Ltd., 11- bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan).

--With assistance from Andrew Harris in Chicago and Tiffany Kary and Linda Sandler in New York. Editors: Michael Hytha, Stephen Farr

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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