Bloomberg News

MF Global Trustee Giddens Says JPMorgan Work Was Limited

November 30, 2011

(Updates with excerpt from filing in third paragraph.)

Nov. 30 (Bloomberg) -- The liquidator of brokerage MF Global Inc., accused by some customers of having a conflict of interest because of past work done for JPMorgan Chase & Co., said revenue from such jobs in 2009 and 2010 was less than one- tenth of 1 percent of his law firm’s total.

Trustee James Giddens disclosed the revenue from JPMorgan, a lender to MF Global’s parent company, in court papers after the judge handling the bankruptcies ordered him to describe his relationship with the biggest U.S. bank. Customers have said he may have interests opposed to theirs because of such work.

“The trustee and HHR do not hold or represent an interest that is adverse to the MFGI estate,” Giddens said yesterday in a filing, referring to his firm Hughes Hubbard & Reed LLP. By contrast, Giddens said that he had “investigated and actively pursued claims” against the bank in his role as trustee of the Lehman Brothers Inc. brokerage, settling for $860 million.

Giddens gave no details of jobs for the bank. His firm has “historically” represented JPMorgan or affiliates or syndicates in “certain corporate and other matters,” he said. The firm’s revenue from the work this year is projected to be less than 1/1000 of 1 percent of revenue and the trustee himself wasn’t involved in the work, he said.

JPMorgan is agent to a $1.2 billion loan to the brokerage’s parent, MF Global Holdings Ltd., and is allowing the company to use cash securing a loan.

Dominion Objection

Dominion Resources Inc., whose Virginia Electric & Power Co. and other affiliates are creditors of the MF Global brokerage, has said in court papers that the bankrupt parent company shouldn’t be allowed to use cash, because brokerage customers may need to obtain assets from the parent to make up for an apparent shortfall in their collateral.

Yesterday, Giddens said he would return as much as $2.1 billion to commodity customers, an amount that’s 66 percent of U.S. customers’ segregated assets.

The latest, and third, transfer to customers of the defunct brokerage will bring total distributions to $4.1 billion, or about three-quarters of customer assets, he said in a statement.

The shortfall in the MF Global brokerage’s U.S. segregated customer accounts may exceed $1.2 billion, more than double what was previously estimated, Giddens has said. That would mean customer accounts are missing about 22 percent of their total of $5.4 billion. A shortfall of 11 percent had been previously estimated by the Commodity Futures Trading Commission.

‘Conservative Approach’

“The trustee continues to take a conservative approach to the shortfall,” spokesman Kent Jarrell said in an e-mail yesterday, responding to questions about reports that some of the missing money may have been found. “These have always been presented as preliminary numbers that may well change, and we of course hope for the benefit of customers that the number comes down.”

The parent company’s Oct. 31 bankruptcy filing, the eighth- largest in U.S. history, listed assets of $41 billion. The firm said it has about $26 million in cash. Corzine, the former co- chief executive officer of Goldman Sachs Group Inc., quit as MF Global’s CEO on Nov. 4.

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

--With assistance from Tiffany Kary in New York. Editors: Stephen Farr, Fred Strasser

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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