Bloomberg News

JPMorgan Actions as MF Global Lender Likely to Be Probed

December 14, 2011

(Updates with transfers in second paragraph.)

Dec. 13 (Bloomberg) -- The liquidator of the MF Global Inc. brokerage said that “certain” actions of JPMorgan Chase & Co., a lender to the broker-dealer’s parent, “are likely to be the subject of investigation.”

The trustee, James Giddens, said he would “act with the respect to” those actions to recover money for brokerage customers if necessary. If the bank received so-called preferential payments before the brokerage went into liquidation, or other payments, he would deal “appropriately” with the transfers or other issues, he said.

“HHR may threaten or bring an action against JPM in the context of a potential dispute between” the bank and the brokerage, he said in a court filing yesterday. Giddens’s law firm is Hughes Hubbard & Reed LLP, or HHR.

JPMorgan, the biggest U.S. bank, was agent for a $1.2 billion loan to the broker-dealer’s parent, and also for a $300 million loan to the brokerage, according to the filing. Giddens made the statement about suing the bank after a judge asked him if he was disinterested enough to litigate in light of past work for JPMorgan.

The broker-dealer paid JPMorgan and the other secured lenders back for the $300 million loan, Giddens said. He didn’t know yet if the bank was still a creditor of the brokerage.

Not a Client

JPMorgan isn’t a “current client” of the law firm, Giddens told the Manhattan federal judge. Giddens’s firm ended “minor” patent and other work for JPMorgan and collected less than $2,000 in fees from the bank in 2011 and less than $35,000 in 2009 and 2010, Giddens said.

The brokerage’s parent, MF Global Holdings Ltd., is in a separate court proceeding.

Joseph Evangelisti, a JPMorgan spokesman, didn’t immediately respond to an e-mail seeking comment on Gidden’s statement about lawsuits.

Three transfers of collateral made and pending will give commodity customers about $4 billion of their assets, according to court filings. Giddens is due to testify on his progress in Washington today before the Senate Agriculture Committee.

The parent company’s Oct. 31 bankruptcy filing, the eighth- largest in U.S. history, listed assets of $41 billion. Jon 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).

--Editors: Charles Carter, John Pickering

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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