MF Global Holdings Ltd.’s insurance unit issued $190 million of liability policies for Jon Corzine, other professionals and the company through May to cover costs of defending against allegations of wrongdoing, according to a court filing.
The wholly owned unit, MFG Assurance, provided $70 million of coverage for MF Global, its units and professionals for lawsuits through May 2011, and $120 million for the period through May of this year, trustee Louis Freeh said in the Feb. 3 filing in U.S. Bankruptcy Court in Manhattan. The policies don’t belong to the bankrupt estate and the coverage should be continued, he said.
Corzine, the bankrupt company’s former chief executive officer, and other executives are facing two potential class- action suits over the company’s Oct. 31 collapse. Futures customers of the MF Global Inc. brokerage are competing to lead a lawsuit over the alleged theft of $1.2 billion of their assets. An investor suit led by the Virginia Retirement System alleges that Corzine made misleading statements that inflated the prices of MF Global securities.
“Directors and officers insurance policies tend to be proportional to the size of the risks that the company might face if it does something wrong,” Nancy Rapoport, a bankruptcy law professor at the University of Nevada, Las Vegas, said in an e-mail.
Lehman Brothers Holdings Inc., which filed the biggest U.S. bankruptcy in 2008, had $250 million of insurance for civil, criminal and regulatory claims through last year. The defunct investment bank said in August that former executives including ex-Chairman Richard Fuld would settle an investor lawsuit over losses on Lehman stock and options using a $90 million payment from insurers.
The MF Global insurance policies, which have a deductible of $25,000 per single claim, cover the insured “for all loss arising out of a wrongful act which gives rise to a claim,” according to the filing. The policies cover defense lawyers’ bills, as well as certain damage awards and settlements.
Andrew Levander, a lawyer for Corzine, hasn’t responded to e-mails seeking comment on the lawsuits.
$15 Million Policy
Separately, the MF Global parent and affiliates have a $15 million insurance policy from New Hampshire Insurance Co. for costs of defending against lawsuits, according to a December court filing. The insurance company disclosed the policy in a request to a judge to let it pay MF Global and a defendant for costs incurred before and after the Oct. 31 bankruptcy.
U.S. District Judge Victor Marrero has been combining the investor cases into one, saying they make similar claims that Corzine and other company officials made misleading statements about MF Global’s financial condition before its Oct. 31 Chapter 11 filing.
The Virginia Retirement System, chosen by Marrero to lead the investor suit together with Canada’s Province of Alberta, said in a filing the two together lost more than $19 million on MF Global stock and debt.
MF Global filed the eighth-largest U.S. bankruptcy, listing $41 billion in assets, after making bets on European sovereign debt and getting margin calls. The holding company’s futures brokerage is being liquidated in a separate court proceeding.
Corzine and MF Global also have been sued by former employees. A trustee liquidating the MF Global brokerage has returned about $3.8 billion to customers after calculating that $1.2 billion or more is missing from their accounts. Corzine has said he doesn’t know where the missing money is and didn’t authorize any misuse of customer money that may have occurred.
The main investor case is DeAngelis v. Corzine, 11-cv-7866, U.S. District Court, Southern District of New York (Manhattan).
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