MF Global Holdings Ltd. (MFGLQ:US) trustee Louis J. Freeh is seeking a jury trial for a lawsuit blaming former Chief Executive Officer Jon Corzine for the firm’s collapse.
Freeh made the request May 3 in U.S. Bankruptcy Court in Manhattan. Bankruptcy courts don’t hold trials by jury, and the case would need to go to a district court if Freeh’s demand for a jury is granted.
“Many people don’t like banks; many, many people don’t like investment firms,” Michael Weinstein, chairman of Cole, Schotz, Meisel, Forman & Leonard PA’s white-collar practice in Hackensack, New Jersey, said today in a telephone interview. “By going to the jury, one could argue that the trustee is playing into those ideas,”
Freeh sued Corzine last month alleging that the former New Jersey governor failed to oversee MF Global, a futures broker, leading to the eighth-biggest bankruptcy in U.S. history. Corzine, once a co-chairman of Goldman Sachs Group Inc., was sued along with senior MF Global executives Bradley Abelow and Henri Steenkamp.
Freeh seeks unspecified damages “to be determined at trial,” as well as legal fees, according to the 61-page filing. Larger damages are often awarded in jury trials than in bench trials, though appellate courts often reduce the awards, said Weinstein, a former U.S. Justice Department trial attorney.
The lawsuit followed a 124-page report also published in April by Freeh, which blamed Corzine and his management team for bungling an expansion of the company’s business while ignoring deficiencies in its risk controls.
The parent company of brokerage MF Global Inc. filed for bankruptcy on Oct. 31, 2011, after a wrong-way $6.3 billion trade on its own behalf on bonds of some of Europe’s most- indebted nations. The company listed assets of $41 billion and debts of $39.7 billion.
The adversary case is Freeh v. Corzine, 13-01333, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The holding company’s Chapter 11 case is In re MF Global Holdings Ltd., 11-bk-15059, and the liquidation of the broker is In re MF Global Inc., 11-bk-02790, both in the same court.
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